RiskTech Forum

Quartet FS: Liquidity Management in Times of Regulatory Pressure

Posted: 1 December 2013  |  Source: Quartet FS


Liquidity management has become an integrant part of any bank’s sound risk management practice. The collapse of Lehman Brothers highlighted the need for banks to consider liquidity as a scarce resource. Since the global crisis in 2008, market reforms are flooding the financial sector, forcing banks to manage their intraday liquidity in a more prudent and a more effective manner. With this in mind, how can banks quickly absorb the structural changes imposed by the regulators? How can banks make sense of the resulting flood of data? And finally, what is best practice when to reporting liquidity ratios in a fast, accurate and flexible manner?

The tightening of the regulatory noose

Regulators aim to avoid situations where banks run out of liquidity. An example is the Basel III regulatory framework. Under Basel III, financial institutions are required to not only increase the amount of capital reserves they hold, but also demonstrate their liquidity risk positions.

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