Lombard Risk - Liquidity Stress Testing
Liquidity Risk     
Managing Liquidity Stress Testing requirements with Lombard Risk
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ScenarioManager: Liquidity risk management

Sudden Stress Events May Be beyond Your Control... "What If" Is Not.

Banks, Building Societies, Investment Firms, Broker Dealers, Hedge Funds, Credit Unions are all required to meet tougher liquidity standards. Stress and scenario testing, especially for liquidity risk, is now both a regulatory must-have, and a key management oversight tool. Lombard Risk's Liquidity Stress & Scenario solutions satisfy these requirements.

Key requirements include the management of 10 key risk drivers, including wholesale funding; Intra-group, Intra-day liquidity and cross-currency liquidity; retail funding; off balance sheet and franchise-viability; marketable and non-marketable assets; and the diversification of your funding.

  • Wholesale funding
    • Test your sensitivity to your reliance on short-term wholesale funding
  • Intra-group liquidity
    • Strip out funding or deals with parents, subs, defined groups
  • Intra-day liquidity
    • Test intra day deltas, proposed deals
  • Cross-currency liquidity
    • See the impact from currency swaps, margins, forward foreign exchange with different settlement periods
  • Retail funding
    • Test changes in maturity, interest rate, outflow speed, for example product or customer type
  • Off balance sheet liquidity
    • What happens if your guarantees don't show, or all your commitments are called?
  • Franchise-viability risk
    • Test the impact of your own, or a peer-firm's reputational damage
  • Marketable assets
    • Impact of a ratings downgrade for highly rated bonds; what about reduced residual maturity?
  • Non-marketable assets
    • Split out your reliance on anything that cannot be repo'd or sold outright
  • Funding diversification
    • Spread your anchors amongst different instruments, products, currencies, liability terms - and test what happens if your available market for realisation drops away.
   

The FSA requirements are both qualitative & quantitative covering the following areas:

  • Sound senior management & board level Early warnings including:
    • General systems & controls to identify, measure, monitor & control liquidity risk & liquidity resources
  • Stress tests & contingency funding plans backed up with:
    • Evidence to demonstrate appropriate funding
    • Board responsibility and oversight of the firm's established liquidity risk tolerance
  • Liquidity standards tailored to the particular stress circumstances of a firm. These include:
    • Market wide stress
    • Firm specific stress
    • A combination of the two.



Contact us to learn more.

Our team of experts can help your experts make the most of Lombard Risk's solutions to capture the data you need to safeguard against excessive risk taking and other unplanned events that can have an adverse impact on liquidity. We work fast and we work smart to deliver the information required for analysis, thoroughly and quickly.

To find out more about how our solution can be used to help your firm carry out your Individual Liquidity Adequacy Assessment, contact Lombard Risk. Lombard Risk can help your firm be ready to improve your approach to liquidity risk management & regulatory reporting.

Learn more about our Consulting Services.

Learn more about our solutions for Liquidity Risk Management
Join Lombard Risk's Liquidity Program
Liquidity & Reporting data sheets
ScenarioManager
STB-Reporter
Regulatory Reporting
Lombard Risk Liquidity Program

Liquidity Management case studies
FSA Deadlines

Lombard Risk News

"Banks are going to be required to set aside more capital as a cushion against trading risks, said Adair Turner, chairman of the UK Financial Services Authority. "The most fundamental change is to create a financial system with more shock absorbers, and the shock absorbers of the banking system are capital and liquidity.."

Speech by Adair Turner, Chairman, FSA
Global Financial Forum, NY
27 April 2009


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