PRACTICAL CONSIDERATIONS IN IMPLEMENTING AND MEETING LIQUIDITY RISK AND STRESS TESTING REQUIREMENTS

A liquidity problem in a bank could be the first symptom of a financial trouble brewing. If not addressed quickly and effectively, it could very well turn into a thunder ball of ultimate destruction. The balance sheets of banks are swelling in complexity and managing liquidity properly is going to be much more challenging in the days to come. Liquidity problems can cause significant disruptions on either side of a bank’s balance sheet.

Effective management of liquidity risk enables a financial institution to meet its cash flow obligations in all reasonably foreseeable circumstances. It entails management of liquidity by raising sufficient funds either by increasing liabilities or by converting assets promptly and at a reasonable cost. Central to assessing and managing liquidity risk are robust cash flow models and appropriate stress scenarios. Effective LRM brings in a host of benefits. It smoothens the operations of banks, enhances the confidence factor of its stakeholders, nurtures a healthy relationship with the borrowers/depositors, avoids fire sale of assets, lowers the default premium, improves the profitability and enhances the solvency of a bank.

The EBF Breakfast Briefing is an exclusive networking event for key decision makers within the banking industry. It will provide invited delegates the golden opportunity to listen to an analyst, a solution provider and other speakers on this matter which in turn can help improve customer confidence. Delegates will also have the opportunity to take part in a Q&A Panel Discussion.