CHANGES IN LIQUIDITY RISK MANAGEMENT POLICY

A substantial change was made to the risk management policy of credit institutions, specifically
that regarding liquidity risk. The Banco de España will periodically assess the
overall management of this risk and encourage the development of sound internal methodologies.
Its assessments shall take into account the role played by credit institutions in
financial markets. However, the Banco de España shall detail the method and procedure
to be used in these assessments.
Credit institutions shall establish robust strategies, policies, processes and systems for
the identification, measurement, management and monitoring of liquidity risk over an appropriate
set of time horizons, including intra-day, so as to ensure that credit institutions maintain adequate levels of liquidity buffers. Those strategies, policies, processes and systems shall be tailored to business lines, currencies and entities and shall include adequate allocation mechanisms of liquidity costs, benefits and risks.
Credit institutions shall consider different liquidity risk mitigation tools, including a system of limits and liquidity buffers in order to be able to withstand a range of different stress events and an adequately diversified funding structure and access to funding sources.
Those arrangements shall be reviewed regularly.
As under the previous legislation, alternative scenarios shall be considered and the assumptions
underlying decisions concerning the funding position shall be reviewed regularly.
Credit institutions shall adjust their strategies, internal policies and limits on liquidity risk
and develop effective contingency plans, taking into account the outcome of the alternative
scenarios considered.