Incorporating liquidity risk regulatory requirements into one unified process for strategic integration

Incorporating liquidity risk regulatory requirements into one unified process for strategic integration

<strong>1. Stephanie, we are looking forward to you joining the panel discussion at the Risk Americas 2017 Convention in New York City across May 23-24. Please tell our readers a little bit about yourself, your role and your professionals experience.  </strong>

I have worked in Treasury at various global financial institutions over the last 25 years.  I am currently the Treasurer of Mizuho Securities USA, which is the U.S. broker dealer sub of Mizuho Financial Group, the 2<sup>nd</sup> largest Japanese bank.  My group is responsible for the unsecured funding and liquidity management for the broker dealer.

<strong>2. You will be discussing ways of incorporating liquidity risk regulatory requirements into one unified process. What key talking points do you expect to be at the forefront of the conversation?</strong>

We need to understand how the different businesses in the firm interact and use liquidity.  Then liquidity risks can be identified, and processes can be built to monitor and manage liquidity risk, in line with regulatory requirements, where applicable.

<strong>3. Banks currently have to implement and contend with LCR, NSFR, EPS and CLAR liquidity regulations. There will be undoubtedly be challenges to unify the process to incorporate them all. How can banks begin to align these?</strong>

Disclaimer-Mizuho is not a LISCC bank and therefore isn’t subject to CLAR.  We are subject to a less painful large FBO Coordinated Liquidity Review, or LFBO CLAR, which is slightly less painful.  However, as mentioned above, having a clear liquidity risk identification and management practice is key.  Even though all of the regulatory requirements are different, there are similar elements and it is important to attempt to standardize as much of the process as possible.  This will simplify the implementation of any additional rollout of new regulations.

<strong>4. What benefits are there to collating results to make strategic and informed decisions?</strong>

See above.  The benefits are standardization where possible, so not recreating the wheel each time a new requirement comes about.  In addition, it is much nicer showing the regulators how organized and accurate the data is, as well as senior management.  It is also easier to make incremental changes where necessary.

<strong>5. What are the key differences between tactical and strategic decisions?</strong>

I believe the difference between strategy and tactics is that a strategy defines “what” is to be done, but tactics define the “how”.  A strategy should be defined first, and the tactical policy should follow.  There may be different people who are able to articulate tactical and strategic decisions, so it is important to include people with different skill sets.

<strong>6. What upcoming challenges do you foresee for liquidity risk professionals over the next six to 12 months?</strong>

Uncertainty around the changing regulatory landscape is always a challenge. If clear goals are eventually articulated, it should become a bit easier to develop a plan.