By Shyam Venkat, Stephen Baird
The newest, complete consultant on liquidity chance management—from the professionals
Written by way of a crew of leaders from the cost Waterhouse Coopers monetary companies Regulatory perform, Liquidity hazard Management is the 1st ebook of its style to tug again the curtain on a world method of liquidity hazard administration within the post-financial predicament. Now, as a couple of regulatory projects emerge, this well timed and informative booklet explores the real-world implications of possibility administration practices in present day market.
Taking a transparent and targeted method of the operational and monetary tasks of liquidity hazard administration, the publication builds upon a foundational wisdom of banking and capital markets and explores in-depth the most important features of the topic, together with governance, regulatory advancements, analytical frameworks, reporting, strategic implications, and extra. The booklet additionally addresses administration practices which are relatively insightful to liquidity threat administration practitioners and bosses in several components of banking organizations.
- Each bankruptcy is authored by way of a value Waterhouse Coopers associate or director who has major, hands-on expertise
- Content addresses key components of the topic, corresponding to liquidity rigidity trying out and data reporting
- Several chapters are dedicated to Basel III and its implications for financial institution liquidity threat administration and company strategy
- Includes a committed, present, and all-inclusive examine liquidity possibility management
Complemented with hands-on perception from the field's best experts at the topic, Liquidity threat Management is key analyzing for practitioners and bosses inside of banking enterprises trying to find the most up-tp-date info on liquidity threat management.
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Additional info for Liquidity Risk Management: A Practitioner’s Perspective
We will also discuss the broader governance context of the liquidity stress test, including the governance around the liquidity stress testing process, how outputs support the liquidity risk management regime of the organization, and the controls required within and around the T 1 Stephen Baird is a director in PwC’s Chicago office. 27 28 LIQUIDITY RISK MANAGEMENT process. Intraday liquidity considerations, however, are separately discussed in Chapter 4. While the industry has made significant strides in enhancing liquidity stress testing capabilities since the dark days of 2007–08, banks and their regulators will be working hard to meet a number of challenges over the next several years in order to realize the goal of establishing a fully robust liquidity stress testing program.
Strategic liquidity represents the cash that is held by the institution to meet future business needs that may arise outside the course of normal operations, but it is not primarily aimed at supporting the bank during times of stress. For example, strategic liquidity may be held to fund future acquisitions or capital expenditure programs. Strategic liquidity may be redirected to meet contingent liquidity requirement needs. As a pragmatic matter, this will likely be feasible only if such liquidity is present via holdings of highly liquid assets.
Some liquidity stress impacts are the result of systemic stress, such as a reduction in the market liquidity of securities, while other impacts are the result of bank-only stress, such as a deposit run. 3 for a detailed description of these impacts. Banks should develop at least one scenario for each of the cases of systemic, idiosyncratic, and combined idiosyncratic and systemic in order to capture these varying impacts. Distinguish between levels of severity. Assuming graduating levels of severity, for example, by developing adverse and severely adverse variations of the idiosyncratic scenario, enables the institution to broaden its view of liquidity risk and applicable limits.