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FINANCIAL MARKET COURSES

Liquidity Risk – Identification & Measurement

Liquidity risk is inherent in a bank’s core business of maturity transformation. Management of this risk involves identifying and measuring the cash needs of a bank and then satisfying those requirements – in good times and bad. In the wake of severe liquidity difficulties encountered during the financial crisis, regulators have highlighted the importance of liquidity risk management within financial institutions and have reviewed the relevant legislation.

 

This course – the first of two on managing liquidity risk – looks at the issues surrounding the identification of this type of risk and the subsequent measurement of it. A second course will focus on the structures banks put in place to manage this risk, as well as examining the liquidity risk regulatory environment.

  • OBJECTIVES

    On completion of this course, you will be able to:

    Explain how different forms of banking business generate particular liquidity risks

    Describe how liquidity risks can be measured using gaps and ladders, and how such measurements can be adjusted to incorporate future uncertainty

  • COURSE OUTLINE

    Topic 1: Identifying Liquidity Risk

    Show me the Money!

    Uses of Cash

    Sources of Funds

    o Equity and Retained Profits

    o Wholesale Borrowing

    o Retail Borrowing

    o Repos

    o Central Banks

    o Asset Cash Flows & Sales

    The ‘Spectrum’ of Liquidity

    Topic 2: Measuring Liquidity Risk

    A Sizeable Task

    Liquidity Gap Reports

    Consolidated Liquidity Gap Report

    Cash Flow Forecasting

    Adjustments

    Liquidity at Risk

  • PREREQUISITE KNOWLEDGE

  • ESTIMATED COMPLETED TIME

    75 Minutes

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