Month: July 2015

Liquidity under CRD IV and ALMM – Additional Liquidity Monitoring Metrics – Is there a positive aspect?

Posted on by Julie Duncan

The imminent introduction of the new LCR and ALMM will indeed increase the volume and even frequency of reporting for many Building Societies but, after closer inspection, is it all bad news or can firms use this data to their competitive advantage?

Volume of Reporting

The amount of regulation reporting for liquidity from each individual firm is now twice the volume that the entire UK Building Society sector was producing prior to 2008. The six new ALMM reports alone contain over 15,000 data points. The new ALMM reports can be considered work in progress as the EBA gain approval from the European Commission and they add technical definitions and validations. For a temporary period, firms are reporting three different cuts of liquidity data as regulations move towards new standards.

Proportionality

There are, however, positive aspects to the new regime announced recently by the PRA.

  • Daily reporting will not be a requirement for firms with >£5bn assets.
  • The new LCR (liquidity under CRD IV) replaces the BIPRU 12 type A/B approach, is more rules based than principles driven and for many produces a lower minimum.
  • The minimum liquidity target is therefore considered easier for most building societies.
  • There is now a wider range of instruments to invest liquid assets.

Turning Compliance to Competitive Advantage

The volume and ‘work in progress’ nature reporting demand that all firms implement smart, automated and flexible systems. The up side though of getting this right will enable firms to better analyse and manage liquidity to their advantage – providing more accurate visibility over a Funds Transfer Pricing allowing understanding of the true cost of liquidity and how to best manage this.

To assist with this, we are developing auto population for four of the main reports and this auto population will be available from beginning of September 2015. We have also prepared a document that explains the reports and a more detailed ALMIS® specification.

For further information or to request an ‘ALMIS® Guide to understanding ALMM’, please contact [email protected]

ALMM – Additional Liquidity Monitoring Metrics

Posted on by Julie Duncan

ALMM – timing of new introduction

6 new reports that contain over 15,000 data points. Under taxonomy 2.3 these contain very limited validations and can be therefore seen as work in progress.

Four categories of reporting are:

  • A contractual maturity analysis (c66)
  • The concentration of funding by counterparty and product (c67 & C68)
  • Volumes, spreads and roll-overs of funding in the past month (c69 & c70)
  • The concentration of counterbalancing capacity (c71)

Current timescale is that the ALMM will be introduced from 1 July 2015 but this is subject to approval by the European Commission and at the current time this approval has not been given. There is therefore wide expectation of a delay and a revised timetable.

Even with this earliest adoption, most UK firms will be exempt from monthly submissions (Chapter 7B, Article 16b of Regulation (EU) No 680/2014). For those firms (total assets less than EUR 30bn), reporting would not commence until the next quarterly (q3) September reference with reporting in November 2015

For a detailed specification or further information, please contact [email protected]