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Liquidity Risk Management - Supervisory Requirements and Industry Practice

6. - 7. 11. 2017
37.000 Kč
Praha, hotel NH Prague
Gary Dunn
    How you will benefit:
  • An understanding of the revised standards
  • Gain theoretical and practical understanding of liquidity risk management
  • Understand links between liquidity risk management and other regulatory initiatives such as IIRBB and FRTB
  • Understand risk transfer, fund transfer pricing
  • Gain experience of facing regulatory challenge
Course Overview and Objectives:

Arguably, loss of liquidity rather than capital inadequacy was the primary driver of failure of financial institutions during the 2008 financial crisis. Regulators have responded with guidance on best practice in the form of principles; new quantitative requirements, for example LCR and NSFR; and a revised and deeper liquidity review process.

This course provides a comprehensive overview of the current regulations in place including BCBS documents, supervisory statements on approaches to the review process, existing CRR requirements and draft revisions to CRR published in November 2016. These requirements will be compared with industry practice and also the interaction of these regulations with other regulatory initiatives, e.g. IRRBB and regulatory capital requirements (particularly under the revised market risk rules - FRTB).

Participants will engage in spreadsheet-based exercises that will give them practical experience in calculating LCR and NSFR, explore the interaction with interest rate risk in the banking book (IRRBB) requirements. They will also participate in a role-playing exercise where they practice responding to regulatory scrutiny.

Who should attend?

Analysts, Vice Presidents, Directors, Senior Managers in:
  • Treasury Functions
  • Capital Management
  • Regulatory Compliance
  • Governance
  • Audit
  • Risk Analytics
  • Liquidity Risk Management

09.15 - 12.00


  • Defining liquidity risk
  • Basel III framework
    • Capital and Liquidity
  • The need for liquidity risk management
  • Case studies
    • Lehman
    • Northern Rock
    • Bear Stearns

Regulatory Requirements

  • BCBS136 and BCBS144 - the principles
  • The LCR (liquidity coverage ratio)
    • LCR Disclosure Requirements
    • Scope, timeline and Phase-In requirements
    • Frequency of reporting
    • Quantitative vs. qualitative requirements
    • Reporting Template design
    • High Quality Liquid Assets
      • Definition and Characteristics
      • Types - Level I vs. Level II
      • Operational requirements
      • Treatment of specific assets (MBS, Equities)
      • Treatment of assets received as collateral
    • Net Cash Outflows
      • Definition
      • Calculation
      • Run-off factors and inflow rates
      • Treatment of specific instruments (derivatives, stable vs. non-stable deposits)
      • Effects of downgrade triggers, valuation changes, etc.
  • Exercise/example Calculating LCR using published bank data

12.15 - 13.15 Lunch

13.15 - 17.00

Regulatory Requirements (continued)

  • NSFR (net stable funding ratio)
    • NSFR Disclosure Requirements
      • Scope, timeline and Phase-In requirements
      • Frequency of reporting
      • Quantitative vs. qualitative requirements
      • Reporting Template design
    • Components for NSFR Calculation
      • Available amount of stable funding
      • ASF categories/factors
      • ASF category components
      • Treatment of derivative liability amounts
      • Interdependent assets and liabilities
      • Required amount of stable funding
      • RSF categories/factors
      • RSF category components
      • Treatment of encumbered Assets, derivatives, secured financing transactions and off-balance sheet exposures
      • Interdependent assets and liabilities
  • Exercise/example Calculating NSFR using published bank data

Tuesday, November 7

09.00 - 12.15

Related topics

  • Related measures used by industry
  • Intraday liquidity
  • CRD and CRR draft revisions (November 2016)
  • Consideration of interest rate risk and IRRBB requirements
    • Another look at the LCR and NSFR exercises
  • Liquidity Transfer Pricing (LTP) and other risk transfers

Role-Playing Exercise

  • Prepare an LCR regulatory report based on the earlier exercises but with revised assumptions
  • Meet the regulator for a regulatory review meeting
  • Exercise review and discussion

12.15 - 13.15 Lunch

13.15 - 16.30

Related regulatory topics

  • FRTB/Revised CRR
    • Position and risk transfer between the banking book and the trading book
    • Liquidity risk and interest rate risk capitalisation on the trading book
  • Stress testing

Evaluation and Termination of the Course

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