Description

Liquidity of a bank describes its ability to meet out its debt obligations as and when they arise without incurring unacceptably large losses. A sound liquidity risk management framework comprises an array of metrics, measurement, and monitoring tools to assist supervisors in identifying and analyzing liquidity risks. Basel III introduced several liquidity risk standards, including two liquidity ratios to assess the liquidity risk and to ensure that banks survive liquidity pressures. Basel III also introduced a set of monitoring tools aimed at capturing specific information related to a bank’s cash flows, balance sheet structure, available unencumbered collateral and certain market indicators.
This course presents a high-level view of common liquidity risk ratios, measurement and monitoring of liquidity risk, and application of liquidity risk management tools. It discusses key liquidity risk standards and tools for measuring and monitoring liquidity risk in banks. The course also provides a brief introduction to the key considerations in the application of liquidity standards in a bank.