Stress testing / Liquidity and funding risk [54]

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Bullet points include: Maximal liquidity gaps (limits) needed for each time bucket and for each currency Crisis showed insufficient to consider only short-term gaps (e.g. up to 90 days) Economically reasonable liquidity limits need to have requirement that potential draw downs plus liquidity reserve be > zero for maturities up to, say, 1 year Effects of shifts in refinancing costs on firm’s P&L should be monitored, by reference to liquidity sensitivities, e.g. PV consequence for net interest income of a 1 bp shift in liquidity costs

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