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Capital Markets Law Journal Advance Access originally published online on September 3, 2009
Capital Markets Law Journal 2009 4(4):451-461; doi:10.1093/cmlj/kmp032
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© The Author (2009). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

Liquidity risk management—policy conflict and correction

George Walker*
* George Walker is Professor in International Financial Law at the Centre for Commercial Law Studies, Queen Mary, University of London. He is a Barrister and Member of the Honourable Society of Inner Temple, a Member of the New York Bar, and was previously a Solicitor in Scotland, England and Wales. He has been a Legal Consultant with the International Monetary Fund, Washington, DC, and has authored or co-authored a large of number of books, articles and other papers in the banking and financial law areas including the co-editing of two major encyclopaedia. Professor Walker has doctoral degrees from London and Oxford Universities, is a former Affiliate Lecturer in Law at Cambridge University and has held visiting positions at Harvard University and subsequently at Georgetown Law School, Washington DC. He is an external examiner at Hong Kong University and has been a Visiting Scholar at the Law School, University of Tokyo, Japan and at other major law schools.

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Key points

  • The recent financial crises have confirmed the importance of both individual bank liquidity management and inter-bank liquidity support.
  • A number of different types of liquidity risk can be identified which must be managed on an integrated, complete and coherent basis.
  • Various papers have been published at the international, European and national levels that take forward separate aspects of liquidity risk management oversight and control.
  • A residual policy dilemma remains in balancing the costs of liquidity support between private financial operators and sources of public finance and market support.

 

Supervisory attention has increasingly focused on the importance of liquidity risk management especially following the recent financial crises. Regulators had earlier invested considerable time and effort in developing increasingly complex capital adequacy obligations over the last three decades with arguably insufficient attention being given to the management of liquidity risk. It is not that the matter has been ignored, but . . . [Full Text of this Article]


   1. Definition and exposure
 

   2. Financial crisis
 

   3. International response
 
Basel Committee
Joint Forum
IIF
CRMPG
IMF

   4. European response
 
ECB
CEBS
High-Level Group on EU Financial Supervision

   5. UK response
 
Adequate liquidity and self-sufficiency principles
Systems and controls
ILAS
Group-wide and cross-border liquidity management
Liquidity reporting

   6. Liquidity comment
 

   7. Liquidity close
 

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