Liquidity Risk Management After the Crisis: More Important Than Ever
Introduction
This report looks at the market for Liquidity Risk Management technology against a backdrop of increasing demand for this capability in the wake of the global financial crisis.
Features and benefits
Banks are obliged to take a critical look at their risk management systems to see what they already have in place and what else they will need to implement to meet these regulatory requirements, and beyond that to use an LRM infrastructure to run their businesses better.
Your key questions answered
This report looks at the market for Liquidity Risk Management technology against a backdrop of increasing demand for this capability in the wake of the global financial crisis.
Features and benefits
- Identifies the key vendors and outlines the approaches to achieving appropriate LRM.
Banks are obliged to take a critical look at their risk management systems to see what they already have in place and what else they will need to implement to meet these regulatory requirements, and beyond that to use an LRM infrastructure to run their businesses better.
Your key questions answered
- What are the key trends in the industry?
- What are banks looking to achieve with LRM technology and what are the options open to them?
SUMMARY
Catalyst
Ovum view
Key messages
Banks' liquidity management platforms failed in the crisis
Liquidity risk derives from credit, market, or operational events
Liquidity risk has broader requirements than ALM
Funds transfer pricing is becoming a requirement for liquidity risk
LRM is unlikely to be a rip-and-replace exercise so integration is key
Vendors should adopt a consultative approach to LRM
MARKET CONTEXT: LIQUIDITY RISK IS TOP OF MIND
The liquidity crisis
Banks' liquidity management platforms failed in the crisis
BUSINESS FOCUS: LIQUIDITY IS ON THE REGULATORY AGENDA
The Liquidity Coverage Ratio addresses short-term funding
High-quality liquid assets
Run-off rates
The NSFR addresses medium and long-term funding
Liquidity risk derives from credit, market, or operational events
Internal sources
External sources
TECHNOLOGY FOCUS: LIQUIDITY MANAGEMENT GOES BEYOND ALM
Liquidity risk has broader requirements than ALM
Stress testing
Contingency planning
Collateral management
Diversification/limits management
Funds transfer pricing
FTP is becoming a requirement for liquidity risk
[Missing title]
RECOMMENDATIONS
Recommendations for enterprises
Watch what the UK is doing and liaise with your own regulators
Prioritize the formulation of an LRM philosophy over technology choices
Once the philosophy has been established, audit what you have in place
Consider ways of turbo-charging existing infrastructure
Recommendations for vendors
LRM is unlikely to be a rip-and-replace exercise, so integration is key
Adopt a consultative approach to LRM
Follow Basel III and partner for localization
Alternative views
APPENDIX
Further reading
Methodology
Author
Ovum Consulting
Disclaimer
Catalyst
Ovum view
Key messages
Banks' liquidity management platforms failed in the crisis
Liquidity risk derives from credit, market, or operational events
Liquidity risk has broader requirements than ALM
Funds transfer pricing is becoming a requirement for liquidity risk
LRM is unlikely to be a rip-and-replace exercise so integration is key
Vendors should adopt a consultative approach to LRM
MARKET CONTEXT: LIQUIDITY RISK IS TOP OF MIND
The liquidity crisis
Banks' liquidity management platforms failed in the crisis
BUSINESS FOCUS: LIQUIDITY IS ON THE REGULATORY AGENDA
The Liquidity Coverage Ratio addresses short-term funding
High-quality liquid assets
Run-off rates
The NSFR addresses medium and long-term funding
Liquidity risk derives from credit, market, or operational events
Internal sources
External sources
TECHNOLOGY FOCUS: LIQUIDITY MANAGEMENT GOES BEYOND ALM
Liquidity risk has broader requirements than ALM
Stress testing
Contingency planning
Collateral management
Diversification/limits management
Funds transfer pricing
FTP is becoming a requirement for liquidity risk
[Missing title]
RECOMMENDATIONS
Recommendations for enterprises
Watch what the UK is doing and liaise with your own regulators
Prioritize the formulation of an LRM philosophy over technology choices
Once the philosophy has been established, audit what you have in place
Consider ways of turbo-charging existing infrastructure
Recommendations for vendors
LRM is unlikely to be a rip-and-replace exercise, so integration is key
Adopt a consultative approach to LRM
Follow Basel III and partner for localization
Alternative views
APPENDIX
Further reading
Methodology
Author
Ovum Consulting
Disclaimer
