Liquidity Risk Management Overview
Liquidity risk management and regulatory compliance are at the forefront of challenges facing financial institutions (FIs). The pressure of increased regulatory oversight, the changing nature of funding markets, the need to manage huge volumes of daily, monthly and quarterly average liquidity data and the burden to report correctly and more frequently — all these factors are forcing FIs to rethink their approach to meeting these challenges.
At the core sits the FR 2052a requirement. An FI’s FR 2052a data and outputs not only produce the liquidity coverage ratio (LCR), but directly relate to satisfying other Pillar II and III liquidity requirements such as the Federal Reserve’s LCR Public Disclosure rule, FR Y-15G and Reg. YY liquidity stress testing (LST). And, more regulatory requirements are coming. The net stable funding ratio (NSFR) draft rule will become a regulatory filing and intraday reporting looms.
Reusing data for multiple regulatory requirements creates operational efficiencies and positions the FI to adapt to regulatory changes and withstand scrutiny. Trusted liquidity data enables informative analytics and provides the FI with a unified view of its entire liquidity landscape. To successfully meet these challenges and position for change, FIs must make their vast liquidity data work harder and more efficiently.
Liquidity Risk Management Solution Modules
Liquidity Risk Management Ecosystem
AxiomSL’s ‘Platform for Change’ enables the FI to achieve strong data management and governance, providing transparent controlled processes from data ingestion to report submission, and dynamic data-lineage with detailed drill-down and drillup inspection. Because the FI’s data is ingested seamlessly, without need of any tranformation, its many orginal data sources are always preserved, regardless of where they originate in the enterprise.
Powerful Liquidity Solution Modules Combine to Create a Comprehensive U.S. Liquidity Ecosystem
With all its liquidity data, models and calculations in one place, the FI meets requirements efficiently, is empowered with trusted analytics and historical perspective, and is positioned to evolve with the changing regulatory landscape.
Liquidity Management Framework
Liquidity Risk Management Background
LST Module: Enables Compliance With Reg. YY – The LST module facilitates compliance with Reg. YY liquidity stress testing requirements. It leverages FR 2052a data and incorporates any additional source data to automate measurements, produce internal reports and quickly demonstrate compliance. It enables cash flows to be subjected to roll-over rate assumptions for the required scenarios as well as the FI’s scenarios.
LCR Public Disclosure Module: Meets The FRB Requirement – The FRB requires LCR and related components to be publicly disclosed quarterly. AxiomSL’s LCR Public Disclosure module enables compliance by calculating the averages and producing the quantitative disclosure template.
FR Y-15G Module: Connects FR 2052a To Line Items On FR Y-15 Schedule G – Leveraging Appendix VII of the FR 2052a instructions, this module maps FR 2052a data to specific line items on Schedule G of the FR Y-15 report.
FR 2052a: At The Core – AxiomSL’s flagship data integrity and control platform and its FR 2052a analytic solution incorporate easily within the client’s technology infrastructure. AxiomSL’s solution provides built-in functionality and flexibility that enables rigorous analysis. Trend analysis delivers insight across multiple dimensions including entities, products, dates and scenarios. Aggregations tailored to an internal analytic need, e.g., Treasury/ALM, can be produced in the same run with the required regulatory reporting output. Treasury/ALM also appreciates the easy inspection of collateral flows. AxiomSL’s solution integrates adjusting and iterative entries thereby enabling support for the FI’s GL processes.
LCR Module: Gives The FI’s Required LCR Value – The LCR-logic module delivers net cash-flows along with LCR rule categories that give the client’s regulatory-required LCR value. The module leverages the FR 2052a solution and its Appendix VI instructions to map FR 2052a data to specific LCR rule sections and calculate the LCR. The results are readily displayed within a
comprehensive LCR control report structure
Liquidity Risk Management Features
Runs on as-is client source data
User-controlled mapping of source data
User-defined list classifications categories and naming
User-defined stress parameters
Visual work flow provides user=defined actions and sequence of processes
Architecture preserves historical process and data lineage
Liquidity Risk Management Benefits
Reusable results for downstream analytics.
Improved operating efficiency.
Traceability to methods, parameters and source data.
Source liquidity data once. Use many ways.
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