Liquidity is King

In a recent survey of the world’s largest banks the top five lessons learned were:

• Liquidity is king (90%);
• Institutionalise a risk culture (73%);
• Stay attuned to industry dynamics (60%);
• Don’t forget the people factor (40%);
• Prepare for the unexpected (35%).

An overwhelming majority (90%) cited an over-reliance on short-term funding, that growth was “king” and that liquidity was just not factored into the equation. Nearly three quarters (73%) of respondents considered it essential to institutionalise a risk culture… that goes beyond a narrow compliance focus. And over half (60%) of the respondents expressed the view that their organisation had been lulled into complacency by the benign market environment and the flow of new product offerings. A view expressed by a significant number (40%) of respondents was their underestimation of the importance of the human factor in managing risk, that human judgement, insight and experience should be more highly valued and utilised. And finally, 35% expressed the view that the banking industry as a whole had adopted a reactive, compliance-driven approach, rather than a forward-looking stance to risk management.

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