Between March and May 2023, significant bank failures affected global markets, marking the largest banking stress since 2008. This led governments and central banks to offer support measures, including FX swap lines and guarantees. As a reflection to these events, the Basel Committee on Banking Supervision (BCBS) presented a report to the G20 assessing lessons from the 2023 banking turmoil, focusing on liquidity risk. Key vulnerabilities included high uninsured deposit concentrations, interest rate exposure, and insufficient stress-testing practices. To improve financial stability, regulators are urging enhanced liquidity resilience and risk management. This newsletter summarizes the main points, that also provide hints about the directions, the central bank, regulators, supervisors may take. For additional information on the topic, we also recommend our previous newsletters on liquidity management: • 2024 October on Treatment of financial time series with seasonality, • 2024 February on Changes in MNB ICAAP-ILAAP-BMA methodology manuals, • 2023 March on Changes in MNB ICAAP-ILAAP-BMA methodology manuals, • 2021 September on ICLAAP – Understanding supervisory expectations and how banks can improve ICLAAP performance, and • 2020 August on Changing supervisory expectations: modified impairment calculations, liquidity stress tests for investment funds, and Pillar II capital requirement
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