22)Senior management should ensure that operationally independent, appropriately trained and competent personnel are responsible for implementing internal controls.
23)Independent oversight and verification should be performed by middle office and/or risk management staff who are capable of assessing treasury’s adherence to liquidity limits, policies and procedures.
24)It is critical that personnel in independent control functions have the skills and authority to challenge information and modeling assumptions provided by business lines. When significant changes impact the effectiveness of controls and revisions or enhancements to internal controls are warranted, senior management should ensure that necessary changes are implemented in a timely manner.
25)Internal audit should regularly review the implementation and effectiveness of the agreed framework for controlling liquidity risk.
A bank must incorporate liquidity costs, benefits and risks into the product pricing and approval process for all significant business activities.
26)Senior management should appropriately incorporate liquidity costs, benefits and risks in the product pricing, and new product approval process for all significant business activities (both on- and off-balance sheet).
27)This quantification of liquidity costs, benefits and risks should incorporate factors related to the anticipated holding periods of assets and liabilities, their market liquidity risk characteristics, and any other relevant factors, including the benefits from having access to relatively stable sources of funding, such as some types of retail deposits.
28)The quantification and attribution of these risks should be explicit and transparent at the line management level and should include consideration of how liquidity would be affected under stressed conditions.
29)Liquidity risk costs, benefits and risks should be addressed explicitly in the new product approval process.
Banks must have sound processes and systems for identifying, measuring, monitoring and controlling liquidity risk in a timely and accurate manner.