434. Below are some examples of the possible approaches: a. Example 1: Institution with an initial …

Below are some examples of the possible approaches:

• a. Example 1: Institution with an initial liquidity buffer of EUR 1,200 million cumulative inflows and cumulative outflows estimated under stressed conditions are projected through a time horizon of five months. During this time horizon, the institution makes use of the liquidity buffer each time inflows fall below outflows. The result is that, under the stressed conditions defined, the institution would be able to survive for four and a half months, which is longer than the minimum survival period set by supervisors (in this example, three months);

Table 19. Illustrative example of benchmark for liquidity quantification Figure 4. Illustrative example of setting specific quantitative liquidity requirement

• b. Example 2: The supervisory minimum survival period is set at three months. An alternative measure to setting a minimum survival period, which can also address the supervisory concern that the gap between inflows and outflows is unacceptably high, is to set a cap on outflows. In the figure below, the mechanism for setting a cap on outflows is shown by the black horizontal bar. An institution is required to reduce its outflows to a level below the cap. The cap can be set for one or more-time buckets and for net outflows (following correction for inflows) or gross outflows. The alternative of adding a buffer requirement instead is shown in the third column.

Figure 5. Illustrative example of setting specific quantitative requirements

1. Overview

1.1 References

1.2 Identified Requirements

1.3 Related Standards

2. Identified Requirements

3. Related Standards

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