Scope, Coverage and Frequency of Cash-flow Projection
LM-2.5.3
Cash-flow projections involve the estimation of a bank's cash inflows against its outflows and the liquidity value of its assets to identify the potential for future net funding shortfalls. The projections must be forward-looking and based on reasonable assumptions and techniques, covering liquidity risks stemming from:
(a) On-balance sheet assets and liabilities;(b) OBS positions and derivative transactions (including sources of contingent liquidity demand and related triggering events associated with such positions);(c) Special Purpose Vehicles; a bank must have a detailed understanding of its contingent liquidity risk exposure and event triggers arising from any contractual and non-contractual relationships with special purpose vehicles; and(d) Core business lines and activities (for example, correspondent, custodian and settlement activities).August 2018LM-2.5.4
Cash-flow projections must address a variety of factors over different time horizons, including:
(a) Vulnerabilities to changes in liquidity needs and funding capacity on an intraday basis;(b) Day-to-day liquidity needs in, say, 5 to 7 days ahead;(c) Funding capacity over short and medium-term horizons (e.g. 14 day, 1, 2, 3, 6 and 9 months) of up to 1 year;(d) Longer-term liquidity needs over 1, 2, 3, 4 and beyond 5 years; and(e) Vulnerabilities to events, activities and strategies that can put a significant strain on a bank's capacity for generating liquidity.August 2018LM-2.5.5
Cash-flow projections must cover positions in Bahraini Dinar (BHD/USD), where appropriate and in all significant currencies in aggregate. Separate cash-flow projections must also be performed for individual foreign currencies in which a bank has significant positions. Please refer to LM-3: Foreign currency liquidity management for the identification of significant positions in other currencies.
August 2018
