LCR Optimization Under HQLA Caps

Tawfik, Maged

doi:10.2139/ssrn.3064067

Cited by 2 publications

(1 citation statement)

References 0 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The haircuts associated with the types of assets are instrumental to the application of the LCR and the banks' portfolio of HQLA. An example of this is the work of Tawfik (2015), which shows an optimization for the LCR based on the haircuts presented for the various assets. As perhaps intended by the regulators, the optimal formula desires all Level 1 assets first, then Level 2A.…”

Section: High Quality Liquid Assetsmentioning

confidence: 99%

Liquidity risk regulation and its practical implications for banks: the introduction and effects of the Liquidity Coverage Ratio

Tammenga¹,

Haarman²

2020

MAB

View full text Add to dashboard Cite

Following the financial crisis, quantitative liquidity risk regulation was introduced by means of the Liquidity Coverage Ratio (LCR). This literature study aims to investigate whether the introduction of the LCR leads to better liquidity risk management in banks. It elaborates on the drivers and definition of liquidity risk as well as the history, benefits and goals of this regulation. It also delves into the exact composition of the ratio and the assumptions used. The impact on bank lending as well as banks' business model and risk management is addressed, as well as the interaction with monetary policy operations and capital regulation. This paper then describes the operational differences that were observed after the implementation, and behavioral aspects. We also address the Net stable Funding Ratio (NSFR) and the discussion on interaction between the two indicators and possible redundancy. We have found that the introduction of the LCR leads to better management of liquidity risk for most financial institutions, but more harmonious implementation throughout the sector could reduce liquidity risk even further.

show abstract

Section: High Quality Liquid Assetsmentioning

confidence: 99%