Bank supervisors from central banks and supervisory agencies meeting at the International Conference of Banking Supervisors in Belgium this week said they endorse the Basel Committees Principles for Sound Liquidity Risk Management and Supervision.
The principles underscore the importance of establishing a robust liquidity risk management framework that is well integrated into the bank-wide risk management process.
The new liquidity principles should help promote better risk management in this key area, said Nout Wellink, chairman of the Basel committee on banking supervision and president of the Netherlands Bank. This will only be achieved, however, if there is robust and timely implementation by banks and supervisors. The Committee will coordinate rigorous follow up by supervisors to ensure banks adhere to these fundamental principles.
The principles support one of the key recommendations for strengthening prudential oversight set out in the report of the financial stability forum on enhancing market and institutional resilience, which was presented to G7 finance ministers and central bank governors in April 2008.
They deliver a significant enhancement to the Basel Committees liquidity guidance that was published in 2000. Draft principles were published for public consultation on June 17.