From yesterday's push for risk assessments to today's call for stress testing, risk management practices for financial institutions have undergone a revolution over the past several years. The recent FIL-84-2008 is no exception. It encourages financial institutions to evaluate the availability of liquidity assuming changes in financial position as a result of a wide variety of events. Community financial institutions need easy-to-use tools and methodologies to meet this challenge of the 21st century banking environment. This paper outlines key steps for a liquidity stress test analysis based on actual client experiences applied to a hypothetical institution.
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Length: 6 pages (PDF 2664 kB)