• Measuring and monitoring Liquidity Risk

    • PRU 9.2.5 PRU 9.2.5

      (1) An Authorised Person must ensure that the method referred to in Rule 9.2.1(4) for measuring Liquidity Risk is capable of:
      (a) measuring the extent of the Liquidity Risk it is incurring and includes early warning indicators to aid its daily liquidity risk measurement and management processes;
      (b) dealing with the dynamic aspects of the Authorised Person's liquidity profile;
      (c) where appropriate, measuring the Authorised Person's Exposure to Foreign Currency Liquidity Risk;
      (d) where appropriate, measuring the Authorised Person's intra-day liquidity positions; and
      (e) where appropriate, measuring the Authorised Person's Exposure to PSIA and Islamic Contract Liquidity Risk.
      (2) An Authorised Person must establish and maintain a system of management reporting which provides relevant, accurate, comprehensive, timely and reliable Liquidity Risk reports to relevant functions within the Authorised Person.

      • Guidance

        1. Management information should include the following:
        a. a cash-flow or funding gap report;
        b. a funding maturity schedule;
        c. a list of large providers of funding;
        d. where appropriate, a schedule of Islamic funding sources;
        e. a limit monitoring and exception report;
        f. asset quality and trends;
        g. earnings projections; and
        h. the Authorised Person's reputation in the market and the condition of the market itself.
        2. Where an Authorised Person is a member of a Group, it should be able to assess the potential impact on it of Liquidity Risk arising in other parts of the Group.