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How can the NSFR be reported to the lowest level of a legal entity?

For internal management but also for regulatory expectations being able to split the NSFR or other related metrics down to legal entity, currency and even further into business line information is of high importance.

For any granular reporting requirement, the granularity of the underlying data is essential. This obviously must include external transactional data but also intercompany data. You can take either a bottom-up or top-down view to collect data. The approach of choice very much depends on the systems and data availability but also on the organizational set-up of each particular institution.

If you take a centralized view, ideally the effort to collect the data and the consistency of the data should improve. What needs to be considered then, however, is also the difference in accounting standards if this data should also be the basis for external regulatory reporting on a legal entity basis.

Furthermore, the ‘worst-of’ logic needs to apply for LCR and NSFR which means that the most conservative regulatory reporting requirements in one country must be taken into consideration when aggregating up local data to a consolidated report.

What are the regulatory expectations for reporting the LCR and NSFR?

Any institution that spreads various locations with local subsidiaries will need to be able to accommodate the home and the host regulatory requirements. This will require the technical and data infrastructure to report on a legal entity basis but also to explain movements in the ratios with detailed business background. While both LCR and NSFR need to be reported on a monthly basis under normal circumstances, the minimum requirements need to be met on an ongoing basis. Each institution therefore needs to ensure a process is in place that allows steering the ratios within the target corridor on a daily basis. Regulators also expect the ability to project LCR and NSFR ratios and to embed the management of these into the broader liquidity management framework. While the reporting function needs to demonstrate independence, it also needs to be very closely linked to the Liquidity Management function and be able to provide further analysis as required for the steering of the metrics.

How should your IT systems function in order to get the data you need to do the reporting for assets, liability, and cash flow?

In theory, liquidity reporting is simple. You need daily transactional data with sufficient attributes to meet the regulatory requirements. Data should come from strategic sources supporting external regulatory reporting requirements but also internal reports based on own methodologies.

You need to be able to aggregate the data into the required reporting templates. However, your reporting platform also needs to be flexible enough to accommodate any ad hoc request from regulators or from internal stakeholders with different aggregation logic. To be able to do that, the system needs to allow drill-downs to transactional level, by currency, legal entity and aggregation based on granular business levels. Furthermore, you need to have the capability to do scenario and ‘what-if’ analysis as well as delta explain.

The IT system cannot be designed in isolation but needs to be aligned to the report production process. So, before engaging into an IT change programme, a reporting function should do a thorough review of its processes to define the detailed IT capabilities and functionalities required.

Why is it important to move into behavioural model based reporting and how can this project future liquidity positions?

To a certain extent, Liquidity Management is more art than hard science as contractual maturities only explain a part of the liquidity risk that a bank needs to prepare for. Subject to the particular environment, clients will behave differently so that behavioural assumptions are integral components of every liquidity management framework. This is evident in the treatment of non-contractual deposits as they are typical for a large part of retail deposits. Typically, these deposits follow a certain pattern and demonstrate a high stability. However, in particular under idiosyncratic stress, a certain amount of outflow of deposits will need to be assumed to prepare for sufficient liquidity buffers. The same applies for contingent funding requirements like committed facilities but even to certain elements of derivative collateral requirements.

For LCR and NSFR, the regulatory requirements broadly reflect such considerations and already embed stability and contingent outflow assumptions into the provided roll-off assumptions. For operational deposits in the cash management area, a certain amount of regulatory flexibility requires an interpretation of the rules and a sound documentation and back-testing for the ongoing reporting.

What would you like to achieve by attending the 16th Annual Liquidity Management conference?

Exchanging ideas and experiences with colleagues from other institutions but also with practitioners from related sectors is my key rationale for attending this conference.

 Ahead of the 16th Annual Liquidity Management Conference, we spoke with Gunar Schramm, Managing Director, Global Head of Liquidity and Treasury Reporting and Analysis at Deutsche Bank about the issues faced by banks in relation to LCR and NSFR.

Practical Insights From:
  • Helmut Mannhardt, Global Head of Funding, Liquidity Management, Barclays
  • Gunar Schramm, Global Head of Liquidity Management and Treasury Regulation, Deutsche Bank
  • Jamie Paris, Managing Director, Head of Liquidity Management, ALM, Standard Chartered Bank 
  • Orla McTiernan, Head of Cash and Liquidity Market and Financing Services, BNP Paribas 
  • Philippe Mangold, Global Head Treasury and Liquidity Risk Strategy and Governance, Credit Suisse
  • Harry-David Gauvin, Head of Liquidity Management and Interest Rate Risk, HSBC

About the conference:

This marcus evans conference will enlighten banks on the latest developments surrounding the NSFR as well as the business implications of the Basel liquidity ratios. Banks will also gain insight into the best practices of managing liquidity under current market changes and the impact that other regulations such as IRRBB will have on liquidity management. They will also discover how to fully incorporate liquidity costs into FTP frameworks and report liquidity ratios to regulators.
The 16th Annual Liquidity Management Conference will take place from the 15th until the 17th of March 2017 in London, UK.


Copyright © 2016 Marcus Evans. All rights reserved.

Previous Attendees Include
  • Lloyds Banking Group
  • Bank of America
  • Barclays
  • Societe Generale
  • Santander
  • HSBC
  • Rabobank
  • Standard Chartered
  • AIB
  • Deutsche Bank
  • HSH Nordbank
  • Swedbank
  • And many more…

About the speaker:

Since October 2015 Gunar Schramm heads the Liquidity and Treasury Reporting & Analysis function within Group Finance. Prior to that, Gunar was the Global Head of Liquidity Management & Treasury Regulation.
From 2003 – 2011, Gunar was based in Singapore where he held the position as Asia Pacific Treasurer before returning to Frankfurt.


NSFR and Liquidity Reporting Requirements


An interview with Deutsche Bank

Gunar Schramm
Managing Director, Global Head of Liquidity and Treasury Reporting and Analysis
Deutsche Bank
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