The thirst for liquidity

Bank supervisors the world over are set to revise liquidity requirements for financial institutions in a bid to improve financial stability. But the banking community – already struggling under the weight of new regulation – is not convinced the efforts are all pulling in the right direction. Harry Thompson reports

Banks, like other financial institutions, are exposed to a wide range of risks, such as market, credit and operational risks, and monitor these using a range of different tools and techniques. But many of these tools are virtually useless in times of extreme market stress. “In a crisis your problems come down to one thing – liquidity,” says Christopher Michel, chief risk officer at CLSA in Hong Kong.

It is a sentiment echoed by Tham Ming Soong, head of risk management at UOB Group in Singapore.