March 18, 2011
Liquidity Risk refresh initiatives get going
New Liquidity risk frameworks as well as Stress tests were in my top 10 list for 2011. Many leading regulators with UK FSA being the first, have issued new guidelines on this globally.
The inspiration for this blog came from a recent announcement about a leading bank enhancing its liquidity risk management capabilities.
I read about one of the worlds largest banks rolling out its liquidity risk enhancement initiatives in UK, with a global rollout at key centres in future. I see these initiatives having some core elements such as;
- Cash Flow analysis, CFAR
- Valuations
- Gap Analysis
- Concentration Risk
- Stress Testing simulations
- Basel III convergence – counter cyclicality, leverage ratio, liquidity risk
The need for real-time risk modeling,high performance computing, RAROC models will only increase in the coming months & years for the industry.
For global institutions, a key component will be powerful simulation engines for the ongoing and future mandatory stress testing prescribed by multiple regulators across the borders.
On the other side of the equation, many regulators are also gearing up for advanced level of industry wide models, that would allow them to have a holistic view of the systemic risk.
In the USA, the Dodd-Frank financial reform has triggered off some early thinking on how OTC derivatives being traded and cleared in swap execution facilities will impact the liquidity risk landscape.
It will be interesting to hear from others on the new regulations and the state of liquidity risk refresh initiatives in their part of the world.
Source: FSA, Financial Times, FinArch Press Release, Mar2011, WSJ.
Posted by spachava at 01:19 AM
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