a.An IB must have a fully integrated information system, commensurate with its nature, size and complexity of operations, that provides clear, timely and accurate liquidity risk reports to its relevant functional units and senior management. The information system must, at suitable intervals, present to senior management and the Board a clear understanding of the IB’s liquidity risk exposures and vulnerabilities, its compliance with established policies and limits, as well as the appropriateness of management strategies with respect to approved risk tolerance.
b.IBs must have a reliable management information system designed to provide the Board, senior management and other appropriate personnel with timely and forward-looking information on the liquidity position of the IB. The management information system must have the ability to calculate liquidity positions in all of the currencies in which the bank conducts business – both on a subsidiary/branch basis in all jurisdictions in which the bank is active and on an aggregate group basis. It must capture all sources of liquidity risk, including contingent risks and the related triggers and those arising from new activities, and have the ability to deliver more granular and time sensitive information during stress events.
c.To effectively manage and monitor its net funding requirements, IBs must have the ability to calculate liquidity positions on an intraday basis, on a day-to-day basis for the shorter time horizons, and over a series of more distant time periods thereafter. The management information system must be used in day-to-day liquidity risk management to monitor compliance with the bank’s established policies, procedures and limits.
d.The IB must make appropriate and regular disclosures of qualitative and quantitative information about its liquidity position and liquidity risk management practices through suitable channels.
e.Senior management must define the types, contents, scope and frequencies of reporting to different levels of management and the board, including various committees such as ALCO and the risk management committee.
f.Liquidity risk reports must provide aggregate information with adequate supporting granularity to enable the recipients to assess the liquidity risk position of the IB in changing market conditions. The reports must pick up any “early warning signals” and provide enough information to the recipients for them to make informed decisions and appropriate changes in policies, procedures and associated thresholds. The reports must also provide information on compliance with the IB’s established policies and procedures, along with details of any breaches and exceptions. The reporting must enable the management to evaluate trends in the aggregate liquidity risk exposure of the IB, as well as its components, in order to provide a basis for timely decision-making and corrective actions.
g.IB’s liquidity risk disclosures must include:
i.summary of the liquidity risk management framework that addresses risk exposure for each category of funding (current accounts, unrestricted and restricted IA), as well as on an aggregate basis;
ii.general information on policies to manage and mitigate liquidity risk, taking into account the ease of access to Shari`ah-compliant funds and the diversity of funding sources;
iii.indicators of exposure to liquidity risk, such as the ratio of short-term assets to short-term liabilities and investment accounts, liquid asset ratios or funding volatility;
iv.maturity analysis of financing and various categories of funding (current account, unrestricted and restricted investment account) by different maturity buckets;
v.policy on maintaining liquidity buffers;
vi.the frequency and type of internal liquidity reporting;
vii.an explanation of the utilisation of stress testing in a liquidity risk management framework;
viii.a summary of the features and testing plans of the CFP; and
ix.supervisory restrictions on the transfer of liquidity among group entities, if any.