Reviewing the regulatory agenda for liquidity risk and aligning changes to implement into BAU systems

Reviewing the regulatory agenda for liquidity risk and aligning changes to implement into BAU systems

By Amit Kalyanaraman, Head of Liquidity Risk (UK), Credit Suisse

Can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?

I am currently the Head of Liquidity Risk (UK) for Credit Suisse. I have got extensive Treasury and Risk Management experience with banks across different countries, having worked with global banks for the last 15 years. My roles have spanned a number of functions ranging from funding and liquidity activities at the money market desk to the development of sophisticated risk management analytics, covering Liquidity, Interest Rate Risk, Funds Transfer Pricing and Asset-Liability Management.

What, for you, are the benefits of attending a conference like the Risk EMEA 2019 and what can attendees expect to learn from your session?

Being able to combine a variety of perspectives is a key ingredient for effective risk management. This conference will bring together industry experts who will share insights on various topics that offer a broader understanding of the risk landscape. My session is a panel discussion on the regulatory agenda for liquidity risk and the steps being taken by banks to prepare for the same.

Why is it important for models to account for liquidity risk?

I once heard it put this way: “Liquidity does not matter until it matters but when it matters it is the only thing that matters.”

What factors need to be taken into consideration when predicting the behaviours of investors to ensure liquid assets?

Various stress scenarios need to be considered along with the incentives for liquidity providers and investors of the bank to withdraw their funding. There are a large number of factors that will be in play, so it is good practice to regularly back-test the calibration of any behavioural assumptions applied in the liquidity models.

Why has there been a need to increase liquidity in the market to support distressed conditions?

Since the global financial crisis, liquidity has been one of most focussed areas from regulators and there have been a raft of regulations that have been implemented. Banks have also significantly enhanced their internal modelling capabilities in order to be able to hold the right buffer to sustain severe stress conditions.

Why is there an increased requirement for liquidity reporting and what have been the resulting effects?

Liquidity reporting has expanded tremendously in the last few years, and continues to grow in order to accommodate regulatory and internal requirements. In the UK, requirements relating to PRA 110, Solvent Wind Down and other initiatives continue to require investment in infrastructure and dynamic capabilities for reporting.