Administrative Measures for the Liquidity Risk of Commercial Banks (for Trial Implementation)
Administrative Measures for the Liquidity Risk of Commercial Banks (for Trial Implementation)
Administrative Measures for the Liquidity Risk of Commercial Banks (for Trial Implementation)
Order of the China Banking Regulatory Commission [2014] No.2
January 17, 2014
The Administrative Measures for the Liquidity Risk of Commercial Banks (for Trial Implementation), adopted at the 18th chairman meeting of the China Banking Regulatory Commission in 2013, are hereby promulgated for implementation as of March 1, 2014.
Shang Fulin, Chairman
Administrative Measures for the Liquidity Risk of Commercial Banks (for Trial Implementation)
Chapter I General Provisions
Article 1 For the purposes of strengthening the administration of the liquidity risk of commercial banks and maintaining safe and steady operations of banking system, the Administrative Measures for the Liquidity Risk of Commercial Banks (for Trial Implementation) (hereinafter referred to as the "Measures") are hereby formulated in accordance with the Banking Regulation Law of the People's Bank of China, the Law of the People's Republic of China on Commercial Banks, Administrative Regulations of the People's Bank of China on Foreign-invested Banks and other relevant laws and regulations.
Article 2 The Measures apply to commercial banks established in the People's Republic of China, including Chinese-funded commercial banks, wholly foreign-funded banks and Sino-foreign joint venture banks.
Article 3 For the purpose of the Measures, the liquidity risk refers to the risk that a commercial bank is unable to obtain adequate funds at a reasonable cost in a timely manner to repay debts that have fallen due, fulfil other payment obligations or meet other fund demands for normal business operation.
Article 4 Commercial banks shall, in accordance with the Measures, establish and optimize their liquidity risk management systems, and effectively identify, measure, monitor and control the liquidity risk of legal persons, groups, subsidiaries, branches and business lines, in a bid to ensure that their liquidity demand can be satisfied at a reasonable cost in a timely manner.
Article 5 The China Banking Regulatory Commission (hereinafter referred to as the "CBRC") shall be responsible for supervising and administering the liquidity risk and liquidity risk management systems of commercial banks in accordance with the law.
Chapter II Liquidity Risk Management
Article 6 Commercial banks shall establish a liquidity risk management system in line with their business scale, nature and complexity at the level of legal persons and groups.
The liquidity risk management system shall cover the following basic elements:
1. an effective governance structure for liquidity risk management;
2. optimal liquidity risk management strategies, policies and procedures;
3. effective liquidity risk identification, measurement, monitoring and control; and
4. perfect management information system.
Section 1 Governance Structure for Liquidity Risk Management
Article 7 Commercial banks shall establish an effective governance structure for liquidity risk management system, define the duties and reporting routes of the board of directors and special committees thereof, the board of supervisions (supervisors), senior management and relevant departments thereof in the liquidity risk management, and establish an appropriate performance assessment and responsibility investigation mechanism.
Article 8 The board of directors of a commercial bank shall bear the ultimate responsibility for liquidity risk management and shall perform the following duties:
1. examining and approving liquidity risk appetite, liquidity risk management strategies, important policies and procedures. Liquidity risk appetite shall be deliberated at least once a year;
2. supervising senior management in its effective management and control over the liquidity risk;
3. paying on-going attention to the liquidity risk status, regularly requesting liquidity risk reports, and learning about the liquidity risk level, management status and material changes thereof in a timely manner;
4. examining and approving liquidity risk information disclosure contents to guarantee the authenticity and accuracy of disclosed information; and
5. other related duties.
The board of directors may authorize special committees under it to fulfil certain duties abovementioned.
Article 9 The senior management of a commercial bank shall fulfill the following duties:
1. formulating, regularly estimating and supervising the implementation of liquidity risk appetite and liquidity risk management strategies, policies and procedures;
2. defining the organizational structure for the liquidity risk management and the division of duties among all departments, so as to ensure that the commercial bank has adequate resources to independently and effectively conduct the liquidity risk management;
3. ensuring the effective communications about and transmission of the liquidity risk appetite and liquidity risk management strategies, policies and procedures in the commercial bank;
4. establishing an optimal management information system to support the identification, measurement, monitoring and control of the liquidity risk;
5. fully learning about and regularly evaluating the liquidity risk level and management status thereof, learning about material changes in the liquidity risk in a timely manner, and regularly reporting the same to the board of directors; and
6. other related duties.
Article 10 Commercial banks shall designate a special department to be responsible for the liquidity risk management. The liquidity risk management function of the said department shall be relatively independent from its business operating function, and the said department shall have the labor and material resources necessary for the fulfillment of the liquidity risk management function.
The department in charge of the liquidity risk management of a commercial bank shall have the following functions:
1. formulating liquidity risk management strategies, policies and procedures, and submitting them to the senior management and the board of directors for examination and approval;
2. identifying, measuring and monitoring the liquidity risk. Continuously monitoring quality current asset status; monitoring the implementation of liquidity risk limits, and promptly reporting limit exceeding circumstances; organizing and conducting liquidity risk stress tests; and, organizing the testing and evaluation of liquidity risk contingency plans;
3. identifying and evaluating the liquidity risks in the new products, new business and new institutions, and reviewing relevant operations and risk management procedures;
4. regularly submitting independent liquidity risk reports, and reporting liquidity risk level, management status and material changes thereof to the senior management and the board of directors in a timely manner;
5. preparing liquidity risk information disclosure contents, and submitting them to the senior management and the board of directors for examination and approval; and
6. other related duties.
Article 11 Commercial banks shall fully consider the liquidity risk factors in relevant systems of internal pricing, assessment and inventive and so on, and include liquidity risk costs in assessing the risk-adjusted incomes of branches or major business lines, in order to prevent the relaxation of the liquidity risk management due to excessive pursuit of business expansion and short-term profits.
Article 12 The board of supervisors (supervisors) of commercial banks shall supervise and assess the performance of duties by the board of directors and senior management in their liquidity risk management, and report the same to the shareholders' meeting (shareholders) at least once a year.
Article 13 Commercial banks shall, according to relevant requirements of the CBRC for internal control, establish an optimal internal control system for the liquidity risk management as an organic component of the overall internal control system of the banks.
Article 14 Commercial banks shall include the liquidity risk management into the scope of internal audit, and regularly examine and evaluate the sufficiency and effectiveness of the liquidity risk management.
The internal audit shall cover all links of the liquidity risk management, including but not limited to:
1. whether the governance structure for the liquidity risk management and relevant strategies, policies and procedures can ensure the effective identification, measurement, monitoring and control of the liquidity risk;
2.
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