Liquidity Risk Management and Supervision

In response to the financial crisis, the Liquidity Coverage Ratio and Net Stable Funding Ratio have been introduced. While this was an important step for supervision, there is wide agreement that compliance with these minimum requirements is not sufficient to ensure sound liquidity risk management.

Recognising this, both the Single Supervisory Mechanism and the European Banking Authority are currently in the process of developing guidance to banks and regulators on how to ensure strong liquidity risk management frameworks. Since the in-depth and bank-specific supervision of liquidity risk is a very new topic, many banks and regulators will have to make major efforts to prepare for raised expectations and upcoming requirements.