The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, approved the revision of the guidelines on liquidity risk management for banks and quasi-banks to make sure they function smoothly not only during normal times but also in stressed conditions.
The revision amended the liquidity risk management guidelines which were first issued in 2006. Liquidity risk stems from the inability of a financial institution to meet its obligations when they come due without incurring unacceptable costs.
“The guidelines emphasize the responsibility of the board of directors to clearly define the tolerance for liquidity risk in a manner that can easily be communicated and understood by personnel,” the Bangko Sentral said.
“On the other hand, it falls upon senior management to develop funding strategies that are aligned with the set risk tolerance. The strategies must ensure the availability of stable funding sources, the diversification of maturities and the preservation of alternative funding sources,” it said.