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ERM Frameworks and Responses to risk [84]

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Bullet points include: Greater focus being placed on liquidity risk after the recent crisis Institutions may be driven out of business by liquidity shocks even if they are still apparently (balance sheet) solvent Banks (and others?) need to maintain a sufficiently high credit standing (rating) because their activities require having unsecured creditors Credit insurers like mono-lines particularly sensitive to adequate credit standing Liquidity ladders, support lines, asset buffers, limits Impose additional charges on transactions that consume liquidity E.g. via an additional risk adjusted return on capital (RAROC) charge

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