Circular
Agencies Seek Comment on Proposed Interagency Guidance on Funding and Liquidity Risk Management
June 30, 2009
Circular No. 12114

The federal bank, thrift and credit union regulatory agencies are seeking comment on the proposed Interagency Guidance on Funding and Liquidity Risk Management.

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the National Credit Union Administration are issuing this guidance to communicate consistent expectations on sound practices for the management of funding and liquidity risks, and to strengthen liquidity risk-management practices.

This guidance brings the agencies' liquidity risk principles into alignment with the international guidance issued in September 2008 by the Basel Committee on Banking Supervision titled, Principles for Sound Liquidity Risk Management and Supervision.

Recent turmoil in the financial markets emphasizes the importance of good liquidity risk management for the safety and soundness of financial institutions. The proposed guidance emphasizes the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal, well-developed contingency funding plan for measuring, monitoring and managing liquidity risk. The proposed guidance, when finalized, will apply to all domestic financial institutions, including banks, thrifts and credit unions.

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