International Initiatives on Liquidity Risk Management

 Here is a copy of the presentation I gave in Abu Dhabi to the High Level meeting organized by the Financial Stability Institute and the Arab Monetary Fund. It summarises recent initiatives by the FSA, U.S. regulators, CEBS and others to strengthen the way banks manage their liquidity. (I didn’t refer to the recent Basel initiative, since that was been addressed by another speaker from the BIS.)

The presentation also refers to some initiatives – under way or forthcoming – by Middle East regulators.

One senior Middle Eastern regulator recently told me that Basel’s proposals on liquidity will be far more significant for Middle Eastern banks than the increased capital requirements. Middle Eastern banks are generally well-capitalised already, but the new liquidity requirements place greater emphasis on banks holding highly rated and high-liquid government debt – and government debt markets in the Middle East are just not deep enough to provide that sort of liquidity. There has also been a presumption in the Middle East that central banks will step in to provide liquidity during times of stress (a correct presumption, as it turned out): but with the publication of more explicit liquidity requirements, counterparties are going to be far less tolerant of banks that point to implicit support rather than real balance sheet liquidity.

Here’s my presentation:

Cunningham, Liquidity, Abu Dhabi 2010

And here are some links to the key documents mentioned in the slides: