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December 7, 2018


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An effective liquidity risk management program helps protect customers by supporting firms’ operations under normal and stressed conditions. FINRA Regulatory Notice 15-33 describes the elements of such programs, which include rigorously evaluating a firm’s liquidity needs, devoting sufficient resources to risk management, developing contingency plans, conducting stress tests and having a training plan. FINRA observed that many firms have substantially strengthened their liquidity management practices, but some firms may benefit from expanding the breadth and scope of their stress testing.

  • Extended Stress Test Period – Some firms’ stress test analyses were limited to a single time horizon, but performing stress tests over multiple time horizons helps firms assess whether they have sufficient liquidity to cover potential funding shortfalls.
  • Improvements to Business Models – Some firms did not incorporate the results of their stress tests into their business model.