LM-1.2.4
The risk tolerance must be set in a way that:
(a) Defines clearly the level of liquidity risk that the bank is willing to assume, under normal and stressed conditions2 ;
(b) Can be easily communicated, understood and monitored by relevant personnel of the bank involved in the liquidity risk management process; and
(c) Reflects the bank's assessment of the sources of liquidity risk it faces, as well as the trade-off between risks and profits.
2 For example, a bank may quantify its liquidity risk tolerance in terms of the level of unmitigated funding liquidity risk the bank decides to take under normal and stressed business conditions.
August 2018