Managing Liquidity in Banks: A Top Down Approach

Preface.

Acknowledgements.

About the Author.

1 Liquidity and Risk: Some Basics.

1.1 Some understanding of liquidity.

1.2 The meaning of liquidity risk.

2 Liquidity in the Context of Business and Financial Policy.

2.1 Introduction.

2.2 Equilibrium as a tool within financial policy.

2.3 The concept enlarged to fit banks.

3 Liquidity as an Element of Banking Risk.

3.1 Some clarifications.

3.2 The concept of downside risk (VAR) and its circle of relationships.

3.3 LAR: liquidity risk and the missing theoretical concept.

3.4 An attempt at an integrated concept for LAR.

3.5 Summary.

4 A Policy Framework for Liquidity.

4.1 Some thoughts and considerations.

4.2 An overview of elements regarding liquidity policy.

4.3 The elements of a liquidity policy in detail.

4.4 Contingency planning.

4.5 A technical framework supporting liquidity policy.

4.6 The link to liquidity management.

5 Conceptual Considerations on Liquidity Management.

5.1 Introduction.

5.2 From accounting presentation to defining the liquidity balance sheet.

5.3 The liquidity balance sheet and liquidity flows.

6 Quantitative Aspects of Liquidity Management.

6.1 General consideration.

6.2 Liquidity at risk as one determinant of the buffers.

6.3 Defining and quantifying the buffers.

6.4 Limit-related input for liquidity policy.

6.5 Transfer pricing and an alternative concept.

7 The Concept in Practice.

7.1 Introduction.

7.2 Establishing the base.

7.3 Case 1: a shock event (9/11).

7.4 Case 2: a name-related stress (Commerzbank in autumn 2002).

7.5 ‘Subprime’ crisis: a stress in progress.

7.6 Final remarks and considerations.

8 Acting Within the Supervisory Frame.

8.1 High-level risks.

8.2 The regulatory focus set by supervisors.

8.3 Considerations and conclusions for bank management.

Bibliography.

Index.