Liquidity

Ensuring banks have robust liquidity risk measurement, management and mitigation practices has become priority for bank supervisors at both the US and international levels.

ABA Position

We are in favor of robust liquidity risk management, but believe that the various requirements should be consistent, reflective of actual liquidity risk and not overly burdensome.

Recent News

ABA Analysis

Basel Committee on Banking Supervision (BCBS)

In December 2006, the BCBS established the Working Group on Liquidity (WGL) to review liquidity supervision across its member jurisdictions. In 2008, the WGL issued Principles for Sound Liquidity Risk Management and Supervision, a set of qualitative standards on liquidity risk management intended to provide updated guidance for financial institutions and supervisors. The BCBS' Principles emphasize:

  • Importance of establishing a liquidity risk tolerance;
  • Maintenance of an adequate level of liquidity, including through a cushion of liquid assets;
  • Identification and measurement of the full range of liquidity risks, including contingent liquidity risks;
  • Design and use of severe stress test scenarios; and need for a robust and operational contingency funding plan;

The Principles document is the foundation for expanded liquidity guidance in the US and the BCBS' quantitative liquidity Coverage Ration (LCR) and the Net Stable Funding Ratio (NSFR).

 

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Contact for further information: Alison Touhey (202) 663-5182