Measuring and Managing Liquidity Risk

Contents

Preface

About the authors

Abbreviations and acronyms

PART I LIQUIDITY AND BANKING ACTIVITY

1 Banks as lemons?

1.1 Introduction

1.2 The first wave

1.3 Banks as lemons?

1.4 The response

1.5 The second wave

1.6 Conclusion

2 A journey into liquidity

2.1 Introduction

2.2 Central bank liquidity

2.3 Funding liquidity

2.4 Market liquidity

2.5 The virtuous circle

2.6 The vicious circle

2.7 Second-round effects

2.8 The role of the central bank, supervision and regulation

2.9 Conclusions

3 Too big to fail

3.1 Introduction

3.2 When giants fall

3.3 A hard lesson

3.4 Closer supervision

3.5 G-SIFI regulations

3.6 The next steps

3.7 Conclusion

4 The new framework

4.1 Introduction

4.2 Some basic liquidity risk measures

4.3 The first mover

4.4 Basel III: The new framework for liquidity risk measurement and monitoring

4.4.1 The liquidity coverage ratio

4.5 Inside the liquidity coverage ratio

4.6 The other metrics

4.7 Intraday liquidity risk

4.8 Beyond the ratios

4.9 Conclusion

5 Know thyself!

5.1 Introduction

5.2 Some changes on the liabilities side

5.3 The role of leverage

5.4 The originate-to-distribute business model

5.5 The liquidity framework

5.6 Stress-testing and contingency funding plan

5.7 The CEBS identity card

5.8 Conclusions

5.9 Appendix: The CEBS Identity Card Annex (CEBS)

PART II TOOLS TO MANAGE LIQUIDITY RISK

6 Monitoring liquidity

6.1 A taxonomy of cash flows

6.2 Liquidity options

6.3 Liquidity risk

6.4 Quantitative liquidity risk measures

6.4.1 The term structure of expected ...