Liquidity risk management

Liquidity is managed in two ways: by way of managing assets and by way of managing borrowed liquidity. 

     Liquidity risk management is based on the bank's management accounting which involves static and dynamic GAP analysis that measures the size of earning assets and interest bearing liabilities (maturity gap), estimating the volatility of the stable share of liquid liabilities and time deposits of the bank's customers, and establishing and controlling maturity gap limits. 

 

       
Calculation and control of these ratios is performed on a monthly basis taking into account the condition of gaps (sufficient or critical) for all currencies and in a breakdown by major currencies. Control is performed in a consolidated manner and separately for branches and the Head Office. To estimate and analyze the actual level of liquidity and solvency, the bank uses required ratios established by the National Bank of Ukraine to regulate the operation of commercial banks, and internal liquidity risk limits. 

Internal liquidity risk limits are established by the bank's Assets and Liabilities Management Committee as proposed by the Risk Management Department and are revised at least once each year.

When monitoring liquidity and solvency risks, the bank focuses considerable attention on:

• the dynamics of the share of highly liquid assets of the total net assets (cash, funds in correspondent accounts)
• the condition of earning assets and interest bearing liabilities (maturity gaps)
• the condition of the stable part of the resource base and its volatility
• maturity of deposits of individuals and corporations, taking into account their turnaround
• the loans-to-deposits ratio
• the balance of invested and borrowed capital on the interbank market and its share of the bank's liabilities
• the solvency condition
• the actual instant and current liquidity ratio
• the quality of the credit portfolio: overdraft loan turnaround times; dynamics of overdue and doubtful loans
• the quality of the portfolio of securities (corporate, state)
• the share of the open currency position in the bank's net assets