Best Practice

Liquidity Risk and Asset-Liability Management


Eurozone banks have been grappling with the ILAAP since the introduction of the SSM, and UK banks for even longer. This core prudential requirement typically covers liquidity and funding risk management framework, funding strategy, strategy regarding liquidity buffers and collateral management, cost/benefit allocation mechanisms, intraday liquidity risk management, liquidity stress testing and liquidity contingency plans.

Avantage Reply has more than a decade of experience with ILAAP given its historical roots in the UK regulatory environment where Avantage has always had a strong presence. Our teams offer tailored ILAAP solutions depending on your business model and balance sheet.


Design and establish ILAAPs for new banks/entities:
- Definition and design of ILAAP framework (including cascading within entities and operational implementation);
- Executive and board training on regulators’ expectations.

Improve and Integrate:
- Embed the ILAAP through banks; strategic-decision making process; 
- Ensure the linkage between ILAAP and other key strategic processes - including trade-offs between capital and liquidity risk management (ICAAP/ILAAP/Recovery Plan options);
- Design and implementation of ILAAP and liquidity risk governance framework (roles, responsibilities, segregation of duties, etc.)
- Three lines of defence organisational governance - roles of first line, Treasury, Finance and Risk in ILAAP.

Improve methodologies:
- Liquidity Stress Testing and Contingency Funding Plan;
- Liquidity management framework – Liquidity adequacy, planning, monitoring and governance; Intraday Liquidity Risk Management; Independent validation of ILAAPs.

Improve risk and data aggregation:
- BCBS239 compliant liquidity risk data aggregation and reporting, including consistency with regulatory reporting (COREP/FINREP/LCR/NSFR/AMM);
- Addressing ECB OSI findings or audit matters in regards to liquidity risk;
- Address ILAAP related technological and regulatory change management around payment services, privacy, crypto currencies or near-monies.

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