{"product_id":"the-liquidity-risk-management-guide-9781118858004","title":"The Liquidity Risk Management Guide","description":"\u003cb\u003eBook Synopsis\u003c\/b\u003e\u003cbr\u003e\u003cp\u003eLiquidity risk is in the spotlight of both regulators and management teams across the banking industry. The European banking regulator has introduced and implemented a stronger liquidity regulatory framework and local regulators have made liquidity a top priority on their supervisory agenda. Banks have accordingly followed suit. Liquidity risk is now a topic widely discussed in boardrooms as banks strive to set up a strong and efficient liquidity risk management framework which, while maintaining sufficient resources, does not jeopardize the necessary profitability and return targets.\u003c\/p\u003e \u003cp\u003e\u003ci\u003eThe Liquidity Risk Management Guide: From Policy to Pitfalls\u003c\/i\u003e is practical guide for banks and risk professionals to proactively manage liquidity risk in a systemic way. The book sets out its own comprehensive framework, which includes all the various and critical components of liquidity risk management. The recommendations are based on experiences from the recent financial crises, best pr\u003cbr\u003e\u003cbr\u003e\u003cb\u003eTable of Contents\u003c\/b\u003e\u003cbr\u003e\u003c\/p\u003e\u003cp\u003ePreface xi\u003c\/p\u003e \u003cp\u003eList of Figures xiii\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Introduction 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 The importance of an overarching liquidity risk management framework 3\u003c\/p\u003e \u003cp\u003e1.2 The ‘6 Step Framework’ 4\u003c\/p\u003e \u003cp\u003e1.3 The structure of the book 5\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 Primer in Banking 7\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 Risk in banking 7\u003c\/p\u003e \u003cp\u003e2.1.1 Managing the risk 9\u003c\/p\u003e \u003cp\u003e2.1.2 The bank’s balance sheet 11\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 The ALM Function – The Framework on Top of Liquidity Management 13\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 ALM within risk, finance and the businesses 14\u003c\/p\u003e \u003cp\u003e3.1.1 Centralization versus decentralization 14\u003c\/p\u003e \u003cp\u003e3.1.2 Accounting and ALM 15\u003c\/p\u003e \u003cp\u003e3.2 The Asset–Liability Committee (ALCO) 16\u003c\/p\u003e \u003cp\u003e3.3 Areas covered by ALCO 17\u003c\/p\u003e \u003cp\u003e3.3.1 Interest rate risk management 18\u003c\/p\u003e \u003cp\u003e3.3.2 Liquidity risk management 18\u003c\/p\u003e \u003cp\u003e3.3.3 Capital reporting and management 19\u003c\/p\u003e \u003cp\u003e3.3.4 Setting or recommending risk limits 19\u003c\/p\u003e \u003cp\u003e3.4 Enhanced role of the ALM unit 20\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Liquidity – Background and Key Concepts 23\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Definitions and more definitions 23\u003c\/p\u003e \u003cp\u003e4.1.1 Liquidity – definition 23\u003c\/p\u003e \u003cp\u003e4.1.2 Liquidity risk 25\u003c\/p\u003e \u003cp\u003e4.2 The liquidity gap 26\u003c\/p\u003e \u003cp\u003e4.3 The timing factor of liquidity risk: tactical, structural and contingent 27\u003c\/p\u003e \u003cp\u003e4.4 It’s all about the ‘L’ word 30\u003c\/p\u003e \u003cp\u003e4.5 Liquidity, solvency and capital 30\u003c\/p\u003e \u003cp\u003e4.6 Liquidity from a macroeconomic perspective – the singular case of contagion risk and asymmetric information 31\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 The Appropriate Liquidity Framework – Introduction to the ‘6 Step Framework’ 35\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Setting the stage – from policy to a practical framework 35\u003c\/p\u003e \u003cp\u003e5.2 The heightened regulatory focus on liquidity 36\u003c\/p\u003e \u003cp\u003e5.3 Recommended liquidity risk management framework – The ‘6 Step Framework’ 38\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Step I: Sources of Liquidity Risk 43\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 The 10 Sources of Liquidity Risk 45\u003c\/p\u003e \u003cp\u003e6.1.1 Definition of retail and wholesale liabilities 45\u003c\/p\u003e \u003cp\u003e6.1.2 Wholesale funding risk 46\u003c\/p\u003e \u003cp\u003e6.1.3 Retail funding risk 50\u003c\/p\u003e \u003cp\u003e6.1.4 Intraday liquidity risk 57\u003c\/p\u003e \u003cp\u003e6.1.5 Intragroup liquidity risk 60\u003c\/p\u003e \u003cp\u003e6.1.6 Off-balance sheet liquidity risk 61\u003c\/p\u003e \u003cp\u003e6.1.7 Cross-currency liquidity risk 63\u003c\/p\u003e \u003cp\u003e6.1.8 Funding cost risk 63\u003c\/p\u003e \u003cp\u003e6.1.9 Asset risk 64\u003c\/p\u003e \u003cp\u003e6.1.10 Funding concentration risk 65\u003c\/p\u003e \u003cp\u003e6.1.11 Correlation and contagion risk 66\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Step II: Risk Appetite 69\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 The risk appetite statement 69\u003c\/p\u003e \u003cp\u003e7.1.1 Eggs, omelettes and a free lunch in the Board room 69\u003c\/p\u003e \u003cp\u003e7.2 Drawing up a risk appetite statement 70\u003c\/p\u003e \u003cp\u003e7.2.1 Risk appetite set at the appropriate level 71\u003c\/p\u003e \u003cp\u003e7.2.2 Liquidity risk statement – tolerance limit approach 73\u003c\/p\u003e \u003cp\u003e7.2.3 Liquidity risk statement – survival time period or scenario-based approach 75\u003c\/p\u003e \u003cp\u003e7.3 The liquidity reserve 76\u003c\/p\u003e \u003cp\u003e7.3.1 A liquidity reserve or a liquidity buffer? 78\u003c\/p\u003e \u003cp\u003e7.3.2 How to review the risk appetite? 78\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Step III: Governance and High-Level Policy 81\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 The role of the Board of directors 82\u003c\/p\u003e \u003cp\u003e8.2 The role of senior management 83\u003c\/p\u003e \u003cp\u003e8.2.1 First down then up again 84\u003c\/p\u003e \u003cp\u003e8.3 High-level liquidity policies and strategies 84\u003c\/p\u003e \u003cp\u003e8.4 Liquidity policy 85\u003c\/p\u003e \u003cp\u003e8.5 Funding strategy 88\u003c\/p\u003e \u003cp\u003e8.5.1 Examination of the business strategy\/plan requirements 88\u003c\/p\u003e \u003cp\u003e8.5.2 Assessment of funding sources and their attractiveness 90\u003c\/p\u003e \u003cp\u003e8.5.3 Medium- and longer-term funding plans 91\u003c\/p\u003e \u003cp\u003e8.6 Funds transfer pricing 95\u003c\/p\u003e \u003cp\u003e8.6.1 Funds transfer pricing in a nutshell 96\u003c\/p\u003e \u003cp\u003e8.6.2 The FTP principles and objectives 97\u003c\/p\u003e \u003cp\u003e8.6.3 Construction of an FTP model 98\u003c\/p\u003e \u003cp\u003e8.6.4 The FTP method in two steps 99\u003c\/p\u003e \u003cp\u003e8.6.5 The pooled (average) cost method 103\u003c\/p\u003e \u003cp\u003e8.6.6 The matched funding method 104\u003c\/p\u003e \u003cp\u003e8.6.7 Funds transfer pricing in application 105\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Step IV: The Quantitative Framework 111\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Different ways to measure liquidity 111\u003c\/p\u003e \u003cp\u003e9.1.1 Balance sheet analysis 112\u003c\/p\u003e \u003cp\u003e9.1.2 Cash flow analysis 115\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Step V: Stress Testing and the Contingency Funding Plan 123\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Stress testing – the heart of the liquidity framework 123\u003c\/p\u003e \u003cp\u003e10.1.1 How banks perform their stress tests 124\u003c\/p\u003e \u003cp\u003e10.1.2 Where stress tests failed during the financial crises 124\u003c\/p\u003e \u003cp\u003e10.1.3 The principles of stress testing 125\u003c\/p\u003e \u003cp\u003e10.1.4 Stress testing within the ‘6 Step Framework’ 126\u003c\/p\u003e \u003cp\u003e10.1.5 Picking the model 126\u003c\/p\u003e \u003cp\u003e10.1.6 The limitation of VaR for liquidity risk stress testing 127\u003c\/p\u003e \u003cp\u003e10.1.7 The deterministic ‘what if’ approach 127\u003c\/p\u003e \u003cp\u003e10.1.8 Setting of the deterministic scenario 128\u003c\/p\u003e \u003cp\u003e10.1.9 Choice of severity 129\u003c\/p\u003e \u003cp\u003e10.1.10 Choice of time horizon 132\u003c\/p\u003e \u003cp\u003e10.1.11 Scenario stress testing, step by step 133\u003c\/p\u003e \u003cp\u003e10.1.12 Define the scenarios 134\u003c\/p\u003e \u003cp\u003e10.1.13 Playing out the scenario 135\u003c\/p\u003e \u003cp\u003e10.1.14 Analysing the outcome 141\u003c\/p\u003e \u003cp\u003e10.2 Final note on scenario stress testing 144\u003c\/p\u003e \u003cp\u003e10.2.1 Reverse stress testing 146\u003c\/p\u003e \u003cp\u003e10.3 Contingency funding plan (CFP) – the SPADE of the liquidity framework 146\u003c\/p\u003e \u003cp\u003e10.3.1 The regulatory requirement 148\u003c\/p\u003e \u003cp\u003e10.3.2 Why banks need a CFP 148\u003c\/p\u003e \u003cp\u003e10.3.3 The CFP process 149\u003c\/p\u003e \u003cp\u003e10.3.4 Spotting the risk – triggers and early warning indicators 150\u003c\/p\u003e \u003cp\u003e10.3.5 Assessing the risk and alert level – the boy who cried wolf 153\u003c\/p\u003e \u003cp\u003e10.3.6 Decisions and action plans 155\u003c\/p\u003e \u003cp\u003e10.3.7 Execution 160\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Step VI: Reporting and Management Information 169\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 Internal controls and internal audit processes 171\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Basel III: The New Global Framework 173\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Basel III – beyond the buzzwords 173\u003c\/p\u003e \u003cp\u003e12.1.1 The Basel Committee on Banking Supervision (BCBS) 173\u003c\/p\u003e \u003cp\u003e12.1.2 Short Summary of the Regulatory Framework Leading Up to Basel III 173\u003c\/p\u003e \u003cp\u003e12.1.3 Basel III 174\u003c\/p\u003e \u003cp\u003e12.1.4 Capital Requirements Directive (CRD) and the single rulebook 176\u003c\/p\u003e \u003cp\u003e12.2 The Basel III liquidity ratios 177\u003c\/p\u003e \u003cp\u003e12.3 The liquidity coverage ratio (LCR) 178\u003c\/p\u003e \u003cp\u003e12.3.1 Challenges the LCR Will Bring to the liquidity framework 180\u003c\/p\u003e \u003cp\u003e12.3.2 The Basel III definitions and stress assumptions 181\u003c\/p\u003e \u003cp\u003e12.3.3 LCR common disclosure template 183\u003c\/p\u003e \u003cp\u003e12.4 The net stable funding ratio (NSFR) 185\u003c\/p\u003e \u003cp\u003eBibliography 187\u003c\/p\u003e \u003cp\u003eIndex 193\u003c\/p\u003e","brand":"John Wiley \u0026 Sons Inc","offers":[{"title":"Default Title","offer_id":49406936056151,"sku":"9781118858004","price":59.85,"currency_code":"GBP","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0817\/1739\/5799\/files\/9781118858004.jpg?v=1730497613","url":"https:\/\/bookcurl.com\/products\/the-liquidity-risk-management-guide-9781118858004","provider":"Book Curl","version":"1.0","type":"link"}