SRB Issues Guidance on Liquidity and Funding in Resolution
SRB published new guidance on liquidity and funding in resolution. The guidance focuses on the first dimension of the SRB Expectations for Banks—that is, the estimation of liquidity needs— and aims to enhance banks’ resolvability and preparedness for a potential resolution. Banks will be assessed on this element in the 2021 resolution planning cycle. In 2022, SRB will issue further guidance for the two remaining elements in the SRB Expectations for Banks, which will be phased in over the next years.
The guidance was developed to support banks’ first-time implementation of the liquidity policy in the 2021 resolution planning cycle and will be updated over time, as deemed necessary. In line with the scope of the SRB Expectations for Banks, this guidance is aimed at banks under direct SRB remit, for which the strategy is resolution. While the guidance is general in nature, its application to each bank may be adapted to individual specificities based on a dialog between each bank and its internal resolution team, taking into account the proportionality principle. This guidance is structured into the following sections that cover the key areas that will constitute the benchmark for assessment in 2021:
- The first section focuses on the identification of key liquidity entities and main liquidity flows in resolution. Banks are expected to identify their key liquidity entities in resolution and to explain why these entities are expected to be relevant for liquidity in resolution, or not.
- The next section focuses on the assessment of the key drivers of the liquidity position in resolution. Banks are expected to include, in their assessments, an explanation of the methodology used for assigning the scores and a description of the evolution of the magnitude of each liquidity driver over the time horizon considered. To identify the key drivers of the liquidity position in resolution, banks can build on the risk identification performed in the Internal Liquidity Adequacy Assessment Process (ILAAP) and in the recovery plan. However, banks are expected to consider how risks identified in a going concern framework will change in a resolution scenario, reflecting the effects of the failure of the bank and the resolution actions.
- The third section focuses on the methodologies for estimation of liquidity position in resolution.
- The final section provides guidance for the implementation of the scenario analysis to performed in 2021.
Related Links
Keywords: Europe, EU, Banking, Resolution Planning, Liquidity Risk, Resolution Framework, Liquidity in Resolution, SRB
Featured Experts
Karen Moss
Senior practitioner in asset and liability management (ALM) and liquidity risk who assists banking clients in advancing their treasury and balance sheet management objectives
Previous Article
OJK Circulars on Business Plans for Commercial and Islamic BanksRelated Articles
EBA Publishes Final Regulatory Standards on STS Securitizations
The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.
ECB Further Reviews Costs and Benefits Associated with IReF
The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.
EBA Publishes Funding Plans Report, Receives EMAS Certification
The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).
MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures
The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.
BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules
The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.
IOSCO Welcomes Work on Sustainability-Related Corporate Reporting
The International Organization of Securities Commissions (IOSCO) welcomed the work of the international audit and assurance standard setters—the International Auditing and Assurance Standards Board (IAASB)
BoE Allows One-Day Delay in Statistical Data Submissions by Banks
The Bank of England (BoE) published a Statistical Notice (2022/18), which informs that due to the Bank Holiday granted for Her Majesty Queen Elizabeth II’s State Funeral on Monday September 19, 2022.
ACPR Amends Reporting Module Timelines Under EBA Framework 3.2
The French Prudential Control and Resolution Authority (ACPR) announced that the European Banking Authority (EBA) has updated its filing rules and the implementation dates for certain modules of the EBA reporting framework 3.2.
ECB Paper Discusses Disclosure of Climate Risks by Credit Agencies
The European Central Bank (ECB) published a paper that examines how credit rating agencies accepted by the Eurosystem, as part of the Eurosystem Credit Assessment Framework (ECAF)
APRA to Modernize Prudential Architecture, Reduces Liquidity Facility
The Australian Prudential Regulation Authority (APRA) announced reduction in the aggregate Committed Liquidity Facility (CLF) for authorized deposit-taking entities to ~USD 33 billion on September 01, 2022.
