Regulatory Alerts2014-09-11
Key matters in examining Liquidity Risk Management at Large Complex Financial Groups
Supervisors examining large complex financial groups must focus on senior management ensuring effective governance of liquidity risk management, including maintaining an appropriate framework and leveraging lessons from past liquidity pressures. Key examination areas include the articulation and compliance with liquidity risk appetite, comprehensive measurement of risk through cash flow projections and stress testing, and holding sufficient, convertible excess liquidity buffers. Further scrutiny should be applied to collateral management, robust liquidity risk management methodologies, incentivizing risk reduction across business units, developing sound funding and investment plans, and establishing comprehensive, feasible contingency funding plans.