Key Components of LCR/2052a implementation

July 22, 2016 – Don Mumma, Managing Director, AxiomSL

LCR requirements will vary significantly by institution. A smaller bank with a very simple business model and simple data will often lack the requisite LCR subject matter expertise. This is a very different challenge than problems a larger institution will face with sprawling data sources, and therefore it’s not a one-size-fits-all approach.

Key components involve early self-assessment and assembling an optimal plan and governance process to tackle LCR. Once you figure out what you have and need, you assemble the team – some inside with others including consultants and technology providers – looking at those resources, plan around that team, and then design the governance process that will guise a firm through LCR milestones and benchmarks, unit testing, user acceptance testing and other aspects of the implementation process.

For larger banks in the United States, a fundamental part of this process is 2052a. Currently, there isn’t an LCR report requirement in the U.S. per se; rather, there is this compliance requirement. The Federal Reserve has produced some element mapping that illustrates how 2052a is used in LCR, but there is no real template here yet, and currently 2052a is actually filed under a separate name, 5-g. Putting those two together is an important component: they’re closely interrelated, and firms currently implementing LCR and 2052a separately will risk significant disconnects.

Therefore, the greatest technology challenge treasury teams face is to source relevant granular information across the bank, as with 2052a compliance, so as to now proactively monitor the LCR in an effective and operationally coherent way.

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