Toolbased Liquidity Coverage Ratio Control

Master's Thesis, 2012

97 Pages, Grade: 1,3




I High Practitioner’s Relevance
1 Introduction
1.1 Structure
1.2 Constructing the LCR
2 Quantitative Impact Study
3 Introduction to Funds Transfer Pricing
3.1 Liquidity Pricing
3.2 General Dependence of Liquidity Costs

II Core
4 Funds Transfer Pricing
4.1 Derivation of the Liquidity Costs
4.2 Liquidity costs of a product
5 A Model
5.1 Derivation of the Cash Equivalent
5.2 Overall Example
5.3 Sensitivity
6 Bank Management
6.1 Expired Situations of Non-Optimal fulfilment
6.2 Target Based Pricing
7 Data

III Limitations and Conclusion
8 Discussion and Limitations
8.1 Discussion
8.2 Limitations
9 Conclusion and Outlook


A Appendix
A.2 Nomenclature
A.3 Proof of the Target Based Pricing
A.4 Application
A.5 VBA-Code

List of Figures

1 Which aspects can be transformed to take advantage?

2 Basic Case of Liquidity Flow (Source: [11])

3 Development of the model's 3M reference rate for liquidity (Data: Reuters - DS 5.1)

4 Trade-off between the three parties

5 Boxplot of the Distribution of the LCR - Median, Quartiles and Range (Source: [3] and [4])

6 Distribution of L1 and L2 assets in June 30 2011 (Source: [3] and [4]) - graphically revised)

7 Structure of Cash Flows (Source: [11])

8 Correspondence of the LCR Transfer Price to the internal FTP (Source: [27])

9 Differences in liquidity transfer pricing system (LTP) Regimes (Source: [11])

10 Three Fundamental Devices

11 (De-) Composed Credit Linked Note, See: [15]

12 Weighting Bars of the Tranche Approach (Source: [15])

13 Calculus of the Basic Case of a Credit

14 Example for a Loan with the Tranche Approach with two amortizing Cash Flows (Source: [23])

15 A "Typical" Working Situation for the Tool

16 The four Asset and Cash Flow Situations

17 Incentive Structure

18 Multivariate Marginal Costs of Funds

19 Development of the Spread between unsecured and secured lending (EURIBOR - EUREPO) from one week to one year, Timeline: 01/01/2007 - 10/01/2012 (Data: Reuters DS-5.1)

20 Screenshot of the Application

List of Tables

1 Derivative of the Liquidity Costs with Respect to the Run-off Rate

2 Explication of the VBA-tool


illustration not visible in this excerpt

Part I.: High Practitioner’s Relevance

1. Introduction

The thesis is based on an issue of the author's internship with Deloitte Germany. The internship took place in a bank preparing for new regulatory claims, especially liquidity. After consulting for a better understatement in the new regulatory needs and improving reporting frequency and quality the issue of the costs to meet the LCR came up.

The first part of the introduction explains the structure of the thesis and sketches the approach. In the second part we will see the most basic concept of the LCR. Furthermore an overview of the contemporary discussion is drawn, which concludes the high relevance in practice.

1.1. Structure

In late 2010 the Basel Committee on Bank Supervision (BCBS) published [2] - It is framework for two new monitoring standards on liquidity the LCR and the Net Sta­ble Funding Ratio (NSFR). After an observation period beginning in 2011, they will become legally binding in 2015 and in 2018. The combination of LCR and NSFR shall be an appropriate mixture of a short rolling 30-day window of liquidity monitoring and a "longterm" window of one year. In the end the reporting frequency for the LCR will be between monthly and daily in case of a stressed financial environment.[1]

During my internship with Deloitte Financial Services our team developed and implemented ideas to fulfill the new regulatory figure LCR. These ideas started from generally distributing an understatement in the bank to automatize data processing. Obviously the regulatory claims were not fulfilled self-acting, but effort was needed. Thus it arose the idea to develop a framework on how to transfer-price this effort.

The LCR describes basically a stress scenario of assumed run-off rates and inflow default probabilities. The resulting cash flows have to be covered by cash stocks or stocks of highly liquid assets i.e. assets which can be transformed to cash almost immediately even in times of stress. As the LCR asks for more liquidity, we gain the comfortable situation where we do not need to define and discuss liquidity in an abstract way. It is straight forward to take a look at what is the BCBS demanding. In the end this is the definition of liquidity and what we will be talking about when we say "liquidity".[2]

The aim of this thesis is to quantitatively measure the price to meet the regulatory needs. This evaluation is done on the level of products, to do so the thesis is struc­tured as:

Section 1.2 Basic knowledge about the LCR

Section 2 Situation in banks according to the Quantitative Impact Study (QIS) Section 3 Baseline of the idea and functionality of FTP

illustration not visible in this excerpt

Section 4.1 How to derive the liquidity term-structure of an institute

illustration not visible in this excerpt

Section 4.2 How to charge a product

illustration not visible in this excerpt

Section 5 Connecting the "How to"s to charge a bargain and set regulatory intended incentives

illustration not visible in this excerpt

Section 6 How the tool supports management to meet regulatory claims

illustration not visible in this excerpt

Chapter 111 Final extensions and thoughts

The final goal is: to find a system being less restrictive and stiff but dynamic to support a bank on its way to meet regulatory claims. During my internship the team[3] came up with the idea that FTP is the way to choose. FTP allows a high degree of decentralized organization. Obviously this appears as the only practically applicable way as the bank structure becomes diverse.

In nature swarms act decentralized. Insects use really simple algorithms, which are the same for every single one of their class. From a desired behavior in individual responsibility arises a preferable state for the community. These patterns of behavior are not deterministic but concluded from simple if-then-statements.[4]

In terms of FTP the diverse internal and external claims become aggregated into a single number: the transfer price. Based on that figure decisions are evaluated on own responsibility to gain a community optimum. Does the transfer price cross a certain threshold bargains are denied or negotiated, making the choice between two or more bargains a "simple" if-then-situation. Thus a feedback is created ("wis­dom of the anthill"). Supervisors, i.e. bank management and the European Banking Authority (EBA) become an insight of current market situations. For instance a con­centration or dry out in certain asset classes or markets could either describe a deficit

illustration not visible in this excerpt

(a) Ant Hill (b) Trading Room of the Commerzbank

Figure 1: Which aspects can be transformed to take advantage?

in the regulatory design or the bank's pricing. In turn a change in bank's strategy or regulatory design tweak the algorithms. I.e. transfer prices are tweaked with no need to explain a completely new task.

Today FTP is organized by a bank's treasury. The treasury ensures that the maturity mismatch between (mostly) long-term assets and (mostly) short-term liabilities does not exceed a certain extend. Maturity mismatch is caused by term-transformation. Doing so the treasury acts like an objective third person. They sell liquidity to loan granting divisions and pay fund raising departments for their funds.

But why do not business units trade their liquidity on their own? The group trea­sury adjusts yields for any type of risk. In that case they appear as external costs which occur if you think of a bank as a going concern. In case of liquidity risk espe­cially maturity mismatch is comprehended.

illustration not visible in this excerpt

Figure 2: Basic Case of Liquidity Flow (Source: [11])

Before we start let me have a last statement. As I consider its style as really appro­priate I will try to stick to [16]. Additionally I will have footnotes and an appendix.[5]

1.2. Constructing the LCR

Banking business is highly dependent on reputation and trust. In times of crisis or environmental change it is almost impossible to switch the business division's focus. In terms of liquidity this means even if a bank wants to fund in the private sector, it will have to do so regularly in unbend-market times to be able do so during crisis as well (We might think of savings). The same counts for wholesale (interbank) funding. Although this is part of corporate governance and an enduring strategy, a profound LTP enhances most other management target.

Before 1997 most solid institutions could issue senior long-term debt below the swap curve. Then the Asian followed by the Russian crises took place. Uncertainty in the loan portfolio caused investors to demand an individual credit spread above London Inter Bank Offered Rate (LIBOR). The Enron-scandal and the new economy crises in 2002 just continued that image. Thus central banks lowered interest rates, consequently the asset swap spreads of the financial sector decreased. Obviously that new liquidity was missing before.

Four years later, in 2006 it became likely that banks looked at spreads above the swap rate as pure (bank individual) credit risks. In June 2007 a tremendous increase appeared (gray surface in figure 3). Recalling 2002, and the risk of not having the "ability to settle obligations with immediacy" - definition of liquidity risk by the European Central Bank (ECB).[6]

Therefore the BCBS concluded that the available cash (or cash equivalent) today should have the ability to settle your outflows within the next 30 days. You could assume as the acceptance of level two assets came subsequently that the weights and run-off rates are a result of negotiation as well. Hence the two caps implemented appear at least partly as a rule of thumb. The result is the following formula:

Talking about the quotient of the LCR it is numerator consists of the weighted "Value of the stock of high-quality liquid assets in stressed conditions''^]. Accord­ing to the BCBS the denominator is the "Total net cash outflows, calculated according to the scenario parameters[...]"[2].

In that way the denominator is "locked" by the Inflow cap (4 OF) so inflows can never exceed three fourth of the outflows. The aim is to get an LCR greater or equal to one. As the denominator is "locked" the fastest way to gain a higher LCR is to increase level one assets. Thus liquidity for the BCBS means getting more level one assets (mainly zero up to 20% risk weight assets, cash or central bank reserves) or reducing contractual outflows. Although according rto practitioner's experience re­ducing outflows is unprobable (see section 6).

illustration not visible in this excerpt

Figure 3: Development of the model's 3M reference rate for liquidity (Data: Reuters - DS 5.1)

Beside the NSFR the 30-day LCR is the new regulatory requirement being bind­ing from 2015. Especially scientists such as Douglas Elliott (working for J.P. Morgan and former principal researcher for the Center on Federal Financial Institutions) de­manded a recognition of liquidity earlier within the Basel Framework. For instance France applied own liquidity requirements.

The banking sector and its representative like the Institute of International Finance (IIF) are persistently resistant but heterogeneous at the same time having different backgrounds. You can find many critics like: "It's all about diversification - that is a key principle of risk management, if you have all your cash-raising collateral in one asset class, such as government bonds, it will be a pretty crowded trade when there is a crisis. We need to be able to diversify and use other assets as cash providers."- which was stated by David Escoffier, co-head of global equity flow at Société Générale Cor­porate and Investment Banking (SG CIB) in London [25]. This might be one of the key arguments why only regarding amounts (not their inherent relation) and especially these harsh acceptance thresholds (assets weights) could even increase interdepen­dencies in times of stress.

In between there are governments or their corresponding central banks. Of course they wish to have a rock solid financial sector. But too high requirements in a still fragile environment might be overshooting. As there is no local differentiation some domestic markets perhaps appear inferior to others, which could draw causal effects to reputation or market risks. Additionally lobbies usual push the "panic button" of unemployment and a declining grant of industrial and private loans. Thus it is no surprise that there is in addition to any BCBS announcement not only another IIF point of view but an - often unpublished - local Central Bank correspondence. According to [26]: "Earlier this year the French, the British and the Canadians [added by author: Central Bank] all wrote to the Basel Committee demanding some form of further recalibration of the liquid asset buffer."

illustration not visible in this excerpt

Figure 4: Trade-off between the three parties.

Recent literature states that a discussion where the level two asset class is extended from AA- covered bonds to BBB or even BBB-[26]. So this might not appear like a standard outlasting times of stress. But it shows the high degree of encouragement and practical relevance related to the LCR.

2 Quantitative Impact Study

Overview LCR The regulatory monitoring exercise is a worldwide bank survey by the BCBS. In the most recent 103 Group 1 and 109 Group 2 banks took part in this survey. By definition Group 1 Banks have at least € 3 billion of Tier 1 Capital. They are more internationally active and therefore more likely to be bigger in terms of market capitalization and balance sheet total. For Group 1 banks the global representation got a "very high" coverage [3].

There is only little change within the six month between figures 5a and 5b. The overall median changed slightly driven by a change in Group two. One interpreta­tion could be that minor banks are more flexible to change their liquidity situation. Another interpretation could be that major banks are situated in countries like the US where the introduction of the LCR is currently questionable and therefore do not cut earnings today to fulfill some figure that perhaps never comes.

illustration not visible in this excerpt

Figure 5: Boxplot of the Distribution of the LCR - Median, Quartiles and Range (Source: [3] and [4])

Assets and Caps Looking at the structure of assets at a first glance we recognize that in average level two assets are quite rare - not even crossing the twelve percent line in figure 6. Recalling the cap of two third this value could decline to 40%. This might have two reasons. Either level two assets are too expensive or they just are not really used by banks. But actually it is quite unlikely that level two assets are too costly as they just got into account by subsequent negotiation. So it is rational to assume a rising relevance of level two assets in the future. In contrast the recent exercise showed an increase in level one assets of 1.4 %. Especially within level one assets the relevance of Cash and central bank reserves moved from 31.3% to 35.3%.

This might be an effect of lowered requirements in the collateral quality at the ECB and constantly increasing high quality t-bill prices.

illustration not visible in this excerpt

Figure 6: Distribution of L1 and L2 assets in June 30 2011 (Source: [3] and [4]) - graphically revised)

Surprisingly even though only 12% of the overall assets are level two assets, 34 of 212 banks got an asset cap on their level two stock. This indicates a high inequality in banks asset structure. It is an interesting issue if this inequality is probable to decline due to future regulation incentives or if it is inherent to the banking branch. Further developments will be seen in the next monitoring exercises.

Cash Flows and Caps As a result of the concept of term transformation the follow­ing result is not that surprising as the unused asset cap was before. If we take a look at the in-/outflows the situation in banks is heterogeneous as well. Only 19 banks got a cap on their inflows all of them were group two banks. In the latter QIS this number declined to 16 - still all minor banks. The amounts of in-/outflows are only announced in a ratio to the liabilities. So let us take a closer look to the inflow to out­flow ratio which is at 75% at its theoretical maximum because of the cap. This ratio decreased for group one banks from 27.5% to 26.5%. There is a stronger decrease for group two of 2.9% from 36.7% to 33.8%.

The reason might be found in generally lower liability amounts. If they decrease, outflows disappear and inflows become relatively larger. However compared to the twelve percent level two asset share on the asset stock, this could indicate that banks already fund a good cash flow balance. Hence future improvements are probably more efficient in the asset numerator.

The source of so few use of the inflow cap is the usual banking business term- structure. The baseline is: banks transform long-term, illiquid and risky loans into short-term, safe deposits. Most contractual outflows are known 30 days in advance but the corresponding inflows are yet to be negotiated. Maximizing the spread be­tween long and short-term positions the most short running deposits are used to hedge outflows, namely: O/N - Sale and Repurchase Agreement (REPO)s.

Therefore figure 7 is by no means a completely random time series or worst case scenario. It is a matter of fact that if most inflows are generated by 3M (or even more short-term i.e. O/N) - revolving bargains are acquired subsequently, but are not yet contractually fixed. Consequently a contractually driven 30-day forecast is likely to be negative.

illustration not visible in this excerpt

Figure 7: Structure of Cash Flows (Source: flll)

3. Introduction to Funds Transfer Pricing

In the introduction you got a sketchy draft of the LCR and funds transfer pricing. The basics of the latter is deepened in this section. 3.1 describes the historical development of the FTP. 3.2 explains the main drivers for liquidity costs. We have to be aware of those drivers as they especially indicate further extensions and feedback effects.

3.1. Liquidity Pricing

Liquidity pricing captures all sources for liquidity costs. [15] mention three types of liquidity risk. Consequently they can be the reason for liquidity costs. Costs from:

Maturity Mismatch Due to the term transformation in bank's business it is usually impossible to even up any asset position with an liability position. Therefore loans have to be charged for obtaining following funds.

Contingent Commitments It is caused by contractual and non contractual events such as margin calls and deviations redemption/prolongation.

Market Liquidity In this case current market conditions permit no sell of assets at fair value. Typical reasons are (systemic) crisis and the individual loss of reputation.

All of these risks and according costs are at least slightly accelerated by wrong LTP but mostly the maturity mismatch, which is the most common. After the following explanations the strong link between LTP and maturity mismatch will become clearer. Liquidity prices are funding driven.[7]

Consequently the result which we will find out to charge regulatory claims covers all these types. Thus if the regulatory demand exceeds the internal perception of liquidity risk, transfer prices have to increase. For instance this could appear if a bank run is viewed by the internal risk management as a 50 year event, but the BCBS excepts it to happen every ten years. If the internal systems are more restrictive they already determine sufficient transfer prices, as in figure 8.

illustration not visible in this excerpt

Figure 8: Correspondence of the LCR Transfer Price to the internal FTP (Source: [27])

As already mentioned in 2006 it was likely for banks to look at spreads above the swap rate as pure credit risks. Some institutions just were not conscious of this issue when spreads between the European OverNight Index Average (EONIA) swap and the rate that is offered to banks (LIBOR) were only slightly above zero as in figure 3.

Let us have a look at the "historical" time line of LTP, which is basically adapted from [11] and shows the incentives of expired methodologies:

When liquidity pricing was first introduced it usually started at a "1st stage". Fig­ure 9a describes an strongly aggregated model for pricing liquidity. The spread of liquidity superior to the reference rate in that model is only the average of all fund­ing bargains independent of time or any other variable. I.e. any bargain got a fixed liquidity margin. Comparing long and short running bargains this strongly encour­ages long running bargains as this margin is relatively smaller at an usual interest term-structure.

illustration not visible in this excerpt

Figure 9: Differences in LTP Regimes (Source: [11])

It was soon improved by a dual pricing system. The gap in interest levels between long-term asset investments and short-term deposits made it necessary to circumvent incentive inconsistencies. For long-term loans the liquidity costs where determined by long-term fund raising e.g. the issue of a bond. The benefit of short-term de­posits was derived from short-term fund raising such as REPOs. Separate average curves for liabilities (higher) and assets (lower) where applied. Hence it defanged the liquidity situation partly. Because of term-transformation this worked for most bar­gains. But obviously there might be some mid-term bargains or long-term deposits and short-term loans which were inefficient in that LTP Regime 9b. Thus as you might see in figure 9d term transformation was strongly encouraged by disincentives in that regime, leading to maturity mismatch.

Especially if you recall how cheap liquidity was until 2006. Therefore loans are ac­quired too much and outflows increase furthermore (long-term) deposits are refused and inflows decline. Maturity mismatch was an inherent hazard. Such a behaviour encourages the progression of an inverse interest rate structure which is one possible trigger of financial crisis. Accordingly in times of financial crisis, when market liquid­ity and with that market access is low, appropriate institutional management based on a defective FTP methodology is almost impossible.

Those effects were realized. Hence a more time continuous pricing model as in figure 9c should be applied. In the end there should be only one marginal funding curve, where the spread above the reference rate determines liquidity costs for assets and liabilities according to their maturity. In the section 4.1 we will find out, how such a curve can be derived. Figure 9d depicts the differences to a misleading liquidity price dependent on the maturity. A reason why it was not applied earlier could have been the costly change over in Information Technology (IT) data base and data supply chain.[8]

3.2. General Dependence of Liquidity Costs

Especially for the later extensions a basic insight on what liquidity prices are depen­dent on is needed. Let us start with a definition of liquidity costs.

Definition A Bank and treasury specific definition of liquidity costs was found in [23]: Liquidity costs are those costs which exceed the cost of pure hedging of interests. They are created by acquisition for refunding purposes on capital or money markets. Liquidity costs take part of pricing of any interest bearing bargain therefore they are contained in any contractual interest rate. In any fixed income product liquidity costs are implicitly integrated from their beginning [...]. At bargains on a variable basis (floating rate) liquidity costs are determined as the excess of the individual reference rate (e.g. European Inter Bank Offered Rate (EURIBOR)).[9]

The last sentence is of highest importance in section 4.1. But before we go on let us take a note what liquidity costs are dependent on:

- market and bank's liquidity level [23]
- bank's credit risk
- funding amount and maturity [23]
- number of free credit and liquidity lines at investors.

But every dependence can be adjusted in an optimal way:

- regional, global, specific or general markets
- unsecured / secured bargains (REPO / Reverse REPO)[10]
- small, large, short and long running funding
- many / less free credit or liquidity lines at investors.

Therefore the in section 3.1 mentioned "Marginal Costs of Funding" are still pooled, despite time. Higher accuracy could be achieved by building a multivariate model. This model could be dependent not only on time but on the mentioned aspects (mar­ket, secured/unsecured funding, amount...).

All those positive adjustments demand a long-term behaviour and a diverse posi­tioning - without no doubt declining returns in a short run, but keeping the institute steady but flexible for external shocks in times of stress. Concluding: if a bank has not been present in a market (long-term funding, regional markets, keeping the op­tion paid to have short-term liquidity lines) these markets will be even more closed for them in times of stress. Therefore although it might be costly it is on a long time scale recommendable to keep theses costs. To do so, although the actual enforcement is not yet given, it is strongly encouraged by the LCR.

Proceeding this way in funding curve only dependent on maturity could at least be augmented (if permitted by IT - processing frequency and bank operations) by the axis:

- funding amount (See: figure 18)
- and altered into an unsecured and secured curve.[11]

Part II.: Core

4. Funds Transfer Pricing

In the next section we will see how to obtain a continuous liquidity cost curve. In section 4.2 it will be explained how to calculate the price of a single product with this liquidity curve. Section 5 then describes how to transform this into LCR costs.

4.1. Derivation of the Liquidity Costs

The following examples to determine liquidity costs are based on [15], in specific A. Leistenschneider. There are two remarks to be made. First as liquidity costs are driven by the funding side there are only liquidity acquiring bargains explained (e.g. REPO instead of Reverse REPO). Second not every bargain is convertible into the liquidity time structure, especially swaps, (e.g. Credit Default Swap (CDS)) as they do not bare liquidity. But as we will see later this makes them handsome to decompose more complex products in order to derive liquidity costs.

The next three products deliver the main devices to gain anchor points for marginal costs of funds. Any more complex, liquidity acquiring bargain can be decomposed into these three plain vanilla bargains (and a swap component). These are only ex­amples representing any bargain with "simple one way" direction.

Floating Rate Note Figure 10a depicts the cash flow structure of a floating rate note. After a bank issues a floating rate note, investors buy that note which pays a floating rate. As you can see an initial liquidity amount is funded for the investor's purchase. Here you can also see why liquidity costs depend on the institutions credit risk - as mentioned in section 3.2. The spread above the reference rate (LIBOR) deter­mines the funding spread.

illustration not visible in this excerpt

Figure 10: Th nee Fundamental Devices

REPO / Tender REPOs or tenders have an equivalent flow structure. Thus the way to determine their liquidity costs is equal, see figure 10b. The situation is similar to the one in deposits. But it is differing in the source of funding, in this case it is a wholesale market bargain. Once again the spread above the reference rate (LIBOR) determines the funding spread. What you can see here compared to the Floating Rate Note (FRN) before, that there are different markets for bargains. As markets differ in their liquidity this could be taken into account for a consistent FTP as well - again see section 3.2.

Deposit / Bond If clients do not want to have contractual adjustments later, interest rates are likely to be fixed in the beginning. This avoids unnecessary market depen­dence. Those bargains have to be transformed into floating rates otherwise there would be no spread above a floating rate. As mentioned in section 1 the group's trea­sury is to be thought of as a neutral element. Therefore no own evaluation of the fixed rate is done. What they do is to sell the fixed rate to a trading division. They in turn pay the fixed rate to the client until the end of the contract and demand a floating rate from the treasury. With this spread we obtain a new anchor point for the marginal costs of funds. This is called a receiver swap for the group treasury. As the trading division gets the floating leg for them it is a payer swap. Figure 10c depicts the explained graphically.

Credit Linked Note To gain more anchor points for liquidity term structure curves, more complex products can be stripped. They are decomposed into a plain funding component and a funding neutral bargain. Actually we did that already with deposits when decomposing or stripping a fixed rate into a floating rate.

The order of decomposing might be different but let us do it this way:

1. Identification of the (for liquidity) irrelevant component
2. Hedging the irrelevant part with a trading unit (usually a swap)
3. Identification of the (for liquidity) relevant component
4. If necessary transform the remaining construction into a floating rate

As the issuer of a Credit Linked Note (CLN) like in figure 11a you are committed to pay in case of a credit event of the reference asset. This payment can be the notional amount, so the purchaser is compensated for the whole default. Also possible is a certain risk participation to decrease the paid yield. This yield not only consists out of the spread for the liquidity (and the bank's credit spread etc. as in section 3.2) paid in advance. Additionally the credit risk of the reference asset got into the bargain.

This is the irrelevant factor. However, if there is no credit event the CLN becomes an ordinary FRN paying the full notional at the end.


[1] The construction of the NSFR is not exactly the same as the one of the LCR in another (longer) window but as it is not tangible for this work a closer description is left for others.

[2] Although Hicks' remark in [12]: "The social function of liquidity is that it gives time to think." is really striking especially in the case of a bank-run.

[3] Team: Tilmann Bolze, Andreas Breitbeil and Michelle Chen.

[4] See [17].

[5] But I will not milk it.

[6] For a comparable timeline see [15] starting from page 146.

[7] See figure 2 and chapter 4.1.

[8] See [21].

[9] Translated from German with focus on a close as possible translation to leave the interpretation to the reader.

[10] In the Conclusion (figure 19) a historical time-line of the spread between secured / unsecured lending can be found.

[11] Of course the implementation of further determinants is possible, e.g. credit risk. Although every further splitting demands a very robust database as the high grade of differentiation, i.e. differen­tiation in types of products (as subordinate / junior bonds and non-subordinate bonds) or funding subsidiaries declines the cardinal number of a set. Recently there is empirically doubt on the often theoretically discussed, interesting relationship between funding liquidity risk and credit risk, see [14].

Excerpt out of 97 pages


Toolbased Liquidity Coverage Ratio Control
University of Hannover
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
6863 KB
Liquidity Coverage Ratio, Funds Transfer Pricing, Basel III, Liquidity Costs, Transfer Pricing, Capital Requirements Directive (CRD) IV, JEL classification, G21, Banks, G28, Government Policy, Regulation
Quote paper
Claus Bissinger (Author), 2012, Toolbased Liquidity Coverage Ratio Control , Munich, GRIN Verlag,


  • No comments yet.
Read the ebook
Title: Toolbased Liquidity Coverage Ratio Control

Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free