GMS LiquidityManagement


The objective of the Liquidity Coverage Ratio (LCR) is to promote the short-term resilience of the liquidity risk profile of banks. It does this by ensuring that banks have an adequate stock of unencumbered (unused) high-quality liquid assets (HQLA) that can be converted easily and immediately in the markets to cash in order to meet their liquidity needs for one month liquidity stress scenario.

During the early “liquidity phase” of the financial crisis that began in 2007, many banks – despite adequate capital levels – still experienced difficulties because they did not manage their liquidity in a prudent manner.

The rapid reversal in market conditions illustrated how quickly liquidity can evaporate, and that illiquidity can last for an extended period of time. The banking system came under severe stress, which necessitated central bank action to support both the functioning of money markets and, in some cases, individual institutions.

Two standards have been developed by the Basel III committee to achieve two separate but complementary objectives. The first objective is to promote short-term resilience of a bank’s liquidity risk profile by ensuring that it has sufficient HQLA to survive a significant stress scenario lasting for one month. The Committee developed the LCR to achieve this objective. The second objective is to promote resilience over a longer time horizon by creating additional incentives for banks to fund their activities with more stable sources of funding on an ongoing basis. The Net Stable Funding Ratio (NSFR), which is not covered by this article, supplements the LCR and has a time horizon of one year. It has been developed to provide a sustainable maturity structure of assets and liabilities.

GMS Liquidity Management Software

Our objective is to provide and maintain an integrated IT solution based on Quartet FS Active Pivot that fulfils regulatory liquidity requirements, i.e. regulatory reporting requirements, internal liquidity risk monitoring and steering as well as liquidity cost calculation.

In terms of liquidity related measures, the scope of the application is defined as follows:

  • Liquidity coverage ratio (LCR)
  • Liquidity gap analysis, i.e. cash flow profile as used for internal purposes (LGA)
  • Liquidity costs on single trade level a.k.a. funds transfer pricing (FTP)
  • Additional regulatory measures (e.g. original/residual runtime analyses)
  • Net stable funding ratio (NSFR)

Regulatory reporting outputs.

The reports are the ones required by regulators but we also offer a flexible reporting tool:

  • LCR reports consisting of various so-called line items according to the template as provided by BCBS or by the local regulation authority (e.g. by the EBA). Both EBA and BCBS are supported.
  • Limit reports showing the utilization of the pre-defined internal limits
  • Liquidity cost reports listing liquidity costs (or revenues) in currency according to the institution’s internal functional structure (e.g. by functional unit)
  • NSFR reporting