Lessons in liquidity

The issue of liquidity risk has come under intense scrutiny since the credit crunch took hold in mid-2007. Christopher Jeffery quizzes Shaji Chandrasenan, director of specialist risk supervision at the Monetary Authority of Singapore, on the topic

Asia Risk: Should liquidity risk be explicitly included in regulatory capital - that is, brought explicitly into the Basel II capital framework? Was the failure to explicitly include liquidity risk management in Basel II a fundamental mistake? If it was not a mistake and liquidity risk is considered under the market, credit and operational risk components, should its role have been articulated more explicitly, in hindsight?

Shaji Chandrasenan, Monetary Authority of Singapore (MAS): Basel II does