Philippines Boosts Liquidity Risk-Management Rules for Banks

(Bloomberg) -- The Philippines central bank has ordered lenders to enhance management of their liquidity risks, giving them 10 months to develop procedures based on new guidelines.

The Bangko Sentral ng Pilipinas said the new rules emphasize the responsibility of a bank’s board of directors to define the tolerance for liquidity risk, which stems from the inability of a financial institution to meet its obligations when they come due. Meanwhile, senior management must develop funding strategies that are aligned with a set risk tolerance, it said.

While simple banks may use static cash-flow projections to determine funding gaps, it said more complex institutions are expected to employ dynamic approaches that factor in future changes in their activities and their impact on balance sheets.

The central bank said the new guidelines cover:

• Foreign-currency management
• Intra-day liquidity management
• Intra-group liquidity management
• Collateral management
• Stress testing and contingency funding plans

Banks will be given until Sept. 1, 2018, to develop or revise their policies and procedures in line with the new guidelines.

To contact the reporter on this story: Cecilia Yap in Manila at cyap19@bloomberg.net.

To contact the editors responsible for this story: Stanley James at sjames8@bloomberg.net, John McCluskey

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