Liquidity Risk Management and Supervision
First published:
ISBN: 9781782722571
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Macroprudential Liquidity Stress Tests
Stefan W Schmitz
Introduction to ‘Liquidity Risk Management and Supervision’
Liquidity Regulation, the 2007-9 Crisis and the Regulatory Response
Sources of Liquidity Risk: Theory and Empirical Evidence
The Process of Liquidity Supervision
How to Implement ILAAP: Lessons Learned at Rabobank
Liquidity Risk Management Strategy and Tolerance
Liquidity Buffer Management and Banks’ Counterbalancing Capacity
Bank-Level Liquidity Stress-Testing
Contingency Funding Plans
Liquidity Transfer Pricing
Intraday Liquidity Risk Management
Putting Liquidity Risk Management into a Wider Context
Macroprudential Liquidity Stress Tests
A Simple Macroprudential Liquidity Buffer
This chapter focuses on macroprudential liquidity stress tests that aim to capture the liquidity situation of an entire banking system under business as usual and under stress.6868This chapter builds on Schmitz (2009, 2014). The objectives, challenges and instruments to overcome such stresses can differ from those presented in Chapter 7, which dealt with microprudential stress tests. The chapter provides an outline for the successful implementation of macroprudential liquidity stress tests. As complementary reading we suggest Aikman et al (2009), Basel Committee on Banking Supervision (2013a,b, 2015), Demekas (2015), Schmieder et al (2012) and Chapter 11 of this book.
This chapter is structured along the following lines. First, we discuss what distinguishes the macroprudential from the microprudential variant. Then we examine the former’s main challenges. The data requirements and the framework are described next, followed by the design and calibration of macroprudential liquidity stress tests. Use of the results is then discussed. Macroprudential liquidity stress tests are an area of lively conceptual debate. The main challenges ahead are discussed in the penultimate section
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