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OCC BULLETIN 2010-13
To: Chief Executive Officers of All National Banks, Department and Division Heads, All Examining Personnel, and Other Interested Parties

Description: Final Policy Statement: Interagency Policy Statement on Funding and Liquidity Risk Management

The guidance attached to this bulletin continues to apply to federal savings associations.

The Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of Thrift Supervision, and the Federal Financial Institutions Examination Council’s State Liaison Committee (collectively, the regulators) are issuing the final Interagency Policy Statement on Funding and Liquidity Risk Management (policy statement). The policy statement summarizes the principles of sound liquidity risk management issued in the past and, when appropriate, supplements them with the “Principles for Sound Liquidity Risk Management and Supervision” issued in September 2008 by the Basel Committee on Banking Supervision. 1

Recent turmoil in the financial markets emphasizes the importance of good liquidity risk management for the safety and soundness of financial institutions. The policy statement emphasizes the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets, and a formal, well-developed contingency funding plan as primary tools for measuring and managing liquidity risk. The OCC expects each national bank to manage liquidity risk using processes and systems that are commensurate with the institution’s complexity, risk profile, and scope of operations.

The general principles presented in this policy statement also apply to U.S. branches and agencies of foreign banks. These entities are expected to comply with the tenets of sound liquidity risk management with full recognition that the application of these principles depends significantly on the specific business models, governance structures, funding approaches and liquidity risk profile of the operation. The OCC expects to have ready access to the information necessary to maintain an understanding and assessment of liquidity risk management processes and systems.

Further Information
You may direct questions or comments to Kerri R. Corn, Director for Market Risk, at (202) 649-6360, or J. Ray Diggs, Group Leader, Balance Sheet Management, Market Risk Division at (202) 649-6360.

                       /signed/                                                  

Timothy W. Long
Senior Deputy Comptroller for Bank Supervision Policy
and Chief National Bank Examiner

 1 Basel Committee on Banking Supervision, "Principles for Sound Liquidity Risk Management and Supervision," September 2008. See www.bis.org/publ/bcbs144.htm.

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