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Public disclosure improves transparency, facilitates valuation, reduces uncertainty within the markets and strengthens market discipline. In step with the Bank of International Settlements, a bank ought to disclose sufficient data regarding its liquidity risk management to enable relevant stakeholders to form an informed judgement about the power of the bank to fulfill its liquidity needs. A bank should disclose its organisational structure and framework for the management of liquidity risk. In specific, the disclosure should explain the roles and responsibilities of the relevant committees, and those of different practical and business units. A bank's description of its liquidity risk management framework should indicate the degree to which the treasury function and liquidity risk management is centralised or decentralised. A bank should describe this structure with regard to its funding activities, to its limit setting systems, and to its intra-cluster lending strategies. Where centralised treasury and risk management functions are in place, the interaction between the group's units should be described. The target for the business units within the organisation should conjointly be indicated, as an example, the extent to that they're expected to manage their own liquidity risk. As part of its periodic financial reporting, a bank ought to give quantitative data about its liquidity position that permits market participants to make a view of its liquidity risk. Samples of quantitative disclosures currently disclosed by some banks embody information regarding the scale and composition of the bank's liquidity cushion, extra collateral requirements as the results of a credit rating downgrade, the values of internal ratios and alternative key metrics that management monitors (together with regulatory metrics that will exist within the bank's jurisdiction), the boundaries placed on the values of those metrics, and balance sheet and off-balance sheet things softened into a variety of short-term maturity bands and therefore the resultant cumulative liquidity gaps. A bank should provide sufficient qualitative discussion around its metrics to enable market participants to perceive them, eg the time span covered, whether or not computed under traditional or stressed conditions, the organisational level to which the metric applies (cluster, bank or non-bank subsidiary), and other assumptions utilised in measuring the bank's liquidity position, liquidity risk and liquidity cushion. A bank ought to disclose further qualitative info that has market participants with more insight into how it manages liquidity risk. Samples of qualitative info currently disclosed by some banks are highlighted below. This list is illustrative rather than exhaustive: 1. The aspects of liquidity risk to which the bank is exposed which it monitors 2. The diversification of the bank's funding sources 3. Different techniques used to mitigate liquidity risk 4. The ideas utilised in measuring its liquidity position and liquidity risk, as well as further metrics for that the bank isn't disclosing information 5. An explanation of how asset market liquidity risk is reflected within the bank's framework for managing funding liquidity 6. An clarification of how stress testing is employed 7. A description of the strain testing scenarios modelled 8. An outline of the bank's contingency funding plans and a sign of how the arrange relates to fret testing 9. The bank's policy on maintaining liquidity reserves 10. Regulatory restrictions on the transfer of liquidity among group entities. 11. The frequency and kind of internal liquidity reporting Become a member of the Basel ii Compliance Professionals Association (BCPA), the most important association of Basel ii Professionals within the world. Our newsletter with news, opportunities and alerts is nice, therefore you'll continue to find out month after month. 15+ of the best headhunters of the globe are members of the association, thus you'll have new opportunities.
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Arlene Nishard been writing articles online for nearly 2 years now. Not only does this author specialize in risk management ,you can also check out her latest website about: Power Tech Home Gym Which reviews and lists the best Powertec Exercise Equipment
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