The consultation proposes guidelines on the appropriate size and composition of liquidity buffers to enable credit institutions to withstand a liquidity stress for a period of at least one month without changing their business models.
CEBS proposes that, when building their buffers, credit institutions consider:
- three types of stress test scenarios : idiosyncratic, market specific, and a combination of the two;
- a time horizon of at least one month; it will also be important to take into account a shorter time horizon of at least one week (acute phase of stress) during which a greater degree of confidence on the capacity for the eligible assets to generate liquidity would be required.
- that the core of the buffer should be composed of cash and assets that are both highly liquid in private markets and central bank eligible, although some flexibility might be appropriate for the longer end.
The consultation deadline is 31 October 2009 and a public hearing will be held on 22 September 2009.
© CEBS - Committee of European Banking Supervisors
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