CEBS out with liquidity risk CP part two
Daily news headlines
CEBS has published the second part to its consultation paper on its technical advice on liquidity risk management
LONDON – The Committee of European Banking Supervisors (CEBS) has opened a public consultation on its advice on liquidity risk management: the second part of its response to the European Commission's Call for Technical Advice on the issue.
The paper sets out CEBS’ preliminary recommendations regarding the management of liquidity risk by credit institutions and investment firms, and the supervision of liquidity risk by EEA prudential authorities. CEBS analysed the 2007-08 crisis, and benefited from input provided in regular meetings with experts representing a broad range of market participants and ad hoc meetings with banking associations and rating agencies, when drafting the recommendations.
The recommendations call for credit institutions and investment firms to have adequate liquidity risk management for both normal and stressed times, including liquidity buffers, robust stress tests, and regularly tested contingency funding plans. The board of directors should approve a liquidity risk strategy and risk tolerance appropriate to the institution’s funding profile and the sophistication of its liquidity risk management, taking into account all liquidity risks, including intra-day and contingent risks, as well as potential constraints on cross-border and intra-group flows. Appropriate responsibilities and incentives should be set by senior management through an internal cost/benefit transfer mechanism.
CEBS’ recommendations to supervisors call for a proportionate approach, allowing for recognition of internal methodologies on a case-by-case basis based on a thorough prior supervisory assessment, while acknowledging the benefits of a more standardised approach for institutions with a simpler liquidity risk profile.
These proposals are generally consistent with the revised Sound Practices for Managing Liquidity in Banking Organizations that have also been published today for consultation by the Basel Committee on Banking Supervision (BCBS). There are differences however as CEBS’s report covers the issues listed in the Commission’s Call for Advice and places special emphasis on the supervision of liquidity risk management.
The public consultation period begins today and runs until 1 August 2008, in parallel with the BCBS consultation. It has been shortened from the normal three months in response to a request from the Commission to adjust the work schedule to the timetable of the review of the Capital Requirement Directive. The Commission expects CEBS to deliver its final advice by September 2008.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Risk management
Beware war exclusions in cyber insurance, risk managers told
Risk Live: Experts say policy wording is tightening up following rise in ransomware attacks
Top 10 operational risks for 2024
The biggest op risks for the year ahead, as chosen by senior industry practitioners
Top 10 op risks: AI fears drive cyber risk to record high
External fraud re-enters top 10; change management now a top five concern
Harsh judgements: why Stateside lenders are upping the Q-factor
As CRE stalls, qualitative adjustments are forming a larger part of US banks’ credit risk allowances
As FCMs dwindle, regulators fear systemic risk
Panellists highlight dangers of clearing membership becoming more concentrated
Bank credit risk: how well do you know your counterparties?
As financial markets evolve, evaluating the complex credit risk exposures of non-bank counterparties is crucial for effective risk management, says Quantifi’s Dmitry Pugachevsky
EU index managers face funding risks as US moves to T+1
Rotations from European to US assets will need prefunding due to slower EU settlement
CCPs show support for daily stress margin tools
Anti-procyclicality measure floated by HKEX official sparks interest from rivals including Nasdaq
Most read
- As FCMs dwindle, regulators fear systemic risk
- Top 10 operational risks for 2024
- Top 10 op risks: AI fears drive cyber risk to record high