Comptroller of the Currency
Administrator of National Banks

SUMMARY

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration (agencies) are seeking comment on the proposed Interagency Guidance on Funding and Liquidity Risk Management. The agencies developed the guidance to provide consistent expectations on sound practices for managing funding liquidity risk and to strengthen liquidity risk management practices. This guidance, when appropriate, brings the agencies' liquidity risk principles into conformance with the international guidance recently issued by the Basel Committee on Banking Supervision titled “Principles for Sound Liquidity Risk Management and Supervision.”¹

BACKGROUND

The recent turmoil in the financial markets emphasized the importance of good liquidity risk management to the safety and soundness of financial institutions. Supervisors and the banking industry participated in various working groups to learn from this experience and to develop higher standards for liquidity risk management. This proposed guidance emphasizes the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal well-developed contingency funding plan as primary tools for measuring and managing liquidity risk. The proposed guidance, when finalized, will apply to all domestic financial institutions, including banks, thrifts, and credit unions.

The proposed guidance was published in the Federal Register on July 6, 2009. The agencies are requesting comments on all aspects of the proposed guidance. Comments on the proposal are due on or before September 4, 2009.

FURTHER INFORMATION
You may direct questions or comments to Kerri Corn, Director for Market Risk, at (202) 874-4364, or J. Ray Diggs, Group Leader, Balance Sheet Management, Market Risk Division at (202) 874-5612.