Tightening up

Building a robust liquidity risk management system is the top priority at many banks and insurance companies, ahead of the expected introduction of tough new liquidity risk regulations this year and the easing of government support for many financial markets. But there are significant technology challenges. Clive Davidson reports

For all its focus on historical data, the financial industry has a surprisingly short memory. Given a decade or so of benign markets, it quickly forgot that liquidity risk is a killer that can destroy a bank in no time. It took the virtual overnight collapse of banks such as Northern Rock in the UK and Washington Mutual and Wachovia in the US to remind the industry of its destructive force. As the Basel Committee on Banking Supervision (BCBS) of the Bank for International Settlements stated in