Featured Product

    ECB Launches Sensitivity Analysis of Liquidity Risk for Banks

    February 06, 2019

    ECB launched a sensitivity analysis of liquidity risk to assess the ability of the banks it directly supervises to handle idiosyncratic liquidity shocks. The exercise will constitute the supervisory stress test of 2019. ECB published a template for the sensitivity analysis of liquidity risk and the template is largely based on the Single Supervisory Mechanism (SSM) liquidity template. ECB also published frequently asked questions (FAQs) for the sensitivity analysis of liquidity risk.

    ECB Banking Supervision will test adverse and extreme hypothetical shocks in which banks face increasing liquidity outflows. The exercise will focus on banks’ expected short-term cash flows to calculate the “survival period,” which is the number of days that a bank can continue to operate using available cash and collateral with no access to funding markets. The sensitivity analysis, which is expected to be completed in four months, will focus solely on the potential impact of idiosyncratic liquidity shocks on individual banks. It will not assess the potential causes of these shocks or the impact of wider market turbulence. The exercise will be carried out without any reference to monetary policy decisions.

    The results will inform the supervisor about the relative vulnerability of banks to different liquidity shocks applied in the exercise and will also identify improvements needed in banks’ liquidity risk management. The results of the exercise will feed into the ongoing supervisory assessments of liquidity risk management frameworks of banks, including the Supervisory Review and Evaluation Process (SREP). However, the outcome of the stress test will not affect supervisory capital and liquidity requirements in a mechanical way. Banks’ individual results will be discussed bilaterally as a part of the supervisory dialog in the third quarter of 2019.

     

    Related Links

    Keywords: Europe, EU, Banking, Stress Testing, Liquidity Risk, Sensitivity Analysis, FAQ, SREP, SSM, ECB

    Featured Experts
    Related Articles
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.10

    EBA published phase 2 of the technical package on the reporting framework 2.10, providing the technical tools and specifications for implementation of EBA reporting requirements.

    July 10, 2020 WebPage Regulatory News
    News

    FASB Proposes to Delay Implementation of Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant insurance companies, adversely affected by the COVID-19 pandemic, an additional year to implement the Accounting Standards Update No. 2018-12 on targeted improvements to accounting for long-duration insurance contracts, or LDTI (Topic 944).

    July 09, 2020 WebPage Regulatory News
    News

    APRA Updates Regulatory Approach to Loan Deferrals Amid COVID Crisis

    APRA updated the regulatory approach for loans subject to repayment deferrals amid the COVID-19 crisis.

    July 09, 2020 WebPage Regulatory News
    News

    BCBS and FSB Set Out Recommendations for Benchmark Transition

    BCBS and FSB published a report on supervisory issues associated with benchmark transition.

    July 09, 2020 WebPage Regulatory News
    News

    IAIS Sets Out Recommendations for Benchmark Transition for Insurers

    IAIS published a report on supervisory issues associated with benchmark transition from an insurance perspective.

    July 09, 2020 WebPage Regulatory News
    News

    ESMA Updates Reporting Manual on European Single Electronic Format

    ESMA updated the reporting manual on the European Single Electronic Format (ESEF).

    July 09, 2020 WebPage Regulatory News
    News

    EBA Calls on Resolution Authorities to Consider Impact of COVID Crisis

    EBA published a statement on resolution planning in light of the COVID-19 pandemic.

    July 09, 2020 WebPage Regulatory News
    News

    BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework

    BCBS Finalizes Revisions to Credit Valuation Adjustment Risk Framework

    July 08, 2020 WebPage Regulatory News
    News

    ECB Guideline on Materiality Threshold for Credit Obligations Past Due

    ECB published a guideline (2020/97), in the Official Journal of European Union, on the definition of materiality threshold for credit obligations past due for less significant institutions.

    July 08, 2020 WebPage Regulatory News
    News

    FED Temporarily Revises FR Y-14 With Respect to PPP and CARES Act

    FED temporarily revised the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes in response to the COVID-19 pandemic.

    July 08, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5458