On 18 September 2008, the Committee of European Banking Supervisors (CEBS) published the second part of its technical advice to the European Commission (Commission) on liquidity risk management (Advice) together with feedback to its consultation. (For more information on the consultation and the Commission's call for evidence to which it relates, see Legal update, CEBS consults on the second part of its technical advice on liquidity risk management.)

The Advice includes 30 recommendations on liquidity risk management and supervision which are principles-based and subject to an overarching principle of proportionality.

The first 18 recommendations are targeted at credit institutions and investment firms established in the EU to ensure that adequate liquidity risk management for both normal and stressed times is in place.

CEBS's last 12 recommendations target liquidity risk supervision. CEBS suggests that supervisors consider if the requirements could be supplemented or replaced by internal methodologies developed by institutions, based on a thorough prior supervisory assessment. CEBS is also of the view that enhanced coordination between supervisors should be pursued, through active use of colleges or through delegation of tasks.

Although it is likely that national solutions to liquidity problems will be pursued, the recommendations highlight the need for consistency. CEBS has liased closely with other European and global institutions reflecting on liquidity issues, in particular with the Basel Committee on Banking Supervision.