ALMIS

Liquidity under CRD IV and ALMM – Additional Liquidity Monitoring Metrics – Is there a positive aspect?

The imminent introduction of the new LCR and ALMM will indeed increase the volume and even frequency of reporting for many Building Societies but, after closer inspection, is it all bad news or can firms use this data to their competitive advantage?

Volume of Reporting

The amount of regulation reporting for liquidity from each individual firm is now twice the volume that the entire UK Building Society sector was producing prior to 2008. The six new ALMM reports alone contain over 15,000 data points. The new ALMM reports can be considered work in progress as the EBA gain approval from the European Commission and they add technical definitions and validations. For a temporary period, firms are reporting three different cuts of liquidity data as regulations move towards new standards.

Proportionality

There are, however, positive aspects to the new regime announced recently by the PRA.

  • Daily reporting will not be a requirement for firms with >£5bn assets.
  • The new LCR (liquidity under CRD IV) replaces the BIPRU 12 type A/B approach, is more rules based than principles driven and for many produces a lower minimum.
  • The minimum liquidity target is therefore considered easier for most building societies.
  • There is now a wider range of instruments to invest liquid assets.

Turning Compliance to Competitive Advantage

The volume and ‘work in progress’ nature reporting demand that all firms implement smart, automated and flexible systems. The up side though of getting this right will enable firms to better analyse and manage liquidity to their advantage – providing more accurate visibility over a Funds Transfer Pricing allowing understanding of the true cost of liquidity and how to best manage this.

To assist with this, we are developing auto population for four of the main reports and this auto population will be available from beginning of September 2015. We have also prepared a document that explains the reports and a more detailed ALMIS specification.

For further information or to request an ‘ALMIS Guide to understanding ALMM’, please contact j.haston@almis.co.uk

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