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Laxman Pai, Opalesque Asia: UK regulator's number one concern for the asset management sector this year is corporate-level liquidity risk, says a survey.
KPMG's annual Risk and ICAAP survey, Safe from Harm, finds that the majority of firms subject to a regulatory visit (Supervisory Review and Evaluative Process - SREP) in the last four years had liquidity risk raised as an area of weakness. This replaces operational risk modeling which topped the list in 2018.
However, firms are moving in the right direction. Whilst last year, just 17% of firms had no corporate liquidity risk management framework in place, this year, that figure has fallen to 10%.
Stress testing was an area of more significant change in the case of corporate liquidity. Whereas last year only 30% of firms performed liquidity stress tests that were separate from capital stress testing, this year has seen a rise in the practice, with 79% of firms doing so.
Firms are also getting more realistic in assessing their capital requirements. The median difference between what regulators calculate, and what firms themselves calculate, was 28% in 2019, down from 39% last year.
Whilst overall the gap between firms' and regulators' expectations has narrowed year-on-year since our report began, firms still fall quite far shy of the mark.
69% of firms have not prepared for new EU regulation - Investment Firm Regulation (IFR).
IFR is expected to come into force in June 2021 and it is broadly expecte...................... To view our full article Click here
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