🚰 LIQUIDITY RISK REPORTS: A Regulatory Love Story with Spreadsheets

Imagine your bank as a giant water tank. You have water $($cash$)$ flowing in through deposits and investments, and flowing out through loans and liabilities. Now picture the regulators as very picky health inspectors who want daily updates on whether your tank is overflowing or about to dry up. That’s where liquidity risk reports come in!

These reports are like the bank’s health checkups—prescribed by regulators, executed by the $($Asset-Liability Committee$)$ or $($ALCO$)$, and scrutinized like a mystery novel. Let’s dive into this hydrological thriller.

💧 Best Practices for Reporting a Bank’s Liquidity Position

Banks under the UK’s $($Individual Liquidity Adequacy Standards$)$ $($ILAS$)$ are required to follow strict reporting guidelines—like submitting homework, but every day, every week, every month… even quarterly!

📅 Report Frequency Breakdown:

Report Type	Frequency	Deadline
Daily Cash Flows & Enhanced Mismatch	Daily / Weekly	End of business day or Monday
Liquidity Buffer & Funding Concentration	Monthly	15 business days post month-end
Retail/SME Funding, Currency, Off-Balance-Sheet	Quarterly	15 business days post quarter-end

Joke: If Excel had a “sweat” mode, these banks would permanently be in it.

🎯 Best Practice Highlights:

Daily Cash Flows: Measures survival horizon—basically, “how long till we’re broke?”
Enhanced Mismatch: Think of it like a dating app for cash flows—matching inflows with outflows by maturity.
Liquidity Buffer: How much water is stored for a drought? Only high-quality, low-risk, easily tradable assets allowed.
Funding Concentration: Do all your friends $($funding sources$)$ live on one street? Time to diversify!
Retail & Corporate Funding: Is your funding base loyal or flaky? Stickiness matters.
Currency Analysis: Are you juggling yen, dollars, and rupees? FX exposures can leak liquidity.
Off-Balance-Sheet Report: Spoiler alert: those hidden commitments aren’t actually invisible when stress hits.

📊 Comparing & Interpreting Liquidity Risk Reports

Let’s break it down report by report, so even your dog could fetch the logic.

🏦 Deposit Tracker Report

Tracks how well your deposits and loans are aligned. The key metric here?

Loan-to-Deposit $($LTD$)$ Ratio = $\frac{\text{Loans}}{\text{Deposits}}$

Too high? You’re a daredevil. Too low? You’re hoarding cash like a squirrel in winter.

Insight: If LTD > 85%, the bank may face trouble repaying customers if they start withdrawing en masse.

🗓️ Daily Liquidity Report

Breaks down assets/liabilities by maturity buckets.

Counterbalancing Capacity: Emergency stash you can sell fast—like a gold chain in a pawn shop.
Liquidity Gap = Cumulative Cash Gap − Counterbalancing Capacity
Liquidity Risk Factor: How stressed your liquidity position is, numerically quantified.

🔁 Funding Maturity Gap Report

Also known as the $($Mismatch Report$)$. It’s like comparing party guests $($liabilities$)$ leaving and pizza delivery $($assets$)$ arriving. If the guests leave before pizza arrives… stress!

Outputs:

Net Inflows/Outflows
Cumulative Mismatch across tenors
Liquidity Ratio at different horizons

🛟 Cash Flow Survival Report

Based on Basel III, a bank must survive at least 30 days of cash flow outflows without selling off kidneys. If the line drops below zero before day 30, the bank’s in trouble.

🧲 Funding Concentration Report

Do you depend on a few big sugar daddies—err, depositors? Time to diversify. If one $($>10% of liabilities$)$ pulls out, you’re toast.

📑 Undrawn Commitment Report

Tracks how much liquidity stress might be triggered if clients suddenly use their $($credit lines$)$. It’s like friends saying, “I might borrow your car this weekend.” You better keep gas in the tank just in case!

⚖️ Liability Profile Report

Breaks down liabilities by customer type—like individuals $($retail$)$ or institutions $($wholesale$)$. Helps assess how predictable or sticky the funding is.

💰 Wholesale Pricing & Volume Report

Monitors the yield curve and cost of funding. If your yield is higher than peers, regulators might say, “You smell like risk.”

📋 One-Page Summary MI

Senior management’s liquidity cheat sheet. Includes:

Liquidity position
Key ratios
Alerts on breaches

Think of it as a financial weather forecast: sunny, cloudy, or “brace for impact.”

🧩 Wrapping It All Together

Each report plays a critical role in tracking the bank’s ability to survive under different liquidity conditions. But they are more powerful when viewed together:

Mismatch reports show misalignment.
Cash flow survival shows how long the bank can last.
Buffer and commitment reports show your rainy-day arsenal.
Concentration and funding cost show where your risk clusters are.

🧠 Final Thought

Managing liquidity without these reports is like driving blindfolded with your fuel gauge broken. You might survive, but don’t count on it.

So the next time you hear “funding maturity gap report,” don’t yawn—realize it’s the financial version of checking if your parachute works before jumping out of the plane.