ILAAP 💧 Beyond ratios. How banks prove liquidity strength. #Banking #Liquidity #riskmanagement
13 April 2026·1 min
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Welcome to this session from the Industry Portal liquidity management course, where we explore the qualitative backbone of liquidity regulation: the Internal Liquidity Adequacy Assessment Process (ILAAP).
While metrics like the LCR and NSFR provide important signals, they only tell part of the story. In this video, we explain how ILAAP goes further by assessing how banks think about liquidity risk, how they govern it, and how prepared they are for real world stress.
You will learn how ILAAP fits within the Basel Pillar 2 framework and how it is assessed by supervisors such as the Prudential Regulation Authority and the European Central Bank as part of SREP.
We break down what a strong ILAAP looks like in practice, including a clear Board approved liquidity risk appetite, robust governance across the three lines of defence, and credible processes for identifying and managing liquidity risk across products, currencies, and entities.
A major focus is liquidity stress testing, including how banks design scenarios, justify assumptions, and use results to drive real decisions such as buffer sizing, funding strategy, and contingency planning.
We also explore contingency funding plans, including triggers, escalation processes, and management actions, as well as the importance of dry runs and operational readiness.
For international banks, we explain how ILAAP addresses group versus entity liquidity, ring fencing, intragroup funding, and foreign currency risk, and how liquidity is embedded into business planning and growth strategy.
By the end of this session, you will understand why ILAAP is often described as the qualitative heart of liquidity risk management — bringing together data, governance, judgement, and strategy.
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#ILAAP #LiquidityManagement #Banking #Finance #Treasury #RiskManagement #SREP #BaselIII #TheIndustryPortal
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