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

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk.

    October 17, 2019 WebPage Regulatory News
    News

    FSB Report Examines Implementation and Impact of G20 Financial Reforms

    FSB published fifth annual report on the implementation and effects of the G20 financial regulatory reforms.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Launches Consultation on Comprehensive Pillar 3 Disclosures

    EBA proposed the new comprehensive implementing technical standard (ITS) for public disclosures by financial institutions.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Consults on Revised Technical Standards on Supervisory Reporting

    EBA launched a consultation on the revised implementing technical standards, or ITS, on supervisory reporting.

    October 16, 2019 WebPage Regulatory News
    News

    BoE and FCA Examine Use of Machine Learning in Financial Sector in UK

    BoE and FCA published a report on the results of a joint survey by BoE and FCA in 2019 to better understand the use of machine learning in the financial services sector in UK.

    October 16, 2019 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel Framework

    BCBS published the seventeenth progress report on adoption of Basel regulatory framework.

    October 16, 2019 WebPage Regulatory News
    News

    APRA Proposes Measures to Strengthen Capital for Bank Depositors

    APRA proposed changes to APS 111, which is the prudential standard on measuring capital adequacy and establishes the criteria for regulatory capital requirements of authorized deposit-taking institutions.

    October 15, 2019 WebPage Regulatory News
    News

    EIOPA Consults on Technical Advice for the 2020 Review of Solvency II

    EIOPA is consulting on an opinion that sets out technical advice for the 2020 review of Solvency II.

    October 15, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3981