![Risk.net](https://www.risk.net/sites/default/files/styles/print_logo/public/2018-09/print-logo.png?itok=1TpHrpuP)
Basel Committee drafts liquidity risk principles
The Basel Committee on Banking Supervision today issued for public comment enhanced global Principles for Sound Liquidity Risk Management and Supervision , with a July 29 deadline for responses.
“The Basel Committee’s goal in developing these global standards is to significantly raise the bar for the management and supervision of liquidity risk at banks,” said Nout Wellink, chairman of the Basel Committee and president of the Netherlands Bank. “The committee fully expects banks and supervisors to implement the enhanced principles promptly and thoroughly. We will vigorously assess the degree to which the principles are implemented.”
The principles support one of the key recommendations for strengthening prudential oversight set out in the Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience, presented to G-7 finance ministers and central bank governors in April.
The draft principles represent a substantial revision of the committee’s liquidity guidance published in 2000, reflecting the need to address critical areas of weakness that have emerged in the financial markets since the second half of 2007. The work was drawn from recent and ongoing work on liquidity risk by the public and private sectors, and is intended to strengthen banks’ liquidity risk management and improve global supervisory practices.
“The principles are based on the fundamental premise that a bank’s liquidity risk framework should ensure it maintains sufficient liquidity to withstand a range of stress events, including those that affect secured and unsecured funding” said Nigel Jenkinson, co-chairman of the Basel Committee’s working group on liquidity and executive director of the Bank of England.
The principles also strengthen expectations about the role of supervisors. Arthur Angulo, the other co-chairman of the working group and senior vice-president of the Federal Reserve Bank of New York, added: “Supervisors, for their part, should assess the adequacy of both a bank’s liquidity risk management framework and its liquidity position. In order to protect depositors and to limit potential damage to the financial system, supervisors should take prompt action if a bank is deficient in either area.”
The principles underscore the importance of establishing a robust liquidity risk management framework that is well integrated into the bank-wide risk management process. The primary objective of this guidance is to raise banks’ resilience to liquidity stress.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Banks fret over vendor contracts as Dora deadline looms
Thousands of vendor contracts will need repapering to comply with EU’s new digital resilience rules
EU banks lose relief on model test after FRTB delay
Deferment of new trading book regime to January 2025 eats into transition period for “erratic” P&L attribution test
Sunday night football and the Basel III endgame
Big banks, political advocates and housing organisations are unlikely allies in race to dropkick new capital regime
Futures exchanges seek clarity on China licensing regime
Hazy details on landmark Futures and Derivatives Law breeds legal uncertainty, unnerving operators
Some EU banks wanted option to start FRTB on time
Representatives of member states raised possibility with European Commission at July meeting discussing the delay
For US Treasury troubles, treat the cause not the symptom
Regulatory alarm about hidden risk in the Treasury futures market misses the point, fund association execs write
Iosco delays pre-hedging consultation to November
Review into controversial practice splits industry
Honey, I shrunk the Fed. (Not a sci-fi fantasy)
Promoting the discount window may be the Fed’s key to shrinking its $7trn balance sheet, says Bill Nelson