LM-3 LM-3 Foreign Currency Liquidity Management
LM-3.1 LM-3.1 Foreign Currency Liquidity Management
LM-3.1.1
A currency must be considered 'significant' if the aggregate liabilities of the bank (both on and off-balance sheet) denominated in that currency, amount to 5 percent or more of its total liabilities (both on and off-balance sheet).
August 2018LM-3.1.2
Banks must formulate, and review regularly, strategies and policies for the management of liquidity risks with respect to BHD/USD, if relevant, and each significant foreign currency respectively, taking into account the potential market conditions and potential constraints in times of stress. If a bank has assets or liabilities denominated in a significant foreign currency, and that currency is not freely convertible, more prudent management of liquidity risk must be adopted, such as more conservative limits on funding gaps in respect of that currency vis-à-vis other currencies, as liquidity may not be easily transferred into or out of that currency, particularly in times of stress.
August 2018LM-3.1.3
Banks must assess their foreign currency liquidity funding gaps under both normal and stressed conditions, and control currency mismatches within acceptable levels.
August 2018LM-3.1.4
As with the management of its overall maturity mismatch position, a bank must set, and regularly review, internal limits to control the size of cumulative net maturity mismatches arising from assets and liabilities denominated in significant foreign currencies.
August 2018LM-3.1.5
Such limits must cover the bank's maturity mismatch position in BHD, if relevant, and each significant foreign currency over various specific time-bands (e.g. next day, 5 to 7 days ahead, 14 days, 1, 2, 3, 6, 9 months and 1, 2, 3, 5 and beyond 5 years).
August 2018
