With the aim of enabling banking supervisors to analyze the status of a bank's liquidity, Basel committee has designed a set of 'monitoring metrics' which focus on improving a bank's ability to absorb losses without impacting the greater banking community.
Salient benefits offered by the Risk Metrics module are:
- LCR / NSFR: Improve bank funding profile with the proper balance of short and long-term funding sources. Track and maintain Liquidity Coverage Ratios (LCR) and Net Stable Funding Ratios (NSFR) at optimal levels.
- Interest Rate Risk: Maintain Interest-Rate Risk (IRR) exposures within defined limits. Enable senior management to assess the sensitivity of the bank to changes in market conditions and other risk factors. An IRR measurement and monitoring system can provide data at the aggregate and detailed levels; these can be configured to user-defined time buckets.
- HQLA and Haircuts: Maintain an inventory of High-Quality Liquid Assets (HQLA) with haircuts at different levels that can be easily liquidated. Satisfy Basel requirements for Liquidity Coverage Ratio (LCR) calculations with an inventory of eligible asset classes.
- Curve Management: Protect against losses with defensive yield curve management. Model curve slope sensitivity factors, leverage single-factor and multi-factor yield curve models and gauge changes in asset valuations and exposures.
- Operational and Excess Cash Management: Configure and compute operational and excess cash using the liabilities modeler. This computation provides inputs for calculating LCR / NSFR ratios, for the corporate banking division.