EBA欧洲银行-CP36_14页_160kb

CEBS Guidelines on Liquidity Cost Benefit Allocation Summary

Core Content

The Committee of European Banking Supervisors (CEBS) issued a consultation paper on Guidelines on Liquidity Cost Benefit Allocation (CP 36), aimed at improving the internal mechanisms for allocating liquidity costs, benefits, and risks within credit institutions. These guidelines are intended to support sustainable business models and efficient liquidity management across the banking sector.

Main Objectives

• Provide high-level guidance for institutions in creating or reviewing liquidity cost benefit allocation mechanisms.
• Ensure that the allocation mechanism incorporates all liquidity costs, benefits, and risks, including contingent liquidity risk.
• Facilitate a risk culture around liquidity management and align risk-taking incentives with liquidity risk exposures.
• Enable institutions to link their strategic direction with liquidity resource allocation.

Key Points of the Guidelines

Guideline 1: Integration with Governance and Risk Framework

• The liquidity cost benefit allocation mechanism should be consistent with the institution's governance, risk tolerance, and decision-making processes.
• It should be part of the overall liquidity risk management framework.
• Internal prices should be derived from a fund transfer pricing (FTP) system, which is typically used for profit planning and asset/liability management.

Guideline 2: Governance Structure

• The methodology should be approved by the management body or a delegated governing body (e.g., ALCO).
• The mechanism must be transparent, consistent, and regularly reviewed.
• The area responsible for internal pricing should be service-oriented and not have profit targets.
• The internal pricing should be aligned with market transaction prices and reflect both direct and indirect costs, including the cost of a liquidity buffer.

Guideline 3: Active Use of Internal Prices

• The output from the allocation mechanism must be actively used by decision-makers at the transaction level.
• Business lines and treasury functions should maintain a good dialogue and understand the rationale behind internal prices.
• Internal prices should be used for performance measurement, product appraisal, and liquidity planning.

Guideline 4: Comprehensive Scope

• Internal prices should cover all significant parts of assets, liabilities, and off-balance sheet items.
• Sight deposits should be properly treated, recognizing their stickiness compared to wholesale funds.
• Trading book assets and marketable assets (AFS portfolio) should be priced based on expected holding period and market liquidity risk.
• Committed and uncommitted credit lines should incur charges reflecting the cost of liquidity.
• The mechanism should be adaptive and updated regularly to reflect changes in the market environment.

Guideline 5: Robust Methodologies

• Internal pricing methodologies should model the behavior of assets and liabilities.
• These models should be independently validated and regularly reviewed.
• The internal pricing yield curve is critical and should reflect the institution's specific circumstances and market conditions.
• Adjustments to the yield curve may include credit risk adjustments, bid/ask spreads, liquidity premiums, and optionality adjustments.
• Internal prices should reflect the marginal cost of funding and be recalculated dynamically when new products or funding are introduced.

Key Information

• Implementation Deadline: CEBS expects its members to transpose the guidelines into national regulations by 30 March 2011 at the latest.
• Consultation Period: The consultation paper was published on 10 March 2010 and closed on 10 June 2010.
• Public Hearing: A public hearing was held on 1 June 2010 at CEBS's premises in London.
• Annexes:
  • Annex 1: Provides examples of liquidity cost allocation mechanisms observed in European banks.
  • Annex 2: Explains how to calculate contingency liquidity costs, including the cost of liquidity buffers and the opportunity cost of holding lower-yielding assets.

Summary of Annex 1

• Internal Pricing Policy Approval:
  • 2 institutions approved via the Board.
  • 1 institution approved via the CFO.
  • 2 institutions approved via ALCO.
• Implementation Responsibility:
  • 4 institutions assigned responsibility to the Treasury division.
  • 1 institution assigned responsibility to the Group ALM.
• Entity Type:
  • 4 institutions classified the Treasury as a cost center.
  • 1 institution classified it as a profit center.
• Amendment Flexibility:
  • 3 institutions allowed amendments to internal prices for incentives.
  • 2 institutions did not allow any amendments.
• Scope of Application:
  • 5 institutions applied internal pricing to assets.
  • 3 institutions applied it to deposits.
  • 2 institutions applied it to all assets and liabilities.
• Inclusion of Contingency Funding:
  • 3 institutions included funding requirements in contingency mode.
• Frequency of Updates:
  • 1 institution updated prices daily.
  • 3 institutions updated prices weekly.
  • 1 institution updated prices monthly.
• Pricing Components:
  • Risk-free curve + CDS spread.
  • Risk-free rate + maturity liquidity premium + institution liquidity premium + buffer premium.
  • Direct funding cost + term premium + buffer premium.
  • Short-term financing cost + term funding cost (including contingent liabilities).

Summary of Annex 2

• Contingency liquidity costs are calculated based on the cost of maintaining a liquidity buffer and the opportunity cost of holding lower-yielding assets.
• The liquidity buffer is used to cover sudden liquidity needs within a short time horizon.
• The cost of the buffer is attributed to the funding with the corresponding maturity, typically up to one month.
• The methodology is dynamic and forward-looking, reflecting current market conditions and the institution's risk exposure.