APS 210 - Qualitative requirements table
Element of risk
management framework
Key matters to consider
Statement of liquidity
risk tolerance
 APRA provides guidance on risk appetite and tolerance in APG 210 Liquidity.
 Risk appetite is the articulation of the nature and level of risk that is acceptable in the context of achieving an ADI’s strategic
objectives.
 Not all aspects of risk appetite are quantifiable.
 Risk tolerance is a quantitative articulation of the maximum level of acceptable risk after taking into account appropriate mitigants and
controls to reduce the risk.
 Risk tolerance is generally expressed using measurable limits that will enable a clear and transparent monitoring process to ensure
that the ADI remains within these risk tolerances.
Liquidity management
strategy
 Must be well integrated into the ADI’s overall risk management process.
 The liquidity management strategy must include specific policies on liquidity management..
 Liquidity policy should contain various triggers; strategic target (for both HQLA and total liquidity), early warning trigger, crisis trigger &
statutory minimum.
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Element of risk
management framework
Key matters to consider
Operating standards for
managing liquidity risk
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The annual funding
strategy
 Will generally include both qualitative and quantitative items, key outcomes and strategies that will be used to achieve the outcomes.
 Funding strategy would combined expected funding outcomes with sensitivity analysis.
 APS 210 requires an ADI to maintain a presence in its chosen fund markets, have strong relationships with fund providers, and
regularly gauge its capacity to practically and effectively raise funds quickly in the event of a funding crisis.
Contingency funding
plan
 ADIs must have in place a formal contingency plan that sets out the strategies of addressing liquidity shortfalls in emergency
situations.
 Depending on the nature, severity and duration of a liquidity shock, the potential sources of funding during a crisis will vary.
In the form of policies, procedures and controls.
Should be in line with the Board approved liquidity risk tolerance.
Should include the ADIs approach to:
Ensuring sufficient liquidity is maintained at all times;
Determining the structure, responsibilities and controls for managing and monitoring liquidity risk, including frequency;
Ensuring adequate controls are in place to ensure the integrity of liquidity management processes;
Ensuring stress tests, contingency funding and HQLA holdings are effective and appropriate;
Establishing reporting criteria and process including exception reports and escalations; and
Monitoring current trends, market developments and internal information on liquidity risk.
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Support
At Crowe Horwath we have the expertise and specialists who can support you in applying or understanding these revised liquidity standards. If you have any
questions feel free to contact Brad Bohun, Anne Lockwood, David Munday or Pippa Hobson.
Brad Bohun
Partner - Audit and Assurance
+61 2 6021 1111
brad.bohun@crowehorwath.com.au
Anne Lockwood
Partner - Audit and Assurance
+61 3 9258 6802
anne.lockwood@crowehorwath.com.au
David Munday
Partner - Audit and Assurance
+61 3 9258 9564
david.munday@crowehorwath.com.au
Pippa Hobson
Partner - Audit and Assurance
+61 8 9488 1140
pippa.hobson@crowehorwath.com.au
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