IT Liquidity Management Flashcards
Numbers printed at bottom of a check
MICR #. Routing #, Federal Reserve District #, Account #, Check #
Components of the Uniform Rating Systems for Info Tech (URSIT)
Audit; Management; Development & Acquisition; Support & Delivery *Composite Rating
IT risk elements (SR 98-9)
- Mgmt process 2. architecture 3. integrity 4. security 5. availability
Effective MIS does what 4 things to risk?
- identify 2. measure 3. monitor 4. control
The quality of MIS depends on
effective internal control environment
Examiners review MIS to ensure that it is
Timely, accurate, complete, consistent, and relevant
SR 00-4 Outsoursing of Information and Transaction
bank is responsible for managing its software vendor and service provider relationships as if the processing was done in-house.
Assessing IT Risk
quantity of risk, quality of Risk Management over IT, adjusted risk, direction
Purpose of MIS
decision support
Core Deposits
DDA, NOW, Money Market MMDA, Savings Accts, CD’s
Net short-term Noncore Funding Dependence
Short-term noncore funding - short-term investments / long-term assets
Three M’s critical in determining liquidity risk
Mix, Marketability, Maturity
Net Non-core funding dependence
(noncore liabilities - ST investments) / LT assets
GAAP Requires a public company to desplay is assets in order of?
Decreasing Liquidity
Commerical Paper
Short-term, unsecured promissory notes
Repurchase Agreements
Short-term loan secured w/securities. Overnight or term arrangement
Liquidity Risk Management
BOPMI
Who’s ultimately responsible for liquidity risk management?
The Board
A bank’s core funding sources include
DDA, NOW, Money Market MMDA, Savings Accts, CD’s
3 types of credit offered by the Discount Window
- seasonal 2. adjustment 3. extended
The FRB can extend credit through the discount window to…
meet bank’s liquidity needs (ie when there is an increase in loan demand)
What can financial institutions use to avoid deficiencies in reserve accts?
the discount window
Liab Non-Core
CD >+ $250M, Wholesale funding, Federal funds purchased
Other liabilities
FRB Funds Purchased; Customer Repurchase Agreements; Sweep Accts; Subordinated debt (more commonly used to provide capital but can be used as a funding source as a last alternative).
3 type liquidity
- liability 2. asset 3. income
What does management have to do to make the balance sheet more liquid?
Asset Restructure.
Earnings / Liquidity Trade off
banks with higher loans to assets ratios tend to have lower liquidity
Risks associated with deposits
liquidity risk and market risks
Elements of Risk Management
1) active board and senior management oversight. 2) adequate policies, procedures, and limits. 3) adequate risk-measurement, risk-monitoring, and anagement information systems. 4) comprehensive internal controls
Responsibilities of the BOD
- reviewing info in sufficient detail to allow them to understand and assess the risks 2. review/approve exceptions to established standards 3. review/approve investment strategy 4. periodically review policies that govern selection of securities dealers.
SR 95-51 risks
Credit; Market; Liquidity; Operational; Reputational; Legal (risk levels: low, moderate, high; risk trends: decreasing, stable, increasing)
When examining bank mgmt, 1st assess:
all other CAMELS ratings (CAELS)
A person is considered part of management
who participate in or have authority in policy making decisions
Risk based supervision focuses os 4 elements of Risk Mgmt
- identify 2. measure 3. monitor 4. control
The risk management rating is factored into which commercial bank rating component?
The management rating
Directors must fulfull responsibilies of?
Duty of Care and Duty of Loyalty (common law)
Directors bound by several areas of law?
Common law, statutory and regulatory law, and criminal law
12 USC 71a
National bank and state member banks must have at least 5 directors, but no more than 25
