Principle 14

Supervisors should regularly perform a comprehensive assessment of a bank's overall liquidity risk management framework and position to determine whether they deliver an adequate level of resilience to liquidity stress given the bank's role in the financial system.

132. Supervisors should require that banks: (a) have a robust liquidity risk management strategy, policies and procedures to identify, measure, monitor and control liquidity risk consistent with the principles set out in this document; and (b) maintain a sufficient level of liquidity as insurance against liquidity stress. Supervisors should have in place a supervisory framework which allows them to make thorough assessments of banks' liquidity risk management practices and the adequacy of their liquidity, in both normal times and periods of stress. Such assessments may be conducted through on-site inspections and off-site monitoring and should include regular communication with a bank's senior management and/or the board of directors. The supervisory framework should be publicly available.

133. In developing their approach to liquidity risk supervision at individual banks, supervisors should consider the characteristics and risks of the banks in their jurisdictions, as well as relevant local contextual factors, such as the legal framework and market structure. Supervisors also should consider the risk a bank poses to the smooth functioning of the financial system given its size, role in payment and settlement systems, specialised business activities or other relevant factors. They should more carefully scrutinise banks that pose the largest risks to the financial system and hold such banks to a higher standard of liquidity risk management.