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03 May 2006

Joint Forum Paper on Management of Liquidity Risk in Financial Groups





The Joint Forum’s Working Group on Risk Assessment and Capital issued the results of a review of funding liquidity risk management practices at conglomerates engaged in banking, securities, and insurance activities. The review focussed on 40 large, complex financial groups with operations spanning national borders, financial sectors, and currencies. The majority of the financial institutions represented in the review were involved in at least two of the banking, securities, or insurance sectors.

The Working Group among others finds that liquidity risk management is mostly separated in financial groups that contain firms operating in multiple sectors. With few exceptions, liquidity risk management is not well integrated in groups conducting an insurance business as well as banking and/or securities businesses. Groups generally have integrated to some extent liquidity risk management across the banking and securities business lines, although the degree of integration varies considerably among firms.

The Working Group also studied differences in liquidity risk management practices within individual sectors. Some of the surveyed firms indicate that regulations may have an impact on the design of their structures for managing liquidity risk. Some regulatory restrictions impede the movement of liquidity across jurisdictions; for example, regulatory restrictions may give rise to the need to maintain liquid assets in separate jurisdictions and currencies, rather than in a single pool.

Press release
Document



© IOSCO


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