Category: Liquidity

ALMM Update

Posted on by Julie Duncan

The PRA has finalised the date of changes to liquidity reporting rules. On 22 April 2016, FSA 050-053 will be switched off and the EU requirements to report additional liquidity monitoring metrics introduced. Firms will not be required to report both sets of returns simultaneously. Note the first reporting date for returns C67.00, C68.00, C69.00, C70.00 and C71.00 will be 30 April for monthly reporters, and 30 June for quarterly reporters.

C66.00 (Maturity analysis) has been dropped

For the months from April 2016 to October 2016 only, the reporting remittance date for monthly reporters is the 30th calendar day after the reporting reference date. Afterwards it reverts to 15 calendar days. Quarterly reporters have 30 calendar days to remit returns.

Reporting remains monthly – but quarterly for institutions that are not part of a group with subsidiaries or parent institutions located outside the UK and the “balance sheet total of the institution represents only a small proportion of the sum of individual balance sheet totals of all institutions in the respective Member State and the institution has total assets which are not significant”. This means almost all UK banks and building societies are quarterly.

http://www.bankofengland.co.uk/pra/Pages/publications/ps/2016/ps1516.aspx

LCR under the new Delegated Act 58 Banks and Building Societies attend ALMIS® webinar

Posted on by Julie Duncan

From 1st October all UK Banks and Building Societies are required to produce the LCR under the new delegated act. To help bring clarity to the new delegated act and address the key points which affect small banks and building societies ALMIS® International, already experts in delivering an automated solution, hosted a highly informative and interactive webinar on Tuesday 29th September, attended by 58 delegates.

The webinar was led by Joe Di Rollo (Managing Director) of ALMIS® International and covered the main points for completing and calculating the new LCR.

This webinar was very relevant to understanding and navigating the issues posed by the new CRD IV liquidity regime which came into force on 1st October. There is definitely an appetite for greater understanding of the new regime and discussion of the more complex and ambiguous issues, as evidenced by the high turnout from both banks and building societies. Everyone agreed on the need for clarity in order to achieve effective compliance and best practice.

The webinar focused on the main points for completing and calculating the LCR and highlighted some key issues.

Key Issues

There is now increased choice for investing in HQLA’s (High Quality Liquid Assets). Delegates were asked which instruments they are considering. The results are captured in the graph below:

lcr-webinar-graph

Outflows are the most complex part of the return with some interesting differences in interpretation. One example of different opinions in interpretation discussed at the webinar is detailed below:

If a customer has a balance greater than the FSGS limit (shortly to be £75,000) should the entire balance be treated as a higher risk outflow of 10% or only the portion of the balance above the insured amount?

The EBA FINAL draft implementing technical standards states:

1.1.1.2 Deposits subject to higher outflows

“Credit institutions shall report here the full balance of the deposits subject to higher outflow rates in accordance with paragraph 2 and 3 of Article 25 of Commission delegated regulation (EU) 2015/61. Those retail deposits where the assessment under paragraph 2 of Article 25 for their categorization has not been carried out or is not completed shall also be reported here”.

This wording suggests that the intent is for the entire balance to be considered non-stable.

On the other hand…

Article 25 para 1 – Credit institutions shall multiply by 10% other retail deposits, including that part of retail deposits not covered by Article 24.

Firms are interpreting this to mean that only the excess over the guarantee is subject to the higher outflow.
ALMIS® software is designed to handle both interpretations.

In summary, ALMIS® is already a fully automated solution which produces the LCR from core data. This same core data is used for liquidity adequacy and analysis, providing a reliable, automated system to help ensure efficient compliance with the new regulations, regardless of interpretation.

For the presentation slides, please contact Jenna Haston by email on [email protected] or call on 0131 452 8898.

PRA Publish Policy Statement and Supervisory Statement on Liquidity

Posted on by Julie Duncan

The PRA has today (8th June 2015) issued a brief policy and supervisory statement.

Some concessions to proportionality, particularly in reporting, have been made. The documents do however, set out more clearly how firms are expected to manage liquidity under CRD IV.

Key to this, is a requirement for daily reporting for firms with assets greater than £5bn for:

  1. COREP LCR (C 72.00 – C 76.00)
  2. Contractual maturity ladder (AMM C 66.00)
  3. Rollover (AMM C 70.00)

Additionally, firms are expected to continue to strengthen stress testing and incorporate liquidity costs into fund transfer pricing more fully.

ALMIS® International are experts in helping firms implement and integrate solutions in all three of these areas (liquidity reporting, stress testing and funds transfer pricing from one system).

Policy statement CRD IV: Liquidity – PS11/15

The PRA’s Approach to Supervising Liquidity and Funding Risks – SS24/15

For more information on the ALMIS® solution, contact Jenna Haston on 0131 452 8898 or email [email protected]

Liquidity Stress Testing

Posted on by Julie Duncan

Thank you to everyone who attended our Liquidity Stress Testing Webinar, which we run exclusively for ALMIS® users. We had a high attendance highlighting how important the topic is.

To encourage interaction and add extra value, William Webster the Managing Director of Barbican Consulting Limited, joined the meeting as a guest treasury expert where he shared his views on Liquidity Stress Testing. He made several interesting comments which are outlined in our slides.

Attendees provided information on the stress tests they run in advance of the meeting. The slides also contain a summary of user feedback on what liquidity stress assumptions are currently used.

Please feel free to download slides from Liquidity Stress Testing Webinar

This peer comparison proved to be very useful, with one attendee commenting

“Always good to see a comparison of what other institutions do”

Polls revealed that most (77%) split out idiosyncratic and market wide stresses and more than half of attendees run 3 to 5 scenarios.

We hold webinars every month on important industry topics. Our next webinar is on yield curves for interest risk and fair values, and will be held on Tuesday 27th September at 2.30pm.

“quick way of getting a good understanding of a subject”

“very easy way to get a group of ALMIS® users together & discuss various topics”