Ahead of the 2nd Annual Liquidity Risk Management Summit 2017, Aaron Sayles, Senior Consultant at Wolters Kluwer provides us with an overview of the evolutions of LCR: Daily management and integration with other regulatory regimes.
Aaron, can you please tell the Risk Insights readers a little bit about yourself, your experiences and what your current professional focus is?
I am a Senior Consultant at Wolters Kluwer. I’ve worked in the Financial Services industry for over twelve years. I primarily work with industry professionals to assess needs and identify internal and external drivers around liquidity risk and data processes.
At the Liquidity Risk Management Summit you will be giving a presentation on your insight regarding – Evolution of the LCR: Reviewing daily management and integration with other regulatory regimes. Why do you believe this is a key talking point in the industry right now and what can risk professionals gain from this insight?
I think this is indicative of the direction of the marketplace. Historically firms have been quite reactionary when responding to new regulatory initiatives which lead to singular bespoke processes. At this point we’re seeing folks take a more holistic perspective with their Risk, MIS and Regulatory Reporting. The data requirements across these domains are almost identical, and as such, replicating data acquisition and mapping becomes not only expensive and inefficient but this increases operational risks as well in that these individual processes need to be maintained. So, in short, I think the evolution of the LCR has less to do with the actual application of the regulation but with the process in and of its self.
In your opinion, how do you think the LCR has evolved?
Today, the regulatory scrutiny for liquidity monitoring and reporting in the U.S. is at an all-time high – and keeping up with regulatory changes involves a lot of time, money, and risk. Ensuring compliance while staying flexible enough to meet changing regulations, fast, is still a challenge for most financial institutions.
In your experience, how can financial institutions best manage NSFR and LCR interaction?
Financial institutions would benefit from developing a solution that will cover liquidity monitoring, calculation, stress testing and reporting obligations – all in one. This will offer full transparency and auditability – from data acquisition all the way through to reporting. Having a single source of truth where data is efficiently gathered and reconciled for all monitoring, calculation and reporting requirements. From a liquidity viewpoint, data is classified once across LCR, NSR and FR 2052a to ensure consistency and economies of scale.
What does the future look like for the Liquidity Risk Professional? And what changes or problems do you see in the horizon and theoretically, how would you tackle these?
From the perspective of integration, I think we’ll see a continuance of harmonizing processes across different domains. With the NSFR coming down the road, there will be even more in common with capital and liquidity from a data perspective. As such, Liquidity Risk professionals will be a component of a larger Risk management process.