Liquidity Review, Gap Assessment, Implementation

Engagement Period: 6 Months

Background

The client, a foreign banking organization, recognizing the critical importance of their combined US Operations and the need to align their liquidity management with Regulation YY. They engaged NextAML professionals to align the liquidity management program with regulations, improve funding efficiency and effectiveness, and strengthen risk management measurement and monitoring.

Approach

We worked closely with the senior executives to understand their needs. We met with key stakeholders, including board members, senior executives, and department heads, and conducted thorough interviews to understand the current organizational structure, US operations, and business strategy and goals. We performed a gap analysis of the liquidity stress testing program (policy and whole Liquidity Risk framework to ensure full regulatory compliance. Next, we defined and implemented a holistic Liquidity Risk Governance covering the Liquidity Stress Test Policy, Limits, Cash flow forecasting, the Contingency Liquidity Funding Plan and the Redemption and Liquidation Strategies. Then, designed and developed liquidity risk and stress tests methodologies in line with best practice. Reviewed and validated methodology and stress test scenarios and assumptions underpinning them. Defined and implemented 2052a and intraday reporting and monitoring process. Implemented Liquidity Management software tools, including intraday. Provide training and continuous support on stress testing, buffer management, and liquidity risk procedures. 

Outcome

We successfully presented and recommended ways to improve their liquidity risk management. This involved restructuring committees, reshaping executive roles and responsibilities, and realigning departments and functions. Our recommendations improved their liquidity risk management program alignment with peers. Enhanced the management of their liquidity buffer and their funding strategy. Lastly, the client saw improved funding testing and analysis to assess liquidity usage and needs.