Institutions need levels of liquidity high enough to meet their payment obligations and low enough to take advantage of any investment opportunities. As sources of funding become ever more volatile and costly, active liquidity risk management enables institutions to keep ahead of the competition.

Establishing an appropriate Liquidity Risk Management and Control Framework, as well as implementing an advanced Liquidity Risk Management System, are essential elements to the effective management and control of liquidity risk.

KPMG in Greece can provide support to the organizations regarding the following areas:

Liquidity Risk Management and Control Framework
Establishing an appropriate framework is essential to the effective management and control of liquidity risk. To enable banks to treat liquidity risk in the same way as the other risks they face, we can define an independent process of liquidity risk control, involving:

• Development of sophisticated methodologies
• Processes for defining and setting limits
• Independent monitoring and reporting of liquidity risk, limit utilization and liquidity risk indicators.

All processes and methodologies that form the liquidity risk management and control framework will be documented and the following documents will be produced, as required by most recent regulatory developments:

• Liquidity Management Policy
• Liquidity Limit Framework
• Funding Plan and Contingency Funding Plan
  
  

Liquidity Risk Management System
The architecture of KPMG's Liquidity Risk Management System has the following characteristics:

• Data environment designed to provide / generate the required data for liquidity reporting and management
• Web interface including the required screens for the maintenance of the liquidity parameters (i.e. generation of cash flows, stress tests)
• Reporting environment producing the required liquidity reports and stress tests
   

Funds transfer pricing
According to Basel III requirements, financial institutions should have in place an adequate internal liquidity cost / benefit allocation mechanism supported, where appropriate, by a transfer pricing mechanism. KPMG can assist its clients with the implementation of Funds Transfer Pricing models and methodologies.

The benefits of adopting such an approach include increased transparency regarding liquidity risk, alignment of business objectives to the company’s business plan and transferring all liquidity risk to central treasury function.