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  • Contingency Funding Measures and Sources

    • LM-10.2.1

      The CFP must provide a bank's management with a diversified set of viable, readily deployable potential contingency funding measures for preserving and making up liquidity shortfalls in emergency situations. All available potential sources of funding must be outlined, along with the estimated amount of funds that can be derived from these sources, their expected degree of reliability, under what conditions these sources must be used, and the lead time needed to access additional funds from each of the sources.

      August 2018

    • LM-10.2.2

      Banks must analyse the viability and likely impact on market perception of adopting different contingency funding measures. Some of the factors that must be considered include:

      (a) The impact of stressed market conditions on a bank's ability to raise funding through different sources;
      (b) The interaction between asset markets and funding liquidity, especially in situations where there is an extensive or complete loss of typically available market funding options;
      (c) Any second-round effects, as well as reputation, legal, regulatory and operational constraints, related to the execution of such measures; and
      (d) Any peculiarities (including special terms and conditions) associated with particular funding sources. For example, banks must generally refrain from excessive reliance on back-up credit lines (even if committed) and need to understand various conditions, such as notice periods, that could affect a bank's ability to access such lines quickly.
      August 2018

    • LM-10.2.3

      In developing contingency funding measures, banks should also be aware of the operational procedures needed to transfer liquidity and collateral across group entities, borders and business lines, taking into account legal, regulatory, operational and time zone restrictions and controls governing such transfers. The CFP should incorporate relevant operational procedures and realistic timelines for such transfers. Assets intended to be pledged as collateral in the event that backup funding sources are utilised, should be held by a legal entity and in a location consistent with management's funding plans.

      August 2018