All measures taken by a bank to ensure its unconditional, unrestricted solvency at any time. – In the course of the subprime crisis and the ensuing financial crisis, it became apparent that some banks had considerable organizational deficiencies in this area, and that there was a lack of coordination between those responsible for the business on the ground, the employees responsible for risk control, and top management. – Pursuant to Section 11 of the German Banking Act (KWG), -every institution must invest its funds in such a way as to ensure adequate solvency at all times. – In addition, the supervisory authority requires each bank to prepare a liquidity overview for an appropriate period. – This must be designed in such a way that appropriate scenario observations and scenario analyses can be carried out on a regular basis to identify any liquidity squeezes that may arise. – See acid ratio, bank rule, golden, cash, controlling, financial, function, Capital Investment Accounting and Valuation Regulation, liquidity maturity balance sheet, liquidity requirements against assets, liquidity coverage ratio, liquidity crisis plan, liquidity buffer, liquidity risk, liquidity shock, liquidity regulation, liquidity at risk, emergency reserve, quick ratio. Solvency, solvency supervision, stock approach, scenarios, exceptional. – Cf. Deutsche Bundesbank Monthly Report of September 2008, p. 63 (insufficient consideration of exceptional risks; deficiencies in coordination within institutions), BaFin Annual Report 2008, p. 51 (CEBS calls for buffers made up of assets that can be permanently liquidated), p. 55 (regulations for liquidity risk management), BaFin Annual Report 2009, pp. 50 f. (Standards for liquidity risk management by the Basel Committee), and the respective Annual Report of BaFin, chapter “International,” Monthly Report of the Deutsche Bundesbank of June 2013, p. 63 f. (Requirements for liquidity management by institutions in the wake of Basel III).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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