Liquidity Contingency Funding Plan Workshop v.pptx PDF

Your Bank of Choice Liquidity Contingency Funding Plan Workshop 27 November 2024 Market and Liquidity Risk Presentation By : 1. Norhayati Masol 2. Mohd Sairi Mat Saidi 3. Mohd Rahmat Ngah Confi...

Your Bank of Choice Liquidity Contingency Funding Plan Workshop 27 November 2024 Market and Liquidity Risk Presentation By : 1. Norhayati Masol 2. Mohd Sairi Mat Saidi 3. Mohd Rahmat Ngah Confidential Strictly for Bank Rakyat Only  02 Your Bank of Choice PART Introduction to Liquidity Contingency Funding Plan  Definition and Importance 01 02 03 Liquidity Contingency Funding Importance in Financial Impact on Risk Management Plan Stability Concept of having a backup plan to Helps maintain operational continuity Mitigates the risk of forced liquidation access funds during a crisis. during financial disturbances. of assets  Ensuring the Bank can meet its Enhances trust among stakeholders Provides a cushion against unexpected short- term obligations without by showing preparedness. market changes. disruptions mechanisms  Prevents liquidity crunches that  Helps in maintaining adequate cash involved in activating could lead to solvency issues. flow under adverse conditions. 3 contingency funding sources. Confidential  Regulatory Context 01 02 03 Relevant Regulatory Compliance Regulatory Bodies Guidelines Requirements Involved  Basel III liquidity  Formal contingency  Role of BNM standards and funding plan (CFP) that in liquidity their strategies for regulations. requirements addressing liquidity impacting shortfall in emergency. liquidity  The CFP outline planning. policies to manage  BNM Policy stress event and clear lines of responsibility, Document(PD) clear invocation and such as LCR, escalation procedure. NSFR and  The CFP must be Liquidity Risk regularly tested and 4 Confidential  Objectives of the LCFP Part 01 Part 02 Part 03 Communication and Role and Procedure Plan Responsibility Management Ensure the Bank has Timely and precise Clear role and procedures in place for information and responsibility for all accessing funds during communication to related personnel to emergency facilitate the Bank to ensure effective and make quick decisions efficient management of liquidity crisis 5 Confidential  03 Your Bank of Choice PART Implementation of the Contingency Funding Plan  Governance and Oversight Board Of Directors Board Of Risk Committee (BRC)  To Oversee Liquidity Risk Management.  Timely update BOD and BRC Liquidity Management on management of liquidity Committee crisis event for effective (LMC) communication and informed Bank strategic direction. 7 Confidential  Term of Reference of LMC Liquidity Management Chairperson Committee (LMC) CEO MEMBERS OTHER REQUIREMENTS 1. Chief Executive Officer (CEO). Quorum: Majority (more than 50%) of the Committee members of whom one 2. Deputy Chief Executive Officer, Business. must be the Committee 3. Deputy Chief Executive Officer, Operations. Chairperson or the alternate 4. Chief Finance Officer. Chairperson. 5. Chief Risk Officer. Decision: Majority. In case there is deadlock in decision, such as 50-50 votes, 6. Chief Business Banking Officer. Chairperson has the casting vote. 7. Chief Retail Banking Officer. Frequency: As and when required 8. Chief Treasury Officer. 9. Chief Strategy & Transformation Officer 10. Secretary: SVP Financial Risk 8 Confidential  Liquidity Management Committee (LMC) Action Plan Objective: Minimising the impact on the Bank’s financial position. Analysis and Monitoring Communication and Reporting  Notify BOD and BRC on the severity of the situation and explain the actions to be taken.  Continuously assess and monitor liquidity  Communicate to regulator on the situation and actions to be taken. risk ratios and position.  Inform the customer and public on the situation and explain the Bank’s action plans.  Notify all business units and continuously advise them on the actions to be taken; and  Ensure that the staffs involve in LMC are aware with their roles and responsibilities if the LMC is evoke. Mitigation Plan for Liquidity Crisis Post Crisis Assessment  Possible mitigation plan that may be utilized  Continuously monitor the adequacy of funding by the Bank (depending on the situation). position.  Prepare report for BOD and BRC on all action taken during the crisis. 9 Confidential  04 Your Bank of Choice PART Components of a Liquidity Contingency Funding Plan  Liquidity Crisis Identification 02 Credit Risk/ Market Risk 01 Liquidity Risks Indicator Indicator 03 Other indicators and situation that could likely trigger a liquidity crisis  Unsubstantiated rumours or negative perception of the Bank that could impact the Bank’s liquidity position.  Substantial financial losses arising from litigation claim on the Bank;  Substantial financial losses from fraud case. 11 Confidential  Mitigation Plan For Liquidity Crisis Liability Related Strategy Assets Related Strategy Other Related Strategies Treasury Funding Treasury Assets  Seek Funding from market via interbank  Allow premature withdrawal of  Selectively approve new deposit. the Bank deposit placement financing or defer any decision  Secure Deposit by offering higher rate of (asset management). until situation return to normal to the deposits.  Start selling or liquidating all reduce large fund utilization.  Utilize available standby credit line investment holdings in the order  Review all financing lines given facility. of its credit rating i.e., AAA, AA, to customer and if possible, with  Contact counterparts from other Banks etc. agreement of the customer, for possible back up credit line. reduce any unused line.  Unilateral rollover of the money market  Stricter collection process placement/interbank receiving. needs to be enforced to ensure  Seek customer consent to defer any continuation of cash inflow. large drawdown of funds.  Potential of limiting access of  Refer to BNM for lender of last resort. cash for MEPS Card holder, in  Sell Eligible financing to Cagamas via which priority to access the purchase with recourse program. Bank’s ATM given to the BKRM  Issue commercial paper and medium- card holders. term note (MTN) (liability management). 12 Confidential  Detail Mitigation Plan For Liquidity Crisis Timing Required Business Units / (Timing of cashflow/timing to No Mitigation Plans for Liquidity Crisis Remarks Stakeholders obtain the funding / timing to execute plans) Liability Related Strategy – Treasury Funding 1. Seek Funding from market via interbank deposit Treasury (MNMK) Same day 2. Secure Deposit by offering higher rate of the Treasury (MNMK) deposits Same day 3. Utilize available standby credit line facility Treasury (MNMK)(CRSB)  Maybank Islamic RM200 mil  Bank Islam RM200 mil T+1 day After utilisation requested to CRSB.  OCBC RM300 mil  CIMB Islamic RM300 mil 4. Contact counterparts from other Banks for Treasury (CRSB) Backup lines including CCM & SBBA possible back up credit line. T+1 day with interbanks 5. Unilateral rollover of the money market Treasury (MNMK) Usually Interbank placement maturity placement/interbank receiving will be pay to the counterparty first then Same day the counterparty will replace back after they sighted the incoming funds at their end. 6. Seek customer consent to defer any large Treasury (MNMK) drawdown of funds. T-30 days As per our current practice. 7. Refer to BNM for lender of last resort Treasury (MNMK) (The amount of repo to BNM will be based on the Bank’s current HQLA market value) Same day To notify BNM before 3.30PM 8. Sell Eligible financing to Cagamas via purchase Finance (Capital Subject to availability of eligible with recourse program. Management) 2 – 4 weeks financing to be sold to Cagamas. 9. Issue commercial paper and medium-term note Finance (Capital Process include approval from ALCO & (MTN) (liability management) Management 2-3 months Board, market updates & bookbuilding. 13 Confidential  Detail Mitigation Plan For Liquidity Crisis Timing Required No Mitigation Plans for Liquidity Crisis Business Units / (Timing of cashflow/timing to Remarks Stakeholders obtain the funding / timing to execute plans) Assets Related Strategy – Treasury Assets 10. Allow premature withdrawal of the Treasury (MNMK) (No incident observed in the Bank deposit placement (asset market) management) To provide the counterparty T-2 days with written notice at least two days in advance of premature placement. 11. Start selling or liquidating all Treasury (FXIN) Timing to execute plan - Same Depends on market demand investment holdings in the order of its day on transaction day and amount credit rating i.e., AAA, AA, etc. of funding needed. Timing to obtain funding – T+2 days 14 Confidential  Detail Mitigation Plan For Liquidity Crisis Timing Required Mitigation Plans for Liquidity Business Units / (Timing of No cashflow/timing to obtain Remarks Crisis Stakeholders the funding / timing to execute plans) Other Strategies 12. Selectively approve new Chief Business Banking financing or defer any decision Officer (CBBO) until situation return to normal to Chief Retail Banking reduce large fund utilization Officer (CRBO) 13. Review all financing lines given to Chief Business Banking customer and if possible, with Officer (CBBO) agreement of the customer, Business Banking Centre reduce any unused line (BBC) LMC to decide on the execution of these strategies. 14. Stricter collection process needs Chief Collection & to be enforced to ensure Recovery Officer (CCRO) continuation of cash inflow 15. Potential of limiting access of ATM Operations (ATMO) cash for MEPS Card holder, in Digital Retail Platform which priority to access the (DREP) Bank’s ATM given to the BKRM card holders 15 Confidential  Activation and Execution of LCFP Process 01. 02. 0. 04. 16 Confidential  Activation and Execution of LCFP Process 01. 02. 0. 04. 17 Confidential  Activation and Execution of LCFP Process 01. 02. 0. 04. 18 Confidential  Monitoring and Reporting Regular Monitoring Activities Internal and External Reporting Key Performance Indicators (KPIs) Reporting to Stakeholders 19 Confidential