1
Bank Liquidity Management
Oleg Deev
2
Contents
1. Bank liquidity needs and acquisition
2. Liquidity planning
3. Liquidity measures
4. Contingency planning / stress tests
3
Bank liquidity management
Assets Liabilities
Cash
Unsecured
short-term
deposits
Volatile
portion
Long-term
portion
Secured long-term
Unsecured long-term
Equity
Liquid assets
Haircuts
Illiquid Assets
Off-Balance sheet
payment obligations
(Guarantees, loan
commitments, …)
for secured lt
Secured short-term
for secured st
-+
< tCFtCF
-+
³++ ttt CFFL
!
tCF
Unexpected
high
outflows
Unexpected
low inflows
Liquidate
liquid
assets
New fundingCash
Generate
new
funding
Liquidity management is to
ensure that outflows are
covered even under very
adverse scenarios
by (i) inflows or (ii) by
liquidity-generating actions,
i.e. Lt + Ft + CFt
+
≥ CFt
=>
Need to estimate cash
flows under many scenarios
to determine the size of
required liquidity reserve
(Lt + Ft)
=> Many products have
uncertain cash flows
(demand deposits) and even
simple products have
uncertain prolongation at
maturity. Finally, new
business is always uncertain.
=> Need models
%100
CF
!
t
³
-
+
+-
t
tt
CF
FL
4
Meeting Liquidity Needs
̶ Bank liquidity refers to a bank’s capacity to acquire
immediately available funds at a reasonable price.
̶ Asset liquidity refers to the ease of converting an asset
to cash with a minimum of loss.
̶ Liability liquidity is an ease which bank can issue debt to
acquire clearing balances at reasonable costs.
̶ Effectiveness of each liquidity source at meeting liquidity
needs depends on:
̶ Market conditions, evidenced by the market’s perception of
risk at the institution as well as in the marketplace
̶ Market’s perception of bank management and strategy
̶ The current economic environment
5
Holding Liquid Assets
̶ Four basic types of cash assets:
̶ Vault cash, demand deposit balances held at the central bank,
demand deposits held at private financial institutions and cash
items in process of collection
̶ Cash assets represent a significant opportunity cost for
institutions because they earn little or no interest.
̶ Banks hold cash to satisfy four objectives:
1. Meet customers’ regular transaction needs.
2. Meet legal reserve requirements.
3. Assist in the payment system.
4. Purchase correspondent banking services.
6
New Borrowings
̶ Banks can access liquid funds by borrowing.
̶ Attractive because quick and prices are predictable.
̶ Historically banks had an advantage over nondepository
institutions through funding with low-cost
deposit accounts.
̶ Use of non-core funding sources adds liquidity risk.
̶ When an institution gets in trouble, lenders withdraw
from the market or increase collateral requirements.
7
Required Reserves and Monetary
Policy
̶ Banks hold deposits at the central bank:
̶ because the central bank imposes legal reserve requirements and deposit
balances qualify as legal reserves;
̶ to help process deposit inflows and outflows caused by maturing time
deposits and securities, wire transfers and other transactions.
̶ Purpose of required reserves is to enable the central bank to control
money supply.
̶ The central bank has three distinct monetary policy tools:
̶ Open market operations. Sale or purchase of government securities in the
open market is the most flexible means of carrying out policy objectives.
̶ Discount window borrowing occurs when banks borrow directly from the
central bank. Changes in the discount rate directly affect the cost of
borrowing.
̶ Changes in the reserve requirement impact the amount that banks can
lend.
8
Short-Term Liquidity Planning
Factors increasing reserves Factors decreasing reserves
Nondicreationary
Immediate cash letter Remittances charged
Excess from clearing house Deficit in clearing house
Deposits from the Ministry of Finance Taxes paid and loan calls
Maturing deposits
Discreationary
Cash shipped to central bank Cash received from the central bank
Security sales Security purchases
Borrowing from the central bank Payment on loans from central bank
Securities sold under repos Securities purchased under repos
Interest payments on securities
New deposits
9
Liquidity versus Profitability
̶ Trade-off between liquidity and profitability.
̶ The more liquid a bank is, the lower its return on equity and
return on assets, all other things being equal.
̶ Large holdings of cash assets decrease profits because of the
opportunity loss of interest income.
̶ Short-term securities normally carry lower yields than
comparable longer-term securities.
̶ Loans carrying the highest yields generally the least liquid.
̶ Liquidity planning focuses on guaranteeing that immediately
available funds are available at the lowest cost.
10
Liquidity Needs Factors
11
Liquidity Risk Measures
̶ Liquidity measures for asset types or groups (expressed in
percentage terms as a fraction of total assets)
̶ Liquidity measures for types of liabilities (incl. Reserve for
loan losses to loans)
̶ Loan-to-deposit ratio
̶ 1W, 1M… liquidity ratio: periodic gap/ cumulated funding
gap
̶ Cumulative liquidity model: daily, available liquidity/ deficit
for next 1-12M
̶ Funding concentration report (10 largest depositors, % of
funding from which market)
̶ Inter-entity lending: % of funding/ lending from/ to intragroup
entities
̶ Strategic liquidity measures: introduced by Basel III
12
Liquidity Risk Measures
̶ Contractual maturity mismatches
̶ Available unencumbered assets (can be used in case of default to
satisfy any investor)
̶ Encumbered assets have been separated for the specific obligor
(secured funding)
̶ Funding concentration by time band: no peak maturing positions
̶ Undrawn commitment report: volume of potentially drawn
commitments
̶ Surplus funding capacity: liquidity capacity after a stress scenario
̶ Aggregate limits metrics: per market (wholesale funding, retail
funding, ...)
̶ Market-lock out horizon/survival period: number of weekdays that
bank can autonomously survive (only using internal liquidity buffer)
Stress scenarios => survival period ó Liquidity buffer determination
13
Basel III and the Liquidity
Coverage Ratio
̶ Objective is to improve large organizations’ liquidity risk management.
̶ Liquidity coverage ratio (LCR) is a ratio of high-quality liquid assets to
projected net cash outflows.
Stock	of	HQLA	
Total	net	cash	out4lows	over	the	next	30	days
> 100%
̶ Total expected outflows are determined by multiplying the outstanding balances of
various categories of liabilities and off-balance sheet commitments by the supervisory
rates at which they are expected to run off or be drawn down.
̶ Total expected cash inflows are estimated by applying inflow rates to the outstanding
balances of various contractual receivables.
̶ HQLA are cash or assets that can be converted into cash quickly through sales (or by
being pledged as collateral) with no significant loss of value. A liquid asset can be
included in the stock of HQLA if it is unencumbered, meets minimum liquidity criteria
and its operational factors demonstrate that it can be disposed of to generate liquidity
when needed (Levels 1, 2A, 2B).
14
15
Public Debtor Securities
Corp./Covered Bonds
80% AA ≤
A- ... AA-60%
Others (ABS, CDOs,...)
Cash
Performing loans50%
Comm.
Lines
10%
Other contingent outflows
Planned Outflows (new business,.)
tbd
Deposits at central banks
Reverse R. (depends on collat.)0% - 100%
10%
Retail
Liquidity
Credit Non-
financial
Corp.
Others
Less Stable
Others
Stable
Repos, ≤30d (depends on collateral)
3-notch Downgrade Collateral
Derivative collateral
Mark-to-Market of Derivatives
Less stable
Stable
Retail
Small
Business
Operating deposits
Firm only holds depositsCorp.,
Non-fin.
Unsecured
Wholesale
Market Price
Fluctuations
Deposits
0% - 100%
mio €
20%
10%
5%
25%
40%
10%
5%
Off-Balance Sheet items
LCR stress scenario assumes several risks
to materialise simultaneously
Significant DowngradeLiquidity (Rating)
Partial loss of Deposits
Calls on Off-Balance Sheet exposures
Call Risk
Loss of unsecured wholesale fundingFunding Risk
Significant increase of secured funding HCAsset Liquidity
Increase in derivative collateral callsLiquidity(Market)
100%* 0% 100%0%
Assets Liabilities
hist. lookback mio €
Cash flows > 30d Cash flows > 30d
16
Public Debtor Securities
Corp./Covered Bonds
80% AA ≤
A- ... AA-60%
Others (ABS, CDOs,...)
Cash
Performing loans50%
Comm.
Lines
10%
Other contingent outflows
Planned Outflows (new business,.)
tbd
Deposits at central banks
Reverse R. (depends on collat.)0% - 100%
10%
Retail
Liquidity
Credit Non-
financial
Corp.
Others
Less Stable
Others
Stable
Repos, ≤30d (depends on collateral)
3-notch Downgrade Collateral
Derivative collateral
Mark-to-Market of Derivatives
Less stable
Stable
Retail
Small
Business
Operating deposits
Firm only holds depositsCorp.,
Non-fin.
Unsecured
Wholesale
Market Price
Fluctuations
Deposits
0% - 100%
mio €
20%
10%
5%
25%
40%
10%
5%
Off-Balance Sheet items
100%* 0% 100%0%
Assets Liabilities
hist. lookback mio €
Cash flows > 30d Cash flows > 30d
LCR =
-
17
Assets € Liabilities €
Cash 50 Equity Capital 80
Government Securities 100 Tier 2 Capital maturing in 5 months 20
Covered Bonds rated AA- 50 Retail Deposits - Stable 100
Retail Credit Cards 200 Retail Deposits - Less Stable 300
Residential Mortgage Loans maturing in less than 1 year 100 Wholesale Deposits from Financial Institutions maturing in 30
days
175
Residential Mortgage Loans maturing in more than 1 year 400
Wholesale loans maturing in 30 days 100 Subordinated debt maturing between 30 days and 6 months 325
1,000 1,000
Liquid Assets € Factor to be applied €
Cash 50
Government Securities 100
Covered Bonds rated AA- 50
Cash Outflows € Factor to be applied €
Retail Deposits - Stable 100
Retail Deposits - Less Stable 300
Wholesale Deposits from Financial
Institutions maturing in 30 days
175
Undrawn credit card facilities 200
LCR =
Liquid Assets
Cash Outflows - Cash Inflows
Cash Inflows € Factor to be applied €
Wholesale Loans maturing in 30 days 100
Scheduled repayments on
Residential Mortgage Loans 500
=
Off
B/S
19
20
Off
B/S
Required Stable Funding € Factor to be applied €
Undrawn commitments 200
Covered Bonds 50
Residential Mortgages (80%>1 year
35% RWA, 20%<1 year 35% RWA) 500
Retail Credit Cards (< 1 year) 200
Assets € Liabilities €
Cash 50 Equity Capital 80
Government Securities 100 Tier 2 Capital maturing in 5 months 20
Covered Bonds rated AA- 50 Retail Deposits - Stable 100
Retail Credit Cards 200 Retail Deposits - Less Stable 300
Residential Mortgage Loans maturing in less than 1 year 100 Wholesale Deposits from Financial Institutions maturing in 30
days
175
Residential Mortgage Loans maturing in more than 1 year 400
Wholesale loans maturing in 30 days 100 Subordinated debt maturing between 30 days and 6 months 325
1,000 1,000
NSFR
=
Available Stable Funding
Required Stable Funding
=
Available Stable Funding € Factor to be applied €
Equity capital 80
Retail Deposits - Stable 100
Retail Deposits - Less Stable 300
22
Longer-Term Liquidity Planning
̶ Involves projecting cash inflows and outflows over 90 days, 180
days, one year and beyond if needed.
̶ Objective is to ensure bank does not face an unanticipated liquidity
crisis.
̶ Forecasts in deposit growth and loan demand required.
̶ Projections are separated into categories, e.g. base trend, shortterm
seasonal, and cyclical values.
̶ Analysis assesses a bank’s liquidity gap, measured as the
difference between potential uses of funds and anticipated sources
of funds, over monthly intervals.
̶ Bank’s monthly liquidity needs estimated as forecasted change in
loans plus required reserves minus forecast change in deposits
23
Considerations in the Selection
of Liquidity Sources
̶ Costs should be evaluated in present value terms as interest
income and expense may arise over time.
̶ Choice of one source over another often involves an implicit
interest rate forecast.
24
Contingency Planning
̶ Financial institutions must have carefully designed
contingency plans that:
̶ Address strategies for handling unexpected liquidity crises.
̶ Outline appropriate procedures for dealing with liquidity shortfalls occurring
under abnormal conditions.
̶ Narrative section addressing senior officers responsible for
dealing with external constituencies, internal and external
reporting requirements, and events that trigger specific
funding needs.
̶ Quantitative section assessing the impact of potential
adverse events on bank’s balance sheet:
̶ Should incorporate timing of events by assigning run-off rates, identify
potential sources of new funds and forecast associated cash flows across
numerous short and long term scenarios and time intervals, including a
wide range of potential internal crises
25
Contingency Planning
̶ Should prioritize which assets would have to be sold in the
event a crisis intensifies.
̶ Relationship with liability holders should be factored into
contingency strategy.
̶ Should provide for back-up liquidity.
̶ Must have specific action steps and establish lines of
decision-making authority.
̶ Should be approved by board of directors.
̶ Difficult because when plan is being made because
probability of needing it seems remote.
26
Liquidity Governance
Risk appetite Risk tolerance
§ Define ‘benchmarks’ to set a target level
of liquidity risk
§ Positive/negative deviations of the
benchmark will be tolerated
§ No linkage to Contingency Funding Plan
(CFP)
§ Measure for global benchmarks: Net
Liquidity Position Target (NLPT) for
various time buckets
§ Global benchmarks should be decascaded
into business units and products
§ Responsibility: Treasury
§ Define ‘limits’ to set maximum level of
liquidity risk
§ Negative deviations of limit will be not
tolerated
§ Linkage to Contingency Funding Plan
(CFP)
§ Measures for global limits: Minimum
Survival Period (MSP), Minimum Net
Liquidity Position (MNLP) for various time
buckets
§ Global limits are sufficient, but for
operational purpose in Treasury units
global limits should be de-cascaded into
business units and products
§ Responsibility: Risk controlling
27
Quantitative framework
The liquidity condition: the capability to fulfill all obligations as and
when they come due in each currency & period:
!"!! 	− "%&!
"
+ ()(! 	> 0
̶ @A@! is the expected liquidity exposure in time t, the difference
between expected negative and positive cash flow:
̶ ABC!
"
is the liquidity-at-risk, the deviations of in- and out-flows due to
specific circumstances in period t, which like value-at-risk focuses on
the downside (i.e., danger of outflows exceeding inflows at some high
confidence level 1-α)
̶ DED!	is the counter-balancing capacity containing asset buffers which
can be readily converted to liquidity (e.g., security sales, repos,
collateralizations, etc.) or capability to renew existing contracts or
new funds from other 3rd parties
28
Quantitative framework
̶ DED!	may be decomposed into the sum of asset (or funding) liquidity
A, sale liquidity S and repo liquidity R (the latter two comprising
balance sheet liquidity):
DED! = G + (J + C)
̶ We may state this equivalently as that CBC needs to exceed the sum
of future exposures:
DED! 	> −(@A@! 	− ABC!
"
)
̶ We can adjust the formula for nostro balances kept for payment
purposes, which at day end if positive (negative) we will invest
(borrow):
DED! 	> −(MA@! 	− ABC!
"
) = −(@A@! + MA@!#$ − ABC!
"
)
where MA@! is forward liquidity exposure in period t
̶ Further adjustments to these are made to make this dynamic (in an
option pricing fashion) with the decomposition of @A@! into
deterministic and random components
29
Capital Requirements Regulation
LCR
LCR =
Liquidity reserve
CFt
-
CFt+
=
100% * 5
5% * 100 + 0%*5 – 0%*100
=
5
5 - 0
= 100% (> 60%)
Available stable funding
Required stable funding
NSFR=
95% * 100 + 100%*5
50% * 100 + 0%*5
=
100
50
= 200% (>100%)
NSFR
=
T1
Total Assets
LR=
5
100%*100 + 100%*5
=
5
105
= 4.76% (> 3%)
Leverage ratio
=
CRR – weight (given) Bank A CRR - weights
NSFR LCR Leverage RWA EUR Assets Liabilities EUR LCR NSFR
50% 0% 100% 75%*8% 100
Retail loans,
Maturity: between 31 days
and 1Y
Retail, stable,
Maturity: ≤ 30d & on
demand
100 5% 95%
0% 100% 100% 0% 5 Cash reserve Core Equity Tier 1 5 0% 100%
105 Σ Σ 105
Core Equity Tier 1
Risk-weighted Assets
5
12.5*(75%*8%*100 + 0%*5)
=
5
75
= 6.67% (> 4.5%/6%/8%)
(here) CET1-ratio = Tier 1 – ratio = Total Capital ratio
=Capital R’s =
30
ECB Liquidity Risk Stress Tests
Rubric
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Overview of scenario assumptions for the key
balance sheet items
Contractual
maturity
items
Securities issued & secured market funding 100% outflow rate 100% outflow rate 100% outflow rate
Secured market lending 100% outflow rate 100% outflow rate 100% outflow rate
Term deposits (commercial counterparties) Constant stock 18%-52% outflow rate(a) 27%-76% outflow rate(a)
Term deposits (financial counterparties) 100% outflow rate 100% outflow rate 100% outflow rate
Derivatives & FX swaps (inflow/outflow) 100% in/outflow rate 100% in/outflow rate 100% in/outflow rate
Loans (commercial counterparties) Constant stock Constant stock Constant stock
Loans (financial counterparties) 100% inflow rate 100% inflow rate 100% inflow rate
Own portfolio investments 100% inflow rate 100% inflow rate 100% inflow rate
Others (inflow/outflow) 100% in/outflow rate 100% in/outflow rate 100% in/outflow rate
Open
maturity
items
Sight deposits (commercial clients) Constant stock 12%-58% outflow(a) 18%-74% outflow(a)
Sight deposits (financial counterparties) 100% outflow 100% outflow 100% outflow
Sight loans Constant stock Constant stock Constant stock
Open repos & reverse repos 100% in/outflow 100% in/outflow 100% in/outflow
CBC
Coins banknotes and CB reserves Nominal value Nominal value Nominal value
HQLA (L1 & L2) and non tradable assets
eligible for CB
Post-haircut value Post-haircut value Post-haircut value
Other tradable assets Post-haircut value Post-haircut value Post-haircut value
Undrawn committed facilities received Nominal value Nominal value Nominal value
Contingencies
Outflows from committed facilities Not relevant
(excl. from NLP)
12%/60% outflow rate(b) 15%/75% outflow rate(b)
Impact from own rating downgrade 1- 3Net
liquidity position computed as:
1
2
3
4
1 2 43 1 2 43 1 2 43
Based on banks’
own business
plans and
assumptions
Baseline Adverse shock Extreme shock Business view
1 2 3
Haircuts based
on current
monetary policy
frameworks
(a) Outflow rates relate to particular types of deposits which are assumed to differ in terms of stability. Lowest outflow rates are attributed to ‘stable deposits’, whereas the highest outflow rates relate to ‘deposits from non-financial corporates’.
(b) The lower rate shall be applied to committed credit facilities whereas the higher rates apply to committed liquidity facilities.
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results
‘Constant stock’
implies no
liquidity inflow
from these loans
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Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 34
Composition of funding sources. Distribution by
business model
Breakdown of funding sources by business model
Note: Each bar represents the breakdown of on-balance sheet liabilities other than equity, short trading positions and derivatives under the breakdown used in the LiST 2019 Template.
Corporate & other deposits
Operational deposits
Other retail deposits
Stable retail deposits
Corporate & other deposits
Operational deposits
Other retail deposits
Stable retail deposits
Repurchase agreements
Deposits from fin. institutions
Securities issued
Wholesale
liabilities
Term
deposits
Sight
deposits
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Corporate /
Wholesale /
Sectoral lenders
Custodians /
Asset managers
Diversified
lenders
G-SIBs /
Universal banks
Small domestic /
Retail lenders
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Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 8
The main outcome metrics were derived from the
evolution of a bank’s net liquidity position
The ‘net liquidity position’ (NLP) at a given point in time is equal to the difference of the
bank’s available liquidity (i.e. its counterbalancing capacity) and the expected net outflows
since the reference date
The ‘survival period’ (SP) corresponds to
the first day in which the NLP turns negative
(i.e. when a bank would have no further
available liquidity to counter the simulated
net outflows)
The ‘cliff effect’ indicates potential Liquidity
Coverage Ratio (LCR) ‘optimisation’
strategies as it measures the difference
between the NLP at day 35 and the NLP at
day 30 (scaled by total assets)
Key maturity ladder output metrics are computed at a consolidated level, as well as ‘by
currency’ and ‘intragroup’ for internationally active institutions
Availability of additional collateral and collateral management practices assessed by
means of ad-hoc ‘deep-dive’ analyses
ECB-PUBLIC
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9%
7%
1%
6%
Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 12
Most banks have ample liquidity buffers on their
balance sheets
Composition of the initial stock of counterbalancing
capacity (CBC) in % of total assets
The average sample bank’s initial
stock of counterbalancing
capacity is 23% of total assets
Withdrawable central bank reserves
and Level 1 tradable assets account
for the majority of the collateral buffer
Within the sample, collateral
management strategies differ
Smaller banks mostly adopt a ‘buyand-hold’
strategy for their collateral
buffers
Larger banks report a much more
active collateral management as they
engage in repo trading and other types
of securities financing transactions
Level 2(b) tradable
assets
Level 1(b) tradable
assets
Withdrawable CB
reserves & coins
and banknotes
~23%
Other CBC
assets(a)
Note: Simple average within the full sample. ‘Liquidity value’ (i.e. post haircut) components of the
CBC shown in % of total assets. Weighted average figure by total assets: ~20%.
(a) Includes: other tradable assets, non-tradable assets eligible for central banks and undrawn
committed facilities received.
(b) Level 1 and Level 2 categories refer to the Liquidity Coverage Ratio classification of High
Quality Liquid Assets (HQLAs). The categories are not related to the IFRS Fair Value
hierarchy.
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9%
7% 6%
11%
8%
29%
7%
8%
4%
7%
7%
13%
1%
0%
1%
0%
1%
2%
6%
6%
11%
4%
4%
7%
All banks Diversified lenders Corporate / Wholesale
/ Sectoral lenders
Small domestic /
Retail lenders
G-SIBs / Universal
banks
Custodians / Asset
managers
Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 33
Breakdown of the initial stock of counterbalancing
capacity (CBC) by business model
Composition of the initial stock of counterbalancing capacity (CBC) in % of total assets
Note: ‘Liquidity value’ (i.e. post haircut) components of the CBC shown in % of total assets.
(a) Includes: other tradable assets, non-tradable assets eligible for central banks and undrawn committed facilities received
Level 2 tradable
assets
Level 1 tradable
assets
Withdrawable CB
reserves & coins
and banknotes
Other CBC assets(a)
~23%
~21% ~22%
~22%
~20%
~51%
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Background & Objectives
7
Based on the selected shocks banks’ liabilities
would decrease dramatically
Note: Simple average figures within the full sample.
(a) Includes non-operational deposits from ‘credit institutions’ and from ‘other financial customers’. Treated as ‘wholesale liabilities’ in the chart on page 13.
Deposits Debt securities issued
Stable retail Other retail Operational
Non-operational
from financial
institutions(a)
Non-operational
from corporates
and others
SightTerm
Adverse shock: cumulated 6m outflows in
% of initial stock
Extreme shock: cumulated 6m outflows in
% of initial stock
Overall depletion fully
defined by shocked outflow
rates applied on initial stocks
Overall depletion depends
both on shocked roll-over
rates and maturity profile
All securities maturing within 6
months assumed not to be
rolled-over
-100% -100%
-58% -74%
-34%
-50%-48% -48%
-32% -43%
-48% -61%
-25% -31%
-37% -42%
-12% -18%
-12% -18%
-16% -16%
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results
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-5%
0%
5%
10%
15%
20%
25%
%of
23.2% -8.4%
0.6%
2.8% 18.1% -15.1%
-1.3%
-0.1% 1.5%
-4.7% -0.3% -0.2% -3.7%
Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 13
Overall outflows equaled to approximately 27% of
total assets under the Extreme shock
Bridge between net liquidity position starting point Baseline to net liquidity position 6-month Extreme
Note: Simple average within the full sample. The sum of individual bars may not perfectly match due to rounding.
(a) Includes items marked as ‘other’ inflows / outflows in the LiST 2019 Template.
(b) Includes variations in the stock of counterbalancing capacity mostly due to deposit withdrawals (e.g. lower minimum reserve requirements).
Initial stock
of CBC
Wholesale
liabilities
maturing &
other(a)
Net collateral
flows
Wholesale
assets
maturing
NLP after
6m
(Baseline)
Deposit
withdrawals
& other(b)
(Adverse)
Committed
facilities
drawdown
(Adverse)
Impact from
rating
downgrade
(Adverse)
NLP after
6m
(Adverse)
Deposit
withdrawals
& other(b)
(Adv to Ext)
Committed
facilities
drawdown
(Adv to Ext)
Impact from
rating
downgrade
(Adv to Ext)
NLP after
6m
(Extreme)
-27%
of total assets
Over a 30-day time horizon, net outflows under
Extreme shock equal 9.5% of total assets
broadly in line with LCR figures (10.5%)
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23.2%
-8.4%
0.6%
2.8%
18.1%
-15.1%
-1.3%
-0.1%
1.5%
-4.7%
-0.3%
-0.2%
-3.7%
19.4%
-5.7%
0.5%
1.2%
15.4%
-12.5%
-1.0%
-0.1%
1.8%
-3.8%
-0.4%
-0.2%
-2.7%
2.8%
-1.1%
-0.1%
1.9%
3.6%
-2.2%
-0.5%
0.0%
0.9%
-0.7%
-0.1%
0.0%
0.1%
2.8%
0.6%
0.4%
-3.0%
0.0%
-1.6%
-0.2%
-0.1%
-1.6%
-0.4%
-0.1%
0.0%
-2.1%
6.6%
-2.3%
0.1%
0.1%
4.5%
-3.7%
-0.2%
0.0%
0.5%
-1.1%
0.0%
0.0%
-0.6%
Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 36
Overview of the key LiST flows for the most shared
relevant currencies in the sample
All currencies
(103 banks)
EUR only
(103 banks)
USD only
(45 banks)
GBP only
(17 banks)
CZK only
(4 banks)
Initial stock of CBC
Wholesale liabilities
maturing & other(a)
Net collateral flows
Wholesale assets maturing
NLP after 6m (Baseline)
Deposit withdrawals &
other(b) (Adverse)
Committed facilities
drawdown (Adverse)
Impact from rating
downgrade (Adverse)
NLP after 6m (Adverse)
Deposit withdrawals &
other(b) (Adv to Ext)
Committed facilities
drawdown (Adv to Ext)
Impact from rating
downgrade (Adv to Ext)
NLP after 6m (Extreme)
Note: Simple average values for banks reporting liquidity figures in a specific currency. Total assets used in ratios are always the consolidated ones. The sum of individual bars may not
perfectly match due to rounding.
(a) Includes items marked as ‘other’ inflows / outflows in the LiST 2019 Template.
(b) Includes variations in the stock of counterbalancing capacity mostly due to deposit withdrawals (e.g. lower minimum reserve requirements).
ECB-PUBLIC
38
ECB Liquidity Risk Stress Tests
www.bankingsupervision.europa.eu ©
Baseline Adverse shock Extreme shock
0 30 60 90 120 150 180 0 30 60 90 120 150 180 0 30 60 90 120 150 180
0
2
4
6
8
10
12
Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 14
90% of banks report a survival period longer than
2 months, even under the Extreme shock
Distribution of banks with a survival period <6m
Numberofbanks
Calendar days (grouped in approximately 10-day intervals)
4 banks from different jurisdictions
and business models report a
survival period shorter than the
exercise time-horizon of 6 months
in the Baseline (which includes a
freeze in wholesale markets)
Only 11 banks report a survival
period shorter than 2 months
under the Extreme shock
~30days(LCRtimehorizon)
39
ECB Liquidity Risk Stress Tests
www.bankingsupervision.europa.eu ©
0 20 40 60 80 100 120 140 160 180
-5%
0%
5%
10%
15%
20%
Baseline
Adverse
Extreme
Background & Objectives
Sensitivity Analysis of Liquidity Risk – Stress Test 2019 – Final results 15
The median survival period would be about 6
months under the Adverse shock and 4 months
under the Extreme
Median NLP in % of total assets Median survival period as
reported by banks(a) (full sample):
Baseline: > 6 months
Adverse shock: 176 days (51
banks report a survival period
longer than 6 months)
Extreme shock: 122 days (26
banks report a survival period
longer than 6 months)
survival period
(Extreme shock)
survival period
(Adverse shock)
NLP(in%ofTA)
Calendar days
Note: NLP lines reflect linear interpolation of values reported in the template’s maturity buckets.
(a) Banks reported the exact dates (among all calendar days except those when TARGET2 was
closed. i.e. the LiST 2019-relevant days) corresponding to the survival periods in the 3
scenarios. In case the sample median did not correspond to a relevant day (e.g. in case it fell
on a weekend day), the next relevant day would be shown.
40
Europe banks can lose 38% of deposits before having
to sell assets at a loss – research Reuters 2023
41
Literature
̶ CHOUDRY M. (2022). The Principles of Banking, 2nd ed. – Chapters
11-13
̶ KOCH, T.W. and S.S. MacDONALD (2015). Bank Management.
Chapter 11.
̶ HORVÁTOVÁ, Eva. Ekonomika a riadenie bánk. S. 44-56.
̶ Sensitivity Analysis of Liquidity Risk - Stress Test 2019 (LiST 2019)
by the European Central Bank