BCBS publishes revised Principles for Sound Liquidity Risk Management and Supervision | Practical Law

BCBS publishes revised Principles for Sound Liquidity Risk Management and Supervision | Practical Law

On 25 September 2008, the Basel Committee on Banking Supervision (BCBS) published a revised version of its Principles for Sound Liquidity Risk Management and Supervision (Principles), first published in 2000.

BCBS publishes revised Principles for Sound Liquidity Risk Management and Supervision

Practical Law UK Legal Update 1-383-4012 (Approx. 3 pages)

BCBS publishes revised Principles for Sound Liquidity Risk Management and Supervision

by PLC Financial Services
Published on 25 Sep 2008 • European Union
On 25 September 2008, the Basel Committee on Banking Supervision (BCBS) published a revised version of its Principles for Sound Liquidity Risk Management and Supervision (Principles), first published in 2000.
The BCBS launched a review of the Principles in February 2008 to update and enhance them to take into account lessons learned from the global turmoil in financial markets and developments in market practice. It published draft revised Principles for public consultation in June 2008 (see Legal update, BCBS consults on revised Principles for Sound Liquidity Risk Management and Supervision).
Amongst other things, the revised Principles:
  • Emphasise that banks should establish a robust liquidity management framework which is fully integrated into a firm-wide risk management process.
  • Set out principles to strengthen the measurement and management of banks' liquidity risk.
  • Identify the role of supervisors.
  • Stress the need for regular public disclosure and communication within and across national borders.
Detailed guidance is also provided in key areas.
The revised Principles were endorsed by supervisors from central banks and supervisory agencies at the International Conference of Banking Supervisors on 24 and 25 September 2008.
Nout Wellink, BCBS Chairman, has called for "robust and timely implementation" of the revised Principles by banks and supervisors. He said that the BCBS "will coordinate rigorous follow up by supervisors" to ensure banks' adherence to the revised Principles.
The BCBS has started to review measures to promote greater consistency in the implementation of global liquidity supervision for cross border banks as a way to enhance resiliency to financial market stress.