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    FED Revises Guidance on Managing Funding and Liquidity Risk

    October 18, 2019

    FED revised and extended, for three years, the interagency policy statement on funding and liquidity risk management (FR 4198; OMB No. 7100-0326). The interagency policy statement, also known as guidance, summarizes the principles of sound liquidity risk management and becomes effective with immediate effect. FED did not receive any comments to this proposal, the comment period for which had expired on August 26, 2019. Thus, the revisions will be implemented as proposed.

    FED had proposed to revise FR 4198 to account for certain aspects of the guidance that include recordkeeping provisions for liquidity risk management policies, procedures, and assumptions and contingency funding plans. Before this revision, FR 4198 did not account for the recordkeeping provisions for contingency funding plans and did not fully account for the recordkeeping provisions related to liquidity risk management policies, procedures, and assumptions. The reporting frequency of FR 4198 is annual and no required reporting forms are associated with the guidance (the FR 4198 designation is for internal purposes only). The documentation required by the guidance is maintained by each institution; therefore, the documentation is not collected or published by FED.

    The guidance states that financial institutions should develop and document liquidity risk management policies and procedures commensurate with the complexity, risk profile, and scope of operations of an institution. Sections 3 and 6 of the guidance provide that financial institutions should maintain such policies and procedures, Section 6 states that financial institutions should have a contingency funding plan that sufficiently addresses potential adverse liquid events and emergency cash flow requirements, and Section 34 states that the contingency funding plan should be documented. The guidance also includes a number of voluntary recordkeeping provisions that apply to bank holding companies, savings and loan holding companies, state-licensed branches and agencies of foreign banks (other than insured branches), corporations organized or operating under sections 25 or 25A of the Federal Reserve Act, and state member banks. The estimated number of respondents for implementing recordkeeping is 30 and for ongoing recordkeeping is 4,789.


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    Effective Date: October 18, 2019

    Keywords: Americas, US, Banking, FR 4198, Liquidity Risk, FED

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