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SRB’s Liquidity & Funding reporting requirement

Integrated approach to meet the “Liquidity and Funding” reporting requirements of SRB by using the current data and technology platform of ALM.


SRB has published a new guidance on liquidity and funding in resolution. Banks are likely to face liquidity stress in resolution because of the reluctance of market participants to roll-over or provide funding to a bank in crisis.

In the SRB’s Expectations for Banks (Efb) document, banks are expected to:

  • Have established processes and developed methodologies to estimate the liquidity and funding needs for the implementation of the resolution strategy;
  • be able to measure, report and forecast their liquidity position and relevant liquidity metrics during the resolution process; and
  • be able to identify and mobilize collateral that could be used to obtain liquidity during and after resolution. It is expected that these collaterals would be unencumbered and without any legal & operational obstacles which can be easily mobilized under stressed conditions for funding.

This guidance focuses on the estimation of liquidity needs, and aims to enhancing banks’ resolvability and preparedness for a potential resolution.

The ALM function of a bank today as part of their liquidity risk management framework conducts daily operational and strategy work that encompasses :

  • Managing liquidity and funding risk management framework
  • Devising funding strategy during the economic boom period and in slow down period
  • Strategy regarding liquidity buffers and collateral management
  • Cost benefit allocation mechanism
  • Intraday liquidity risk management
  • Liquidity stress testing and
  • Liquidity contingency plan.

Additionally according to Basel III norms banks use the metrics LCR (Liquidity Coverage Ratio) and NSFR (Net Stable Funding Ratio) to measure the short-term and long-term resilience of bank’s liquidity risk profile.

Taking an integrated approach by extending the LCR , NSFR and ILAAP reporting data and processes , banks can meet the reporting obligations on “liquidity and funding options” to SRB by using the same data and technology platform.

Intended audience: CTOs, CFOs , CIOs , Head of Treasury and ICT risk and treasury teams.

Single Resolution Board requirements on “liquidity and funding options assessment for banks”

SRB presents the high-level framework to determine when a bank is assessed to be failing or likely to fail (FOLTF). This is based on the net liquidity position of the bank in a short-term. A bank reaching the failing stage has two scenario’s (i) slow moving and (ii) fast moving. In a slow-moving scenario, the bank is estimated to reach the failing stage in 12 months, so it can still take corrective measures to avoid this whereas in the fast-moving scenario the bank is expected to reach the failing stage in less than 3 months, so it has limited or no options to take corrective steps to avoid the situation.

SRB has provided high level guidelines on calculating the liquidity risk profile of a bank and based on the net liquidity position (NLP) of a bank it decides when it should take over the bank for implementing the recovery and resolution tools. The resolution tools are bail-in, asset separation, bridge institution and sale of business.

SRB uses NLP (net liquidity position) and MON (minimum operating liquidity needs) to determine the liquidity crisis in a bank. To know whether the bank is able to carry on its BAU operations, MON (minimum operating liquidity needs) as a metric is used by SRB and if the MON is below 7 days for a bank is deemed to be Failing or likely to fail (FOLTF). For both NLP and MON the ALM maturity model C66 template is used to gather information. 

It uses the same data of LCR but in the case of MON the total net liquidity outflow is non-stressed unlike in LCR where the outflows are stressed. So, its value is expected to be positive and less than the LCR net liquidity outflow for 30 days.

SRB in its guidelines expects that the banks will start implementing liquidity risk framework in 2023, which will help it to report about its liquidity risk resilience profile to SRB. In future the banks may be expected to have this information provided in real time, which will be difficult as it requires complete transformation of how the data and processes currently work in a bank.

Download the whitepaper to get a more detailed assessment on how the banks can leverage their existing ALM platforms to assess the liquidity in more granularity and take necessary action in changing macro and idiosyncratic scenarios to address regulator’s concern.

Download the full report of liquidity and funding options to SRB