BCBS completed a review of its 2008 Principles for sound liquidity risk management and supervision. The review confirmed that the principles remain fit for purpose. The principles underscore the importance, for banks, of establishing a robust liquidity risk management framework.
As implementation of all its standards and guidelines is a high priority for the Committee, a review of these principles was initiated in 2017. The review also covered liquidity-risk-related developments in financial markets since 2008. Based on information provided by each Basel Committee-member jurisdiction, the review concluded that:
- All Committee member jurisdictions have implemented the Sound Principles through regulation, published guidance, or supervisory practice.
- The global liquidity standards introduced under Basel III—the Liquidity Coverage Ratio and Net Stable Funding Ratio—are important complements to the principles for liquidity risk management. As such, banks and supervisors should continue to heed the broader liquidity risk management considerations set out in the principles.
- Significant developments in financial markets since the principles for liquidity risk management were published in 2008 are likely to have an important bearing on liquidity risk management considerations of a bank. These developments include the increasing digitization of finance and payment systems and the broader growth of financial technology; a greater use of central clearing of derivatives and margining; and the increasing risk and magnitude of cyber-attacks.
The Basel Committee advises banks and supervisors to remain vigilant in their liquidity risk management. In line with the principles for liquidity risk management, banks' risk management and supervisors' practices should be consistently and rigorously applied through the economic cycle, regardless of market liquidity conditions.
Keywords: International, Banking, Basel III, Liquidity Risk, Principles for Liquidity Risk Management, BCBS
Previous ArticleEBA Finalizes Guidelines for High-Risk Exposures Under CRR
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).