Regulation > CP 09/13 Strengthening liquidity standards 2: Liquidity reporting April 2009

Published: 28th April 2009 by William Webster

This CP is mainly concerned with questions about what firms should report and the frequency and scope of reporting. Comments are due by 15^th July 2009.

The rules and guidance on liquidity risk including the transitional arrangements are to be effective in Q4 2009. New reporting arrangements are to go live in Q1 2010.

The Individual Liquidity Guidance (ILG) will lead to a strengthening of firms’ liquidity over a period of several years.

The reporting is designed to inform the FSA about firms’ cashflow survival periods, eligible cashflow survival periods, cumulative gap positions and liquidity risk drivers. The FSA proposes to aggregate data in order to obtain a picture of market liquidity.

Some Individual Liquidity Adequacy Standards (ILAS) will fall into a standardised buffer regime. These firms will be simpler building societies and mortgage banks. The criteria are as follows:

The firm has no foreign exchange exposures in assets or liabilities;
Wholesale funding is no more than 30% of total funding;
The majority of assets are mortgages secured on residential property.

There is discussion about the frequency and detail of reporting. The FSA comments that “....to satisfy that firms are indeed capable of reporting the key data items daily, we will periodically check their capability via “on request” daily reporting over a set time period (e.g. two weeks) as part of our normal supervisory relationship with those firms”.

This means that even where firms do not normally report on a daily basis in a crisis situation the FSA will expect daily reporting.

Cost benefit analysis includes an anticipated cost associated with liquidity reporting. Ongoing costs range from £18k pa (building societies) to £951k pa (banks). One off set up costs are much higher at £49k and £3.2m respectively.

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