CEBS advice to EC on liquidity risk management

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19 Sep 2008

The Committee of European Banking Supervisors has submitted to the European Commission the second part of its advice on liquidity risk management.

The advice consists of an analysis of specific issues listed by the Commission and challenges not currently addressed in the EEA and includes 30 recommendations, as follows:
  • CEBS's 30 recommendations on liquidity risk management 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 European Union to ensure that adequate liquidity risk management for both normal and stressed times is in place. In particular this should build on diversification of funding sources, appropriate liquidity buffers, robust stress tests and regularly tested contingency funding plans.
  • CEBS's last 12 recommendations target liquidity risk supervision. Supervisors should consider whether their requirements could be supplemented or replaced by internal methodologies developed by institutions, based on a thorough prior supervisory assessment. Enhanced coordination between supervisors should be pursued, notably through active use of colleges or through delegation of tasks.
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