Liquidity Risk Management
Funding liquidity, market liquidity, and regulatory requirements
Liquidity Risk Management
Executive Summary
Liquidity risk—the risk of being unable to meet obligations when due without unacceptable losses—sits alongside credit and market risk as a core concern for banks, asset managers, and corporates. Funding liquidity (cash flows, term funding, contingent commitments) and market liquidity (bid–offer, depth, price impact) interact: stress in one can amplify the other. Regulators enforce the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), so treasury and risk teams must design balance sheets and contingency plans accordingly. For consultants advising on liquidity strategy, buffer sizing, or regulatory readiness, a precise grasp of LCR/NSFR and stress-testing supports credible recommendations and value for money; this manual provides that foundation.
Learning Objectives
By the end of this manual, you will understand liquidity risk types and measurement frameworks, regulatory requirements including LCR and NSFR, stress testing and scenario analysis, liquidity management strategies and tools, and market liquidity assessment and monitoring.