Liquidity Risk Management

Liquidity Risk Management explores one of the most critical dimensions of financial stability: a bank’s ability to meet its obligations under both normal and stressed conditions. This program introduces key concepts and practical tools used to identify, measure, and manage liquidity risk, with direct relevance to both regulatory expectations and internal bank strategy. It begins by defining liquidity risk—what it is, why it matters, and how it differs from solvency or capital risk. You'll examine threats from both the asset and liability sides of the balance sheet, and how shifts in confidence or market conditions can rapidly impact a bank’s liquidity position. You’ll then explore the drivers of liquidity risk, such as sudden deposit withdrawals, unexpected credit line drawdowns, funding maturity mismatches, and dependence on wholesale markets. These factors are examined in the context of a typical bank’s operating environment, using historical examples to illustrate their impact. From there, you’ll delve into industry-standard approaches to measuring liquidity risk, including key regulatory ratios like the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), along with internal stress testing practices and scenario modeling. The course also covers how to develop a comprehensive Liquidity Management Plan. Topics include contingency funding strategies, internal governance frameworks, and the creation of early-warning indicators to detect and respond to emerging liquidity pressures. To ground these concepts, the program closes with a case study of Signature Bank’s 2023 collapse. This real-world example highlights how a lack of diversification and poor liquidity planning—even amid strong core fundamentals—can lead to institutional failure. This course is part of the New York Institute of Finance’s Asset Liability Management Professional Certificate program. 3b:Td82,{"@context":

• Define liquidity risk and its consequencesDifferentiate liquidity risk from solvency riskIdentify liability- and asset-driven liquidity threatsUnderstand role of market confidence in liquidityAnalyze sources of funding and outflow risk