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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.
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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.
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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.
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