Duration 2 Days – 16 hrs.

 

Overview

 

This course provides a comprehensive understanding of liquidity risk management within banking institutions. It focuses on how banks maintain sufficient liquidity to meet obligations while optimizing profitability and complying with regulatory requirements.

 

Participants will explore key liquidity concepts, measurement techniques, stress testing, and regulatory frameworks such as Basel III Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The course also highlights practical approaches used by banks to manage liquidity under both normal and stressed conditions.

 

Objectives

 

• Understand liquidity risk and its importance in banking operations
• Identify sources and drivers of liquidity risk
• Apply key liquidity measurement tools and ratios (LCR, NSFR)
• Analyze cash flow mismatches and funding gaps
• Conduct basic liquidity stress testing and scenario analysis
• Understand regulatory requirements (Basel III, local BSP guidelines)
• Develop practical liquidity risk management strategies

 

Target Audience

 

• Risk management professionals
• Treasury and ALM (Asset & Liability Management) staff
• Finance and accounting personnel in banks
• Compliance and regulatory officers
• Internal auditors
• Banking professionals involved in liquidity planning

 

 Prerequisites

 

• Basic knowledge of banking operations
• Familiarity with financial statements and ratios
• Understanding of risk management concepts (recommended but not required)

Course Outline

 

Module 1: Introduction to Liquidity Risk

 

• Definition and importance of liquidity risk
• Types of liquidity risk (funding vs market liquidity risk)
• Key drivers of liquidity risk in banks
• Lessons from financial crises (e.g., 2008 Global Financial Crisis)

 

Module 2: Liquidity Risk Frameworks and Governance

 

• Liquidity risk management framework
• Roles and responsibilities (Board, ALCO, Treasury, Risk)
• Risk appetite and liquidity policies
• Contingency Funding Plan (CFP)

 

Module 3: Liquidity Measurement Tools and Techniques

 

• Cash flow projections and maturity gap analysis
• Liquidity gap and mismatch analysis
• Behavioral assumptions (deposits, loan repayments)
• Early warning indicators (EWIs)

 

Module 4: Basel III Liquidity Standards

 

• Overview of Basel III
• Liquidity Coverage Ratio (LCR)
  • High Quality Liquid Assets (HQLA)
  • Net cash outflows
• Net Stable Funding Ratio (NSFR)
• Practical calculation examples

 

Module 5: Liquidity Stress Testing

 

• Purpose and importance of stress testing
• Scenario design (idiosyncratic vs market-wide stress)
• Reverse stress testing
• Interpreting stress test results
• Integrating stress testing into decision-making

 

Module 6: Funding Strategies and Liquidity Management

 

• Sources of funding (retail, wholesale, interbank)
• Diversification of funding
• Managing liquidity buffers
• Intraday liquidity management

 

Module 7: Regulatory Environment and Compliance (Philippines Context)

 

• Overview of Bangko Sentral ng Pilipinas requirements
• BSP liquidity regulations and reporting
• Supervisory expectations and audits
• Aligning internal policies with regulatory standards

 

Module 8: Integration with Asset and Liability Management (ALM)

 

• Link between liquidity risk and interest rate risk
• Role of ALCO (Asset-Liability Committee)
• Balance sheet optimization
• Transfer pricing and funding cost considerations

 

Module 9: Case Studies and Practical Applications

 

• Liquidity crisis scenarios
• Bank run simulation
• Group exercises: liquidity gap analysis
• Best practices from global and local banks