Chartis: More with less: liquidity risk management
Posted: 25 November 2014 | Author: Philip Mackenzie | Source: Chartis
Regulatory pressure and scarcity of capital are compelling banks to take a more complete view of their balance sheets, and demanding that they do more with less. This is driving a new approach to liquidity risk management (LRM) and financial management.
Regulations such as Solvency II, Basel 3, and Dodd-Frank are driving a market-based view of liquidity risk, including valuations, counterparty and credit risk, funding, and cross-border financing. Some of the most notable requirements are based around stress testing and real-time liquidity risk management in the trading and banking book.
However, these are more than mere regulatory requirements: real-time analytics in particular are increasingly seen as a business advantage, enabling the management of intra-day cashflows and the capture of long and short-term cash positions. To enable this kind of process, robust data management systems are a necessity, but aggregation and storage methodologies are still attempting to catch up with financial institutions’ expectations.
The area in which LRM analytics and data management are the most mature is in Europe, where technological evolution has been driven by the more comprehensive and detailed European regulation. As such, Europe remains the key market for LRM technology vendors looking to establish themselves.
While it was initially the purview of larger and more complex financial institutions with more stringent regulatory requirements, liquidity risk management is increasingly being invested in by smaller financial institutionss. In particular, these are looking for LRM solutions with a low total cost of ownership, and out-of-the-box functionalities such as regulatory reporting.
Chartis recently published its 2014 update report for Liquidity Risk Management Systems. To obtain the report please click here.