In Focus: Liquidity Risk Management
A best-practices liquidity risk management program comprises the following documentation:
Description of the internal liquidity adequacy assessment process (“ILAAP”);
Description of the liquidity assessment governance process, including the risk appetite statement;
Quantitative and qualitative liquidity reports provided to senior management;
Description of the liquidity risk management program, including:
- limit and trigger framework;
- expected case funding plan;
- contingency funding plan;
- liquidity transfer pricing methodology;
- intraday liquidity risk management;
- collateral management;
- foreign currency liquidity risk management;
Reports documenting the results of liquidity stress tests and the consistency of results with the stated risk appetite;
Description of the stress testing methodology, including assumptions and model validation reports; and a
Summary of the most-recent Internal Audit or other independent reviews.
Speritas Advisors works with clients to develop or enhance these documents and to synthesize these often disparate documents into a cohesive and thorough liquidity risk management package. We also assist clients in developing individual components, such as key deposit decay assumptions.
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Speritas Advisors can help C-Suite executives and other senior finance, treasury and risk managers adapt to the changing financial and regulatory environment. Our broad business and regulatory experience provides a unique and practical viewpoint on risk management and finance issues. Our approach yields customized processes that reflect the liquidity, capital, complexity, strategy - and people - of each institution.