Objectives On completion of this tutorial, you will be able to:

• Recognize the reasons why the nature of the banking business means that banks are particularly exposed to liquidity risk
• Identify the problems with liquidity risk management that were exposed by the global financial crisis and the regulatory response to this
• Recognize the relationship between asset-liability management and liquidity risk
• List the key components of a liquidity risk management framework

Tutorial Overview Liquidity risk is the risk that a bank will be unable to fund an increase in its assets or meet its obligations as they fall due. Banks are particularly vulnerable to liquidity risk, as was proven during the financial crisis. This tutorial examines why liquidity issues such as those experienced during the crisis can arise, and how both regulators and banks have changed their approach to assessing and managing liquidity risk since the crisis. The tutorial also introduces the concept of ALM and outlines how liquidity risk is managed as part of a bank's overall ALM strategy. Prerequisite Knowledge Risk Management - Risk Types & Measurement Tutorial Level: Intermediate Tutorial Duration: 60 minutes