
Cebs consults on liquidity buffers
Daily news headlines
LONDON - The Committee of European Banking Supervisors (Cebs) has published its draft guidelines on liquidity buffers, aimed at improving the resilience of banks' risk management to future liquidity shocks.
The consultation paper (CP28) addresses the appropriate size and composition of liquidity buffers, on the principle that bespoke buffers should be in place to enable credit institutions to withstand a liquidity drought for at least one month without switching business models.
"As liquidity risk is largely institution-specific, Cebs encourages credit institutions to engineer their own individual counterbalancing framework, starting with robust bespoke liquidity buffers available outright over the defined 'survival period'," said Kerstin af Jochnick, chair of Cebs.
CP28 stresses that, when internal risk management functions build their firms' buffers, they should consider three types of stress test scenarios: idiosyncratic, market-specific and a combination of the two approaches.
It also sets a one-month time horizon as appropriate, as well as a shorter test of a single week, labelled an "acute phase of stress", requiring a greater degree of confidence on the capacity for the eligible assets to generate liquidity.
Cebs says the buffer's core should be based on cash and assets that are highly liquid in private markets and central bank-eligible, although for the longer stress period some flexibility is considered appropriate.
In a nod to pro-cyclicality lessons from the current crisis, Cebs also cautions it wants to avoid defining standardised parameters that might encourage a number of banks to trigger their buffers in similar market conditions, in turn posing further systemic risk.
Cebs will hold a public hearing on its plans for liquidity buffers on September 22, and public consultation will run until October 31.
Click here to read the CP28.
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
Liquidity risk learnings in the banking industry
Sidhartha Dash, chief researcher at Chartis Research (part of Risk.net's digital network), talks to Steve Pemberton, chief executive of Coherent Europe, about the dynamics and challenges surrounding liquidity risk in the banking industry
Investing in operational readiness to optimise FRTB capital
A forum of industry experts discusses the implementation of FRTB, the burden of investment into data and infrastructure for FRTB compliance, the considerations for banks in using the standardised approach (SA) and the internal model approach (IMA)
Top 10 operational risks: The umpire strikes back
Tougher regulatory enforcement, new consumer rules and rise of ESG are ringing alarm bells
Ion wasn’t deemed a ‘critical’ vendor by most clients
Software firm escaped heavy scrutiny ahead of cyber attack, says US Treasury official
Op risk data: Stanford fraud haunts banks for billions
Also: Helaba’s crank capital relief; TSE stock price sanction; 1MDB mauls Mudabala. Data by ORX News
Hacked off: banks demand answers after Ion cyber attack
Clients left in the dark about ransomware attack that disrupted futures trading last month
Digital exposure makes fraud management a vital responsibility for financial institutions
Fraud management and detection continue to be an increasing area of concern for financial institutions worldwide
UBS takeover of Credit Suisse to trigger higher G-Sib surcharge
At 14.2%, UBS’s CET1 capital ratio is more than sufficient to absorb the deal