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 2018