Large Bank Supervision Forum eBook

Internal Use Only The 2023 Banking Crisis proved that the antiquated liquidity risk framework was lacking several key elements . . .

The failures in March of 2023 introduced a digital run at record speed demonstrating that the industry could not count on antiquated liquidity analytics and should take the following steps to modernize their liquidity risk framework.  Track time sequenced liquidity metrics  Shift from cash to fed master account availability  Shift borrowing capacity in front of on-balance sheet liquidity  Brokered and listing are acceptable funding sources for IRR and Liquidity  Large deposits ($250k and up, large deposits, uninsured deposits) must be analyzed and uninsured deposits must be tracked  Banks must rethink and redo their contingency funding plans

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Internal Use Only

Identify stable vs. volatile funding . . .

Stability Metrics for non maturity deposits: 1. Relationship with Director or shareholder 2. Within market area 3. Additional non-deposit services 4. Electronic banking services 5. Active demand deposit account 6. At market interest rate 7. Tenure of bank relationship

Short term volatile

Long term volatile

Stable Funding

Insured Deposits (i.e. < $250k) High Cost Deposit calc is critical Internet Deposit assessment is critical Uninsured Deposits Valid “high cost” deposits Valid “internet” deposits Municipal Deposits Large Depositors Listing Service

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Core Funding Non-Core Funding Wholesale Funding Non Maturity Non Maturity Non Maturity Maturity Maturity Maturity

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Brokered Deposits FHLB Borrowings Other Borrowings

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core deposits: the sum of demand deposits, all NOW and ATS accounts, MMDAs, other savings deposits and time deposits under $250,000, minus all brokered deposits under $250,000

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