414. Competent authorities should assess whether the institution’s liquidity contingency plan (LCP) …

Competent authorities should assess whether the institution’s liquidity contingency plan (LCP) adequately specifies the policies, procedures and action plans for responding to severe potential disruptions to the institution’s ability to meet its liquidity needs and fund itself. They should take into account the content and scope of contingency funding measures included in the LCP, and in particular factors such as:

• a. whether the LCP adequately explains governance arrangements for its activation and maintenance;
• b. whether the LCP appropriately reflects the institution’s liquidity- and funding-specific and wider risk profile;
• c. whether the institution has a framework of liquidity early warning indicators, including among others those established as liquidity indicators in the EBA GL on recovery plan indicators that are likely to be effective in enabling the institution to identify deteriorating market circumstances in a timely manner and to quickly determine what actions need to be taken;
• d. whether the LCP describes clearly that the LCR liquidity buffer is designed to be used in case of stress, even if that leads to LCR values below 100%, including that it is part of the expected management of liquidity risk under stress that subsequent communications to senior management take place if established lower LCR values are reached. The LCP should clearly reflect and describe how liquidity risk should be managed under stress to steer towards targeted LCR levels as closely as possible;
• e. whether the LCP clearly articulates all material (potential) funding sources, including the estimated amounts available for the different sources of liquidity and the estimated time needed to obtain funds from them;
• f. whether the measures are in line with the institution’s overall risk strategy and liquidity risk appetite;
• g. the appropriateness of the assumptions regarding the role of central bank funding in the institution’s LCP. Examples of factors competent authorities may consider could include the institution’s views on:

I. the current and future availability of potential alternative funding sources connected to central bank lending programmes; II. the types of lending facilities, the acceptable collateral and the operational procedures for accessing central bank funds; III. the circumstances under which central bank funding would be needed, the amount required and the period for which such a use of central bank funding would probably be required.

1. Vue d’ensemble

1.1 Références

1.2 Exigences identifiées

1.3 Normes associées

2. Exigences identifiées

3. Normes associées

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