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    • Liquidity risk

      • In particular, in managing the bank's liquid assets, the treasurer considers liquidity risk—the risk that cash is not immediately available when needed—and interest rate risk—in this case, the risk that the value of a liquid asset will change due to a change in interest rates.
      www.stlouisfed.org/publications/review/2019/07/12/how-have-banks-been-managing-the-composition-of-high-quality-liquid-assets
  1. Sep 21, 2024 · At the heart of a treasurer’s role lies the management of a bank’s balance sheet. This includes overseeing liquidity, funding, capital, and risk management. Each of these areas is intertwined, requiring a deep understanding of financial dynamics and the ability to forecast future trends accurately.

  2. In this article – the fifth in a series of six – the author explains why liquidity risk management involves significantly more than simply managing liquidity risk. The above is not meant to imply that managing liquidity is a minor or easy part of the overall process of managing a bank.

    • What Is Liquidity Risk?
    • Increased Focus on Liquidity Risk
    • Impact on Treasury
    • Measuring Liquidity Risk
    • Sources of Funding Liquidity Risk
    • Quantifying Change of Cost of Funds

    It is very difficult to find a universally accepted definition of liquidityrisk, however, it is commonly accepted that liquidity risk comes in two forms – funding liquidity risk and market liquidity risk. Funding liquidity risk is defined as an institution’s inability to obtain funds to meet cashflow obligations, whereas market liquidity risk refer...

    One of the primary reasons as to why there has been increased attention on liquidity risk in recent years has been due to the anticipated impact of the new Basel Capital Accord. Basel II will have a significant impact on current practices with regards to liquidity risk management, and more specifically, funding liquidity risk. The new Basel II Acco...

    Liquidity risk should not be an issue of ‘business as usual’ – the case that funds can be replaced once they mature, according to a source from a top European bank. The key issue for banks is to make sure that they are fully prepared in situations where liquidity risk does become a problem. The treasury group has many key responsibilities, one of w...

    Almost every banking institution has its own methodology to measure liquidity risk that they are exposed to. A number of techniques are available, ranging from basic calculations to highly sophisticated modelling. It is important for banking institutions to adopt a technique that is most suitable and to take into consideration the nature, scale and...

    Today, in many cases, banking institutions rely less on large numbers of mostly inert retail depositors for funding, and instead depend more on fewer, large risk conscious wholesale depositors. Banks use a variety of funding sources, including long-term debt and credit derivative issuance. In some banks, funding is spilt between different areas of ...

    One investment bank’s rating is AA, and it is only when a situation occurs where A drops to A1 that funding costs would really be hit. It was suggested that this would be the threshold at which the bank would be concerned, however, at present they are not affected. Some industry experts believe that nobody has the capability to quantify the cost of...

  3. Jan 1, 2019 · In particular, in managing the bank’s liquid assets, the treasurer considers liquidity risk— the risk that cash is not immediately available when needed—and interest rate risk—in...

  4. 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.

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  6. Managing funding liquidity risk and market liquidity risk is integral to the role that banks play in maturity transformation, which is, in turn, a fundamental aspect of intermediation between savers and borrowers that contributes to the efficient allocation of resources in the economy.

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