ILAAP Support

SUMMARY

Following the Supervisory Review and Evaluation Process (SREP), the bank received a letter from the Banque Centrale du Luxembourg (BCL) highlighting a number of findings and recommendations concerning its liquidity risk management framework. The bank was asked to address these recommendations as part of its submission of the 2021 Internal Liquidity Adequacy Assessment Process (ILAAP).

CUSTOMER GOALS

The bank’s Treasury team, who is responsible for the ILAAP, required assistance with enhancing its liquidity management framework and support in preparing its 2021 ILAAP report while implementing the SREP letter recommendations. The primary goals were the following:

• Address the findings and recommendations identified by the BCL
• Enhance relevant policies, procedures and frameworks to incorporate the changes required for the liquidity management processes
• Assist in the preparation of the 2021 ILAAP report, including coordinating inputs required from key stakeholders (e.g. Risk Management, Finance, Treasury, etc.)
• Develop a stand-alone Contingency Funding Plan (CFP)
• Support the Treasury team with any other ad-hoc requests related to liquidity management

CHALLENGES

Avantage Reply had to 1) update last year’s ILAAP report from start to end, and 2) address the recommendations required by the BCL. The first objective was impeded by the lack of documentation and the previous person responsible for this report. This required extra time to understand the bank’s specificities. Secondly, most of the solutions had to be developed and approved prior to the update of the ILAAP, which required a practical and efficient working plan.

SOLUTION

Avantage Reply provided one full-time resource who led the project along with coordination of the ILAAP development and drafting of the report. The senior consultant provided the necessary technical and industry best market practices by developing custom-made solutions to address the comments from BCL. The final delivery consisted of:

• An updated ILAAP report
• A revised risk identification and quantification approach for the ILAAP
• An updated ILAAP Reader’s Manual
• An updated Liquidity Adequacy Statement
• An updated Intraday Liquidity Policy
• An updated Liquidity Risk Management Policy
• A new Contingency Funding Plan
• The Board of Directors and other relevant risk committees’ presentations, which described the key ILAAP elements to facilitate the approval process