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October 04, 2017

The Financial Stability Institute (FSI) of BIS published an occasional paper (No. 14) on the Basel III liquidity monitoring tools, with focus on the possible application of the additional tools. The purpose of this document is to explain the five metrics presented in the liquidity coverage ratio (LCR) and liquidity risk monitoring tools document as well as to show how the data can be gathered.

The paper shows how the data and trends in the metrics can be analyzed and outlines the implications for supervision. Focus is on the analysis of liquidity data and assessment of qualitative aspects of liquidity management, with the aim of forming a view on a bank’s liquidity position and market vulnerabilities. The paper also discusses data collection and design of liquidity reporting, to optimize the value of data for analysis and use by supervisors and banks.

While the introduction of LCR and Net Stable Funding Ratio (NSFR) have made the measurement of liquidity across banks and jurisdictions significantly more comparable and consistent, the ratios in isolation do not capture all aspects of a bank’s liquidity risk. In January 2013, BCBS had, therefore, published its paper on the Basel III LCR and liquidity risk monitoring tools. This paper contains a number of additional metrics for use by supervisors and banks. BCBS recognizes that supervisors may need to supplement these by using additional tools and metrics to capture jurisdiction-specific issues.

 

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Keywords: International, Banking, LCR, Liquidity Risk, Basel III, Liquidity Monitoring Tools, FSI, BIS

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