Improve liquidity management under a regulation framework. Nicolas Kunghehian

Transcription

1 Improve liquidity management under a regulation framework Nicolas Kunghehian 24 th May 2011

2 From Basel II to Basel III» Too much leverage» Excessive credit growth» Insufficient liquidity buffers» Weaknesses of risk management systems» Too much systemic risk» Greater capital buffers» Capital of higher quality» Liquidity buffers» More accurate measurement of risks (e.g. market risks)» Addressing systematically important banks Moscow, 24th May 2011

3 What is new in Basel III? Moscow, 24th May 2011

4 Basel III squeezes capital!» More strict rules on capital, lowering it (own funds review)» Higher capital requirements (updated calculation rules increase RWA for some asset classes)» Increased capital ratios (Core Tier 1, Tier 1, Conservation buffer, Countercyclical buffer) Moscow, 24th May

5 Results of the QIS: Capital Ratios Source: Moscow, 24th May

6 Results of the QIS: Liquidity Ratios Source: Moscow, 24th May

7 Liquidity coverage ratio (LCR) example Assets 470 Cash 50 v Stock of high quality liquid assets 150 Gov. Bonds 100 Financial Institution Bonds 50 Loans 270 Liabilities and Equity 470 Run-off factor Outflows* Inflows** Net outflows Stable retail deposits 100 v 7.50% 7.5 Less stable retail deposits 100 x 15% = 15 - Unsecured Wholesale Funding (Non fin. Corporate with no operational relationship) % Equity LCR 115% *Additional requirements are also considered as outflow (e.g. 100% of outstanding liquidity facilities to non fin. Corporate, etc) ** 100% of planned inflows from performing assets Moscow, 24th May

8 Net stable funding ratio (NSFR) example Assets 470 Required stable funding factor Required stable funding Cash 50 0% 0 Gov. Bonds 100 5% 5 Loans (to retail) % Liabilities and Equity 470 Available stable funding factor Available stable funding Stable retail deposits % 85 Less stable retail deposits % 70 Unsecured Wholesale Funding (Non fin. 170 x 50% = Corporate with no operational relationship) 85 Equity % NSFR 123% Moscow, 24th May

9 Higher costs for a better risk control performance Internal reports Specific risk drivers Board of Director Daily summary report Regulatory reports Local reports Group reports Operational reports Limit monitoring P&L reports Budgeting reports Single portfolio reports Risk reports Credit risk Liquidity risk Market risk Operational risk Moscow, 24th May

10 Higher costs and a better allocation Assets 470 Cash Cost of holding these assets: 50 v Stock of high quality liquid assets 150 Gov. Bonds 100 Financial Institution C = X% Bonds per year x Loans 270 Liabilities and Equity 470 Run-off factor Outflows* Inflows** Net outflows C is allocated depending on the outflows generated by the instrument Stable retail deposits 100 v 7.50% 7.5 Less stable retail deposits 100 x 15% = 15 - Unsecured Wholesale Funding (Non fin. Corporate with no operational relationship) % Equity » Short term assets» Long term liabilities» Assets eligible to the Buffer Negative FTP component» Risky assets» Unsecured wholesale funding Positive FTP component LCR 115% Moscow, 24th May

11 Conclusions» More constraints for banks More capital of better quality Liquidity buffers» A great opportunity Shared ownership Better risk management Better performance management Modeling Forecasting Risk Calculation Reporting Limit monitoring Action plans Optimization Strategy Budgeting Planning Moscow, 24th May

12 Contacts Nicolas Kunghehian Associate Director Moody's Analytics 436, Bureaux de la Colline Bâtiment E - 12e étage Saint-Cloud Cedex, France +33 (0) direct +33 (0) mobile nicolas.kunghehian@moodys.com Moscow, 24th May

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