Liquidity is critical to the ongoing viability of any financial institution. Poor management of liquidity risk can lead to undue financing costs and difficulty liquidating assets at fair value. This risk may be greater if a financial institution’s reputation is damaged.
Similarly, a financial institution’s capitalization can impact its ability to obtain liquidity in a crisis, which is why it is important for all financial institutions to properly assess the adequacy of their capital given the liquidity of the markets in which they operate.
This guideline sets out the AMF’s expectations regarding liquidity risk management performed by financial institutions. While drawing predominantly on the core principles and guidance issued by The Basel Committee on Banking Supervision (BCBS), this guideline also takes into account the principles of the International Association of Insurance Supervisors (IAIS).
