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- An institution should establish a robust liquidity risk management framework that ensures it maintains sufficient liquidity, including a cushion of unencumbered, high quality liquid assets, to withstand a range of stress events, including those involving the loss or impairment of both unsecured and secured funding sources.
An institution should establish a robust liquidity risk management framework that ensures it maintains sufficient liquidity, including a cushion of unencumbered, high quality liquid assets, to withstand a range of stress events, including those involving the loss or impairment of both unsecured and secured funding sources.
The CPMI-IOSCO Principles for Financial Market Infrastructures (the Principles)1 define liquidity risk as risk that arises when the financial market infrastructure (FMI), its participants or other entities cannot settle their payment obligations when due as part of the clearing or settlement process.
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- Introductionnote de Bas de Page 1
- Liquidity Risk
- Sound and Prudent Liquidity Risk Management
- Assessment of Liquidity Adequacy
- Mitigation of Liquidity Risk
- Crisis Management
Liquidity is critical to the ongoing viability of any financial institution. Poor management of liquidity risk can lead to undue financing costs and difficulty liquidating assets at fair value. This risk may be greater if a financial institution’s reputation is damaged. Similarly, a financial institution’s capitalization can impact its ability to o...
Liquidity refers to a financial institution’s ability to meet its current and anticipated financial obligations as they come due, without disrupting its operations and without incurring substantial losses. Accordingly, liquidity risk results from a financial institution’s difficulty or inability to meet its liquidity obligations in a timely manner ...
This A document that describes the steps that financial institutions can take to satisfy their legal obligation to follow sound and prudent management practices and sound commercial practices. favours a principles-based approach and does not impose quantitative requirements regarding ratios or thresholds. Under this approach, the AMF expects financ...
Financial institutions should critically assess their level of liquidity and their future needs based on their risk profile and business plans. The implementation of an internal liquidity adequacy assessment process should allow them to maintain their liquidity at adequate levels on an ongoing basis.
4.1 Diversification of funding sources
A financial institution should avoid any potential concentration of certain sources of funding. To this end, the financial institution should analyze the various characteristics of its liabilities and their impact on its liquidity position in light of the following: 1. maturities of liabilities and their A measure of the variability of the price of an asset.; 2. percentage of holdings of secured and unsecured funding; 3. reliance on: 3.1. a single provider of funds or on a related group of pr...
4.2 Market access
A financial institution should ensure that it has opportunities to borrow or issue debt An interest in or charge on property taken by a creditor or guarantor to secure the payment or performance of an obligation. on the market if necessary, even during a crisis. The financial institution should also expand its funding opportunities and develop solid and lasting relationships with funds providers. The financial institution should be able to assess its ability to obtain funding in local currenc...
4.3 Management of foreign currency liquidity risk
The financial institution could use foreign currency deposits or loans in order to fund a portion of its liquidity requirements in local currency or foreign currencies. The financial institution could also convert liquidity in local currency in order to meet foreign currency liquidity needs. In both cases, it should take the following factors into consideration: 1. the convertibility of each currency, the A measure of the variability of the price of an asset.of the exchange rate, and the dela...
5.1 Contingency plan
The principal objective of the contingency plan should be to identify and document the various processes to be implemented and steps to be taken in order to manage a liquidity crisis effectively and efficiently. The results of the scenario analyses and stress tests should be incorporated into the contingency plan. These results should be used as the basis for identifying the various crises that could affect the financial institution’s liquidity and estimating their severity. The financial ins...
Introduction. Liquidity is critical to the ongoing viability of any financial institution. Poor management of liquidity risk can lead to undue financing costs and difficulty liquidating assets at fair value. This risk may be greater if a financial institution’s reputation is damaged.
integrated risk management framework and adopt a liquidity risk management strategy tailored to its overall risk profile, as well as a reliable policy and procedures for identifying, assessing, quantifying, controlling, mitigating and monitoring liquidity risk.
Together with the Liquidity Adequacy Requirements Guideline, which outlines a set of quantitative liquidity standards and metrics, it forms the framework under which OSFI assesses the liquidity adequacy of the institutions it supervises.
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Sep 18, 2020 · The Purpose of this CSA Staff Notice (the Notice) is to provide guidance to investment fund managers (IFMs) on developing and maintaining an effective liquidity risk management (LRM) framework for investment funds. While this guidance is aimed at investment funds that are subject to NI 81-102 Investment Funds (NI 81-102), many of the LRM ...
