Forum on Addressing Pro cyclicality in the Financial System:
Measuring and Funding Liquidity Risk” http://UAnrfnandabta-
bilityboatd.org/pnblications/r_0904ii.pdfM page 24
85. Sre Basel Committee on Banking Supervision, Consultative
Document “International Framework for Liquidity Risk,
Measurement Standards and Monitoring” Bank for International
Settlements Publications at page 1
86. Namely: systemic aspects, bank regulations and remuneration
policies
87. Since specific knowledge which banks possess about their
borrowers is considered to be a factor which determines the
illiquidity of bank loans; see “The Concept of Systemic Risk”
ECB Financial Stability Review December 2009 at page
137<http://www.ecb.int/pub/fcr/shared/pdf/ivbfinancialsta-
bilityreview200912en.pdP05d3164914c6a 14bb 13522
2b5c3894fa≥
88. ibid; According to the Review, the reduction in the common
pool of Hquidity also lias the potential to trigger the failure of
banks and could consequently lead to a devaluation of illiquid
bank assets and further aggravation of problems within the
banking sector.
89. Report of the Financial Stability Forum on “Addressing Pro
CydicaHty in the Finandal System: Measuring and Funding
Liquidity Risk" http: //UAiwfttiaticialstabilityboard.org∕pιιblications∕
r_0904a.pdf at page 24
90. ibid
91. Principles for Sound Liquidity Risk Management and
Supervision Sept 2008 at pages 20 and 21
92. See Report of the Financial Stability Fonim on Addressing Pro
CyclicaHty in the Financial System “Measuring and Funding
Liquidity Risk” at page 24
93. ibid
94. SreAccompanying Doaiment to the Proposal for a Directive of
the European Parliament and of the Council amending Capital
Requirements Directive on trading book, securitisation issues
and remuneration po∏cies.< http://ec.eHropa.eu/intertial_tHar
ket∕bank∕docs/regcapital/c0m2OO9/impact_as$esment_en .pdf> See
page 44-46
95. Sre C Hadjiemmanuil, Banking Regulation and the Bank of
England Lloyds of London Press 1995 at pages 208-209
96. Sre Bank for International Settlements, Consultative Document
“International Framework for Liquidity PJsk, Measurement
Standards and Monitoring” at page 2
97. This ratio „identifies the amount of unencumbered» high quality
Hquid assets an institution holds that can be used to offset the
net cash outflows it would encounter under an acute short-term
stress scenario by supervisors.“ ibid at page 3
98. This ratio measures “the amount of longer-term, stable sources
of Iiinding utilised by an institution relative to the Hquidity pro-
files of the assets being iiιnded and the potential tor contingent
calls on funding liquidity arising from off-balance sheet com-
mitments and obligations.“ ibid
99. ibid
100. ibid at page 25
101. ibid
102. SrespeechbycMccreevyEuropeanconmiissionerforlntenMl
MarketanservicesattheEuropeanPariiamentl 1 Sept20C7Λtfp.∙∕/
енгора. en/rapid/p ressReleasesAction. do /reference=SPEE CH/O 7 /
520tfortnat=HTML&aged=l&iangiiage=EN&guiLingUige=en
103. ibid
104. JF Mogg, ,The Bank of England and the Development of
Internal Control Systems’ in R KinseHa (edj Internal Controls in
Banking (OakTree Press Dublin 1995) at page 31
105. ibid at page 28
106. See “Framework for Internal Control Systems in Banking
Organisations”, Basel Committee for Banking Supervision
1998 at page 27
107. Whiht it is contended by some that the problems attributed
to Barings focussed round the lack of controls, the system of
internal controls which operated were also considered by the
regulator at the time (the Bank of Enghnd) to be informal
but effective. See Baring? Bank and International Reguhtion
Volume 1 (12 December 1006) at page xiii
108. See Treasury’ Committee, Barings Bank and International
Regulation Report No 1 1996 page xv
109. See Framework for Internal Control Systems in Banking
Organisations, Basel Conmiittee for Banking Supervision 1998
at pages 6 and 7
110. In order to evaluate the quality of internal controls, supervi-
sors could adopt a number of approaches which include i)
the evaluation of the work of the internal audit department
of the bank (though review of its working papers—including
the methodology implemented in identifying, measuring,
monitoring and ControHing risks), ii) It supervisors are satis-
fied with the qua∏ty of the internal audit departments work,
they could use the reports of internal auditors as a primary
mechanism for the identification of control problems in the
bank (or for identifying areas of potential risk—areas which
have not been recently reviewed by the auditors). iii)Further
some supervisors may use a self-assessment process in which
management reviews the internal controls on a business by
business basis whilst iv)other supervisors may require periodic
external audits of key areas (given that supervisor defines the
scope). Supervisors may ultimately combine one or more of
the techniques highlighted under (i)—(iv) with own on site
reviews or examinations of internal controls. Sre ibid at pages
22 and 23
111. House of Commons Select Committee on Treasury. Mnutes of
Evidence submitted by the Institute of Chartered Accountants
in England and Wales as part of its inquiry into the arrange-
ments for financial regulation of public Hmited companies at
page 17
112. ibid
113. See K Keasy and M Wright/Issues in Corporate AccoimtabHity
and Govenunce: An EditoriaF Accounting and Business
Research, 23 (91 A) at page 291. OECD principles define cor-
porate governance as involving “ a set of relationships between
a company’s nuɪngement, its board, its shareholders, and other
stakeholders."
Volume 30 ∙ Number 9 ∙ September 2011
Banking & Financial Services Policy Report ∙ 45