Liquidity data items: FAQs

FSA047 and FSA048

Q: What are the reporting periods over UK bank holidays?

A: For reporting purposes, bank holidays make no difference. If a firm has flows on the day in question, then that is when they should be reported. The only exception is in relation to weekend flows, which are reported on either the previous Friday or the following Monday depending on how the time buckets fall.

In terms of submission due dates, Gabriel accommodates bank holidays and the due date will be shifted to the next immediate working day.

FSA055 — systems and controls questionnaire

Q: Does your firm have a liquidity risk management framework in place?

A: BIPRU 12.3.4 requires all BIPRU firms to have a liquidity risk management framework in place.

Q: Are processes, strategies and systems for liquidity risk assessment incorporated into the framework?

A: BIPRU 12.3.4 requires that these items should be included in the liquidity risk management framework.

Q: Is the framework documented?

A: Firms need to be able to demonstrate that they are in compliance with our rules. We anticipate that the liquidity risk management framework be a document and that this document is regularly reviewed and updated in order to demonstrate compliance.

Q: Do you consider institution-specific and market-wide stresses and their impact upon your assets?

A: BIPRU 12.4.5A requires that all BIPRU firms consider these stresses across different time horizons and varying degrees of stress.

Q: Do you consider your ability to raise funds under stressed market circumstances as adequate?

A: It is for a firm to consider what an adequate ability to raise funds is, but we would expect to find evidence that this has been considered in a firm’s liquidity risk management framework. Also, we would expect to see consideration given to whether alternative sources of funding may be needed.

Q: Does your firm undertake stress testing on your liquidity risk model?

A: BIPRU 12.4 covers in detail what stress testing is required, and BIPRU 12.4.1 requires that all BIPRU firms conduct appropriate stress testing on a regular basis.

Q: Is your approach to stress testing documented?

A: We anticipate that the approach to stress testing is a document in order to demonstrate compliance.

Q: How many times throughout the year do you conduct stress tests?

A: BIPRU 12.4.1 requires that stress testing is carried out regularly. The guidance in BIPRU 12.4.3 advises that we expect that the frequency of stress testing is proportionate to the nature, scale and complexity of a firm’s activities, but no less frequently than annually.

Q: Do you have an appropriate contingency funding plan in place?

A: BIPRU 12.4.10 requires that firms must develop an effective contingency funding plan taking into account the results of their stress testing.

Q: How frequently is this plan updated? (Monthly/quarterly/semi-annually/annually/less than once a year)

A: BIPRU 12.4.11 states that contingency funding plans must be regularly tested and updated based on the results of stress testing. The contingency funding plan must be reported to, and approved by, a firm’s governing body.

Q: How many times has this plan been updated in the past 12 months?

A: The plan must be updated regularly.

Q: Is the governing body/senior management actively involved in reviewing and updating the liquidity risk management approach?

A: BIPRU 12.3.10 requires that a firm must ensure that its governing body approves the firm's strategies, policies, processes and systems relating to the management of liquidity risk.

Q: How frequently does the governing body/senior management formally review the liquidity risk management approach? (Monthly/quarterly/semi-annually/annually/less than once a year)

A: BIPRU 12.3.11 requires that a firm must ensure that its governing body reviews regularly (not less frequently than annually) the continued adequacy of its strategies, policies, processes and systems.

Q: Is an appropriate process in place for capturing, managing and escalating liquidity risk issues?

A: BIPRU 12.3.6 requires that a firm should ensure that its strategies, policies, processes and systems in relation to liquidity risk enable it to identify, measure, manage and monitor its liquidity risk positions and that it should ensure that it has in place reliable management information systems to provide its governing body, senior managers and other appropriate personnel with timely and forward-looking information on the liquidity position of the firm.

Q: Does the governing body approve stress tests and contingency funding plans?

A: BIPRU 12.4.2 and BIPRU 12.4.11 require that both the stress tests and contingency funding plan be approved by a firm’s governing body.

Q: In your liquidity risk management do you consider:

  • pricing liquidity risk?
  • intra-day liquidity risk management?
  • management of collateral positions?
  • how liquidity is managed across legal entities, business lines and currencies?
  • funding diversification and market access?

A: Each of these items is covered in BIPRU 12.3.