9.2 Overall assessment of liquidity risk

To assess whether the liquidity held by an investment firm provides appropriate coverage of risk to liquidity, competent authorities should use all of the following sources of information:

• a. the outcomes of the assessment of liquidity risk;
• b. the investment firm’s ILAAP, where available; and
• c. other relevant inputs such as information from on-site inspections, AML/CFT supervisors peer group analysis or stress testing, internal risk management reports and ad-hoc reports requested by the competent authorities, where available.

For the outcome of the assessment of liquidity risk, competent authorities should take into account the findings regarding all of the following aspects:

• a. risk of liquidity not covered by liquidity requirements specified in Regulation (EU) 2019/2033, including, where relevant, intraday liquidity risk;
• b. other risks not adequately covered and measured by the investment firm, as a result of underestimation of outflows, overestimation of inflows, overestimation of the liquid assets or unavailability from an operational point of view of liquid assets, such as assets not available for sale and assets that are readily available;
• c. specific concentration funding by counterparties or product/type; and
• d. other relevant outcomes of the supervisory liquidity stress tests.

When assessing the investment firm’s ILAAP framework, competent authorities should assess whether ILAAP calculations are credible. Calculations used by investment firms should be considered credible where they properly cover the risks they are looking to address. Calculations should be considered understandable where there is a clear breakdown and summary of the underlying components of the ILAAP calculations.

Competent authorities should translate this overall assessment into a liquidity and funding score, which should reflect the view of competent authorities on the threats to the investment firm’s viability that may arise from risk to liquidity.