What is liquidity and what does a banking liquidity professional do?

Liquidity represents the cash and liquid assets that are immediately available to an organisation. An asset that can readily be converted into cash is referred to as a liquid asset because it can be sold with little impact on its value.

A liquidity professional in a bank helps to manage a bank’s liquidity on a daily basis while providing a balance between its commercial needs and its liquidity risk management responsibilities. Professionals in this field will assist senior management in assessing and analysing liquidity requirements and make decisions on the daily management of cash movement. Liquidity professionals will also work with the bank’s risk management team to ensure the bank’s liquidity risks are identified, measured, monitored and reported in a timely fashion, and work to enhance the liquidity risk management framework.

Key responsibilities

Responsibilities will vary, but examples include:

  • Evaluating, assessing and analysing liquidity requirements
  • Developing and implementing global and regional liquidity management policies and frameworks
  • Determining drivers of cash flows and liquidity flows
  • Developing liquidity projections and forecasts
  • Building out contingency funding plans
  • Developing and implementing liquidity stress models. Modelling liquidity risks under various stress scenarios with appropriate assumptions and calibrations
  • Ensuring compliance with relevant regulatory stress measures and related reporting
  • Identifying and monitoring all the liquidity risks relating to business activities
  • Enhancing the liquidity risk management framework and producing key risk management metrics to manage day to day risks
  • Assessing new business initiatives and products for their liquidity and funding risks
  • Responding appropriately to changes in, or new, regulations impacting liquidity
  • Overseeing liquidity change, planning, testing and delivery for the appropriate regulatory authorities

Why are they important?

Liquidity professionals use their experience, market knowledge, and understanding of accepted practice and industry standards to monitor a bank’s commercial liquidity needs. They also perform liquidity modelling, testing forecast assumptions and liquidity stress testing to ensure that the bank is operating within its regulatory requirements and ensuring it is always in a position to meet its financial obligations.

Skills needed for this role

Liquidity professionals must be highly organised in order to work to tight deadlines and manage changing priorities in a high-pressured environment. They should be pro-active and able to work independently, exercising excellent judgment, based on their knowledge and experience. Excellent interpersonal and communication skills, both verbal and written, are essential in order to communicate complex information and ideas to senior management clearly and effectively.

Strategic Professional Options examinations linked to this role

Advanced Financial Management

Career opportunities presented by this role

The current economic climate means that liquidity management is moving up the board agenda for banks. Liquidity professional roles are becoming more prevalent, with increasing opportunities to progress to senior manager or executive director level positions.

Competencies

High level competencies required include:

  • Corporate and business reporting

    A. Prepares financial statements, corporate financial and integrated reports for external stakeholders using appropriate technology.

    B. Leads effective decision making through analysing, evaluating and communicating performance and position of entities.

    C. Prepares financial statements for groups of entities using appropriate technologies.

    D. Monitors, critically evaluates, and advises on the relevant accounting standards, regulations, conceptual and financial reporting frameworks.

     

  • Financial management

    A. Links developments in global trade, markets, business practices and the economic environment to required improvements in the financial and risk management of an organisation.

    B. Advises on business asset valuations, capital projects and investments using appropriate analytical qualitative and quantitative techniques.

    C. Identifies, evaluates and advises on alternative sources of business finance and different ways of raising finance.

    D. Communicates and advises on the impact on financial decision making on current developments in regulation, governance and ethics.

    E. Assesses and advises on appropriate strategies to manage business and organisational performance regarding business and finance risk and effectively communicates the impact.

  • Governance, risk and control

    A. Evaluates organisational structures and governance to protect the long-term interests of stakeholders.

    B. Recommends appropriate strategies to ensure adherence to governance structures and application of best practice internal controls.

    C. Identifies and manages risk appropriately.

    D. Uses risk management for the best interests of an organisation and its stakeholders.

    E. Monitors and applies relevant legislation, policies and procedures.

  • Strategy and innovation

    A. Applies business acumen and commercial awareness to deliver business objectives.

    B. Recommends a range of suitable strategic options from which to develop sustainable plans and objectives.

    C. Evaluates, justifies and implements suitable strategic options.

    D. Adopts and applies innovative methods to implement strategy and manages change.