How much real-time liquidity risk management is needed?
Liquidity risk management has recently moved into the limelight for many good reasons: There is increased awareness that failure to manage it properly can have fatal consequences for any financial business. This in turn has meant that regulators are also increasingly eager for banks to better control this part of their organisation, due to its institution-wide consequences. Banks are facing many difficult challenges in this area, including a difficult market environment, numerous and complex new regulations and an often resistant corporate culture.
Basel III has already had a significant impact on banks’ behaviour, including a lower risk appetite, higher liquid asset buffers driven by fear of a possible future liquidity shortfall. But not knowing what the future regulatory changes will hold means that banks need to prepare for more than just Basel III readiness.
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