Regulatory Alerts2011-08-04
Added · Updated
Sound Practices for Liquidity Risk Management
The HKMA issues Annex 2 to establish sound practices for liquidity risk management, requiring Authorized Institutions to define board-level liquidity risk tolerance and allocate costs to align business incentives. Institutions must implement robust governance, including precise cash-flow measurement, currency-specific monitoring, and regular stress-testing with prudent assumptions for asset haircuts and run-off rates. Furthermore, the document mandates the maintenance of a high-quality liquidity cushion, intraday liquidity reviews, and a tested contingency funding plan triggered by early warning indicators.
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