Tiểu luận assignment LIQUIDITY AND RESERVE MANAGEMENT STRATEGIES AND POLICIES

NATIONAL ECONOMICS UNIVERSITY
COMMERCIAL BANK

ASSIGNMENT
TOPIC:

LIQUIDITY AND RESERVE MANAGEMENT: STRATEGIES
AND POLICIES
Teacher: PhD. DO HOAI LINH

Group 2 :
1.
2.
3.
4.
5.

BÙI VIỆT ANH
PHẠM TÂM LONG
NGUYỄN HỮU BẢO
ĐỖ KHÁNH HUYỀN
HOÀNG PHƯƠNG QUỲNH

Ha Noi 2017

1


Contents
I. Liquidity risk: .................................................................................................. 3
II. ........................................................................................................................... 2

1. Definition of liquidity of bank: .................................................................... 3
2. Definition of liquidity risk: According to Basel committee on Banking
Supervision: The risk that a financial institution is unable to find sufficient
funds to meet its maturing obligations without affecting its day-to-day
business operations nor affecting its financial position. ................................... 3
3. The relationship between liquidity and bank reserves:................................ 3
4. Reason to happen liquidity risk: .................................................................. 3
4.1. Model of supply of and demand for liquidity: ....................................... 3
4.2. The reason of happen liquidity risk: ...................................................... 4
III. Management of liquidity risk of bank: ......................................................... 8
1. Signals from the marketplace: ..................................................................... 8
2. How to prevent liquidity risk: ...................................................................... 9
2.1. Estimating liquidity needs: .................................................................... 9
2.2. Principle of management and supervisor of liquidity risk ................... 12
2.3. Prevent liquidity risk: ........................................................................... 12
3. Control the status of liquidity of banks ...................................................... 14
4. The way to surmount deficit of net liquidity position: .............................. 16
4.1. First strategy......................................................................................... 17
4.2. Second strategy: Borrowed liquidity management strategies: ............ 17
4.3. Third strategy: Balanced liquidity management strategies: ................ 17

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I. Liquidity risk:
1. Definition of liquidity of bank:
-

-

According to Basel committee on Banking Supervision: Liquidity is the ability of a
bank to fund increases in assets and meet obligations as they come due, without
incurring unacceptable losses.
=> Liquidity of bank depends on the demand and supply of fund in the financial
market. Bank uses model of demand for and supply of liquidity to determine net
liquidity position at any moment in time and set the plans to use funds.

2. Definition of liquidity risk:
According to Basel committee on Banking Supervision: The risk that a financial
institution is unable to find sufficient funds to meet its maturing obligations without
affecting its day-to-day business operations nor affecting its financial position.

3. The relationship between liquidity and bank reserves:
-

-

When the bank falls short of liquidity, the bank's reserves will finance the deficit in
the short term. In addition to the cash in vault, the bank needs to reserve a premium
for this type of risk.
Liquidity risk is the type of risk mentioned in Basel II's minimum capital
requirements, and needs to be carefully assessed by the bank and monitored by the
central bank.

4. Reason to happen liquidity risk:
4.1. Model of supply of and demand for liquidity:
a) Supply of liquidity:
 Definition: is the amount of money that already have or going to have in the short
period of time for bank in using purpose.
 This cash flow comes from :



Customer’s deposit
Considered to be the most important source of supply for the liquidity. The
more deposits bank has, the more liquid bank will be. Bank could adjust the
interest rate that attract people’s deposit.



Customer’s loan repayment
Second important of all, Lending is the main activities of bank, bring back
the highest profit for bank but also come with the greatest risk -> affect the
ability of payment of bank. If every loans have been paid, it not just bring
profit to bank but also be a great source of liquidity for bank.



Borrowing from the money market:

3


Bank could increase the supply of liquidity by borrowing from the money
market, including new loans, extend the due date, … borrowing from other
bank and also from central bank.


Sales of assets :
-

To meet the liquidity demand, bank could sell their assets.
+ Revenues from the sale of nondeposit services:

-

Is the amount of money that bank has received through the process of
serving the customers : Opening L/C …
+ Issuing securities to the market:



Bank issuing stocks to the market is a great source of liquidity for bank

b) Demand for liquidity:
 Definition: is the demand for withdraw the money out of bank in different time
 This demand depends on these elements:


Demand on withdrawing the money of customers
This demand is frequent, immediately, including deposit with no terms,
payment deposit and deposit with terms and can withdraw before the
maturities. In deposit with no term and payment deposit, bank have to secure
the amount of reserve money in the account to meet the demand of
withdrawing. Elements that create demand of liquidity could be the rate of
inflation in the economy, fluctuation in channeling funds interest rate
between banks.



Credit request from customers:

This is also an element that has great influence to liquidity demand. It comes
from the demand of investing from investors, competitive interest rate
between banks -> Harder to approach the funding sources.



Repayment of nondeposit borrowing
This is the amount of money that bank have to repay

the debt from

borrowing financial institution, Central bank,…


Interest expenses:
These are costs that have to pay through mobilizing funds, interest through
issuing valued paper.



Payment of stockholder cash dividends:
The amount of money that banks have to pay to their stock holders.

4.2.

The reason of happen liquidity risk:
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There are a lot of causes lead to liquidity risk and it comes from all sides of

bank’s business activity: from subjective, objective; from the bank itself, from
the customer, the policy, from the other types of risks, etc. However, in terms of
researching to find an effective solution to liquidity risk management, the
following main reasons can be deduced:
a) Subjective reason:
 Due to the maturity of asset and liability are disproportionate, because of the
converting maturity function of the bank: mobilizing short-term deposits from
the public for long-term loans. So asset's term is longer than liability's term,
making asset's cash flow not equal to the cash flow needed to meet the maturity
of liability, causing difficulties for banks to find the source for compensation.
 Risk of imbalance in asset structure.
This comes mostly from the short-term profit pressure of shareholders on the
board of directors, which forgot the principles of asset and liability management.
In their asset portfolio, commercial banks invest in stocks and bonds, most
important of which are government bonds and / or Treasury bills. Although,
interest rate of Government bonds and Treasury bills are not attractive but they
are easy for commercial banks to discount at the central bank when occurring
liquidity risk. Any commercial bank, especially small banks, understands this,
but with their weak financial, it is difficult to compete with big banks in the
auction of government bonds and treasury bills.
 Customer structure is not reasonable.
Bank just concentrates on potential customer’s credit or a proportion of one
sectors, an area which occupy a large proportionof total liability. Or in total
mobilizing a customer having a large proportion, When these customers are
having difficulty in paying off their debts on time or unexpectedly withdrawing,
this leads to an liquidity risk.
 Because banks are pursuing profit targets in short term, there are overly open
lending policies that lead to lower lending conditions, loans to underprivileged
borrowers. As the consequence, it leads to credit risk and liquidity risk
 Because banks do not estimate the need of withdrawals or obligations to pay.

When demand for withdrawing money and performing obligations exceed
their expectations, these banks will face liquidity problems.

5


 As the financial capacity of banks is limited. Charter capital is the amount of
capital owned by the bank, which is formed when the commercial bank is
established. It reflects the scale or financial capacity of commercial banks. The
higher capital of the commercial banks have, the bigger potential finance of the
banks are. On the contrary, the lest the bank's charter capital has, the smaller the
size of the bank. Small banks often find it difficult to access sources of capital,
or only with high interest rates, especially for loans. It can be said that there is a
huge pressure when these banks have to bear the high cost to overcome
difficulties in solving liquidity problem. The small scale of charter capital may
be one of the reasons that pushes commercial banks to insolvency and
bankruptcy when demand for liquidity increases suddenly.
 Due to the multiple currency trading, it is created the liquidity risk and financing
requests each currency.
 Due to the reduced of bank’s prestige, the depositors quickly withdraw the
deposit causing the liquidity risk. This is the consequence of the weak business,
the PR team has not been sufficiently invested.
b) Objective reason:


Financial assets are susceptible to fluctuations of interest rates.
Interest rates change leads to a great effect of depositor’s psychology. In case of
rising interest rates, customers will withdraw money to deposit at other banks
with higher interest rates, while borrowers will minimize new borrowing to avoid
paying higher interest. When interest rates fall, the reaction is reversed. In both

cases, fluctuations in interest rates affect both deposit and loan cash flow,
ultimately affecting the liquidity of banks. In addition, the change in interest rates
will affect the market value of selling financial assets and the cost of borrowing
in the monetary market.



Monetary policy of the central bank.
To perform its function in managing monetary policy, the central bank uses three
instruments, including open market operations, reserve requirements, discount
rates and rediscount of valuable papers.
-

Open market operations (OMO) are the activities of central banks to buy or
sell commercial banks and treasury bonds to commercial banks. When
wanting to increase the money supply, the central bank buys bonds from

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commercial banks, the money that the central bank pays to commercial banks
increases the money supply for the economy and also increases the supply of
liquidity to commercial banks. On the contrary, in order to reduce the money
supply, the central bank sells bonds to commercial banks, the money that the
central bank collects reduces the money supply of the economy and also
reduces the liquidity supply of commercial banks.
-

The required reserve ratio is a regulatory measure that central banks require
commercial banks to maintain a minimum reserve requirement ratio at the

central bank. If the required reserve ratio is high then the supply of
commercial banks liquidity increases and vice versa.

-

Discount and rediscount rates are the interest rates the central bank uses in the
discounting or rediscount the value of commercial banks’ paper. If this interest
rate is low, this will be the cheap capital fund that commercial banks can easily
mobilize to meet the liquidity demand..



Legal framework of operational safety in credit institutions system.
The mechanisms, policies and legal documents related to banking operations are
clearly and specifically issued as well as the operation of the bank’s supervision
agency, the close coordination between “remote monitoring” and “site
inspections” will contribute to ensuring the safety of the NH system.



Due to the customer's business cycle.
According to seasonality at the end of year, businesses will speed up their
business activities, settle debts to other companies, pay compensation to
employees, make commitments to disburse money to partners, solve Inventory,
import of goods ... creating a large demand for money in the last months of the
year, which increases demand for liquidity for commercial banks.



Due to the special characteristics of the cycle business

Cycle business requires that commercial banks are always ready to meet the
demand for immediate loans. For other businesses, company can delay debt with
customers,

pay tardily with partners, even can proactively occupy the capital

of business partners ... But for commercial banks in the sensitive monetary,
commercial banks can not delay payment. Any payment delays can cause anxiety
in the public, and if the commercial bank does not solve this problem right away,
the customer can go to the bank to withdraw money leads to the liquidity problem.

7


If this situation becomes more and more seriously, commercial banks may go
bankrupt. On the other hand, on the balance sheet of commercial banks, the
liability always has a certain percentage of demand deposits and term deposits
but can be withdrew before its maturity This is the liability that the commercial
banks are obliged to pay immediately if the customer needs to withdraw, so that
commercial banks are always ready to meet liquidity needs.




Due to economic crisis or financial crisis.
The economic or financial crisis has led to rising costs of mobilization,
reducing lending and investing efficiently. On the other hand, the crisis may
undermine the belief in the financial system, organizations and residents will
withdraw money from commercial banks causing liquidity pressures on
commercial banks.

Due to rumors
Bad rumors will lead to distrust on a particular financial institution. The
mechanism of imbalance between the value to be paid and the value earned from
investment and lending activities will occur so that commercial banks will face
liquidity risk.

II. Management of liquidity risk of bank:
1. Signals from the marketplace:










Public Confidence.
Institution losing money: is it because of the public perception that it will be
unable to pay its obligations.
Stock Price Behavior.
Falling stock price may indicate of liquidity crisis
Risk Premiums on CDs and other borrowings.
Payments of higher interest on these liabilities may be considered as risk
premiums and liquidity crisis.
Loss Sales of Assets.
Sales of assets in hurry (with significant losses) again may indicate of liquidity
crisis.
Meeting Commitments to Creditors.

Is it able to honor all requests for potential profitable loans?
Borrowings from the Central Bank.
Borrowing in large volume and more frequently from the central bank indicates
liquidity crisis. If problems exist in any
of these areas, management needs to take a close look at its liquidity management

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practices to determine whether changes are in order.

2. How to prevent liquidity risk:
2.1.


Estimating liquidity needs:
Method 1: The sources and uses of funds approach. The key steps are:
Step 1: Loans and deposits must be forecast for a given liquidity planning period.
Step 2: The estimated change in loans and deposits must be calculated for the
same period.
Step 3: The liquidity manager must estimate the net liquid fund’s status for
planning period by comparing the estimated change in loans to estimated change
in deposits.
At the first step, There are two way to estimate loans and deposits at a given
liquidity planning period
The first way: Bank uses econometric models to estimate the forecast of loans and
deposit by using the variables.
The variables will be collected in the past of all party that take part in the process
of take deposit and make loans of bank. They are variables that affect to the
deposits such as income, interest rate of deposit,.. and the loans such as GDP,

inflation, interest rate of loan,..
=> - Difficult to obtain the data and deploying model.
- Spend a lot of money to use the model.
The Second way: Use statistics in the past of internal of bank and estimate the
forecast of sum of deposits and loans. Bank divide sum of deposit and loan at any
time into 3 part:
- Trend component:
Estimated by constructing a trend line using as reference points year-end,
quarterly,...
- Seasonal component: measuring how deposits and loans are expected to
behave in any given week or month due to seasonal factors
- Cyclical component: Representing positive or negative deviations from a
bank’s total expected deposits and loans, depending upon the strength or
weakness of the economy in the current year.
Sum of deposits or loans expected = sum of deposit or loans in before
period + trend component + season component + cyclical component
=> Easy to collect the data and deploy model.
Step 2: Calculate the change in expectation in planning period
- According to forecast model:
delta (change sum of loans) = f (GDP, interest rate of loans, inflation,...)
delta (change sum of deposits) = f(income, interest rate of deposit,....)

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

- According to data of internal bank model:
change in loans or deposit = total loan or deposit expected in coming period - total
loan or deposit in before period.

Step 3: Determine the net liquidity position:
Estimated net liquidity position = estimated change in deposits - estimated change
in loans.
Method 2: The structure of funds approach:
Managers of liquidity risk only take care of demand for liquidity, do not have care
about supply of liquidity. The sources of fund are divided into many group, depend
on ability of withdrawal, and reserve of each group is different.
Step 1: Divide fund into 3 group depend on the ability of withdrawal
- Hot money liability: deposit and other borrowed funds that are very interest
sensitive
- Vulnerable funds: customer deposits of which a substantial portion
- Stable funds: funds that management consider unlikely to be removed.
Step 2:
Determine reserve for liquidity of each group: Liability that has high ability of
withdrawal will has high proportion, and the bank needs to hold high money for
liquidity of this liability.
95% to hot money liability after minus legal reserve held
30% to vulnerable funds after minus legal reserve held
15% to stable funds after minus legal reserve held
Step 3:
Estimated liability liquidity reserve:
A = 0,95 x (hot money liability - legal reserve held) + 30% (vulnerable funds
- legal reserve held) + 15% x (stable funds - legal reserve held)
Step 4:
Estimate liquidity for increase the maximum of credit operation.
- Bank should hold an amount of reserve enough to increase the credit operation
because of profit of bank and relationship with customer.
Bank should hold amount reserve B equal Potential loans outstanding minus
actual loans outstanding.
Step 5:

Estimate total liquidity requirement
Total reserve for liquidity = A + B
Step 6:
Bank use stress testing to make many scripts with many ability happen so as to
estimate demand for liquidity of each script.

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

Liquidity indicator approach:
Bank can calculate indicators of liquidity to estimate their liquidity needs, and
compare with other bank in banking system to adjust for
There are some liquidity indicators that are important for bank to estimate liquidity
needs.
a) Indicators about asset of balance sheet
- Cash position indicator:
cash and deposit due from depository institutions / total assets.
-> This high indicator reflects good liquidity for bank, but cash and deposit in
other depository institutions are unprofitable money, so bank should maintan
this indicator at a reasonable level, both profit and liquidity.
- Liquidity securities indicator:
Government securities/ total assets
Government bonds are free-default risk bonds, highest liquidity in each
country and take the interest for bank.
-> Bank should maintain this high indicator so as to prevent liquidity risk,
special the economy has bad debt.
- Capacity ratio: Net loans and leases/ total assets
-> The high capacity ratio tends to decrease the liquidity for banks because

net loans and leases are illiquid of assets.
b) Indicators about liability of balance sheet:
- Deposit composition ratio :
demand deposits/ time deposits
-> This ratio measures how stable a funding base each institution possesses.
A decline ratio suggests greater deposit stability and lesser need for liquidity
c) Indicators about both liabilities and assets of balance sheet:
- Core deposit ratio:
Core deposits/ total assets
-> Core deposits are primarily small checking and savings accounts that are
considered unlikely to the withdrawn in short term
-> High ratio suggests lower liquidity requirements for bank.
- Hot money ratio:
(cash and due from deposits held at other depository institutions + short term
securities + Fed funds loans + reserve purchase agreements)/ (CDs + Fed fund
borrowing + repurchase agreement + Eurocurrency deposit)
-> This ratio reflects relationship between assets and liability of bank in
money market or sensitive assets and sensitive liability of bank.
-> The high ratio reflects bank has enough assets that can be sold to meet the

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need to withdraw funds from money market.
2.2. Principle of management and supervisor of liquidity risk:
According to the “Principles for sound liquidity risk management and supervision”
of Basel committee to guide banks on risk management, there are 17 principles,
they belong to groups:
- Governance of liquidity risk management:
-> Bank must have model apparatus for liquidity risk, and the senior management

of bank should develop a strategy, policies and practices to manage liquidity risk
- Measurement and management of liquidity risk
-> Bank should have model to estimate liquidity risk and conduct stress tests on a
regular basis for variety of short-term and long-term so as to identify sources of
potential liquidity strain.
+ Public disclosure
+ The role of supervisors.
2.3. Prevent liquidity risk:
 Liquidity risk management model
About the risk management structure
There are 3 main elements
The frame
The infrastructure
The risk management steps

According to the Basel Committee on Banking Supervision: "Risk management
must be a continuous process at all levels of Commonwealth of Independent States
and play an important role in the achievement of goals, Finance and debt

12


repayment of that organization ". From analyzing the organizational structure
constraints in the liquidity management of commercial banks, in order to improve
the liquidity management capacity of commercial banks, the responsibility should
be divided into 3 rounds as follows:
To manage risk in banking operations, banks need to set up an organizational
structure to divide management responsibilities with each type of risk. One of the
risk management systems that has been successfully applied in modern
commercial banks and widely recommended by international experts in Vietnam

is the three-round protection model

- Control round 1:
Branches where direct business and risk exposure will be in the first round of control
on the management of business plan formulation and implementation, capital balance
and usage
- Control round 2:
ALCO department coordinates with the Liquidity risk management department of the
Risk management unit which responsibles for building the system, rules, procedures,
guidelines for liquidity management; construct , Propose setting limits, monitor and
control the liquidity of units in round 1 and independently report liquidity condition to
the board.
- Control Round 3:

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The internal audit department is responsible for periodically and irregularly inspecting
and supervising the implementation of liquidity management to ensure full and effective
implementation of the two rounds above.
We can call this a modern liquidity risk management model
The first is the business department
The second is the risk management department
The third is the internal audit department
The Risk Management Council (RMC) under the Board of Directors supervises and set
the overall policy, the limits of all the bank's risk, which must include liquidity risk.
This council is also responsible for assisting the BOD in determining the risk appetite
for the entire bank.
The asset-liability management system is responsible for managing the balance sheet
structure or achieving the greatest profit but still ensure compliance with the general

direction of risk of the bank, which has a major role in managing liquidity risk of the
bank.
Relevant departments in this system include:
 Asset-Liability Committee - The ALCO is the main responsible agency for the
operation of the ALM, which may include Board ALCO and Management ALCO. .
Small and medium banks operating in only one country may only build one ALCO
at the management level.
 ALM unit / desk is where applies and develops risk management program; Identify,
measure and track the balance sheet as well as the liquidity risk (and interest rate
risk) from the business activity of the capital department ; Verify the
appropriateness of the annual Liquidity Risk Management policies and procedures
and make recommendations on the Liquidity Risk Limits. ALM is also a
department that conducts affordability and case analysis tests. ALM has strength
in financial sector, risk management sector or capital sector of the Bank, but
ideally remains in the financial or capital block.
 Funds department, under the direction of the Executive Board, may include (but
are not limited to) sales departments and ALM departments. Business units are
responsible for the bank's currency and capital business, providing regular data to
the ALM.
 The internal control department functions independently from the risk
management system, performs inspection and evaluation of the effectiveness of
risk management policies and frameworks; Ensure the compliance of the risk
management process and the quality and content of measurement methods.

3. Control the status of liquidity of banks
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To control the liquidity of banks, we set up a process to manage liquidity risk. The
general procedure for managing the liquidity risk of a commercial bank can be

described in this figure
Quản trị
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các
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Step 1: Set the maturity ladder
Định nghĩa
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The first step in setting the maturity ladder is to build the liquidity flows of the
commercial bank. This can be done through the steps described in the following
diagram.
Define cash flows arising during the operation of the BANK as risk factors.
Classify the identified cash flows and distinguish identified and random cash flows.
Define time intervals depending on the term of the products which are being used
(short, medium, long term), such as daily up to 1 month maximum, weekly up to 3
months maximum, monthly up to 1 year maximum , over that is annual.
- Based on historical data, the BANK categorizes Gaps of random cash flows with
short and medium term bands.

- Calculates potential changes of risk factors from historical scenarios.

15


- Calculates the probability distribution of risk factors for specific time bands based
on these scenarios.
- Presents the probability of distribution function.
- Calculates cash flows for each time band, with seasonal impact in mind with the
help of a historical simulation.
- Summary of identified and randomized cash flows for each time band.
- Determine the cumulative cash flow limits for the specified time bands. Basically,
the limits for short and medium term bands are based on liquidity changes and
experience of "potential gap exposures"
Step 2: Create/Write liquidity report
- The Bank should prepare a daily report on results of cash flow forecasts, which
will identify cumulative cash flows, cumulative reserves postage, cumulative Gaps,
changes in limits, and cumulative "cushioning" .
- A liquidity cushion relates to a business or individual holding an ample amount of
cash, or other highly liquid assets, in relation to debt, so that a short-term liquidity
crunch or other unexpected event will not lead to potentially disastrous
consequences.
- The daily liquidity report of the BANK is scheduled for a period of time. Example:

Các
luồng
tiền cộng dồn
Dự trữ vốn
khả
dụng

cộng dồn (+)
Hạn mức
Gap cộng dồn
“Lớp đệm"
cộng dồn

4.

T+1

T+2
-1.250

T+3
đến15
1.400

Từ 30- 60 Từ 61- 90 Từ 90- Từ
180
>181
-1.600
-1.500
1.000
2.000

1.500
3.030

4.030

3.830

3.830

3.530

3.500

3.500

1.500
4.530
3.030

1500
2.780
1.280

2.000
5.230
3.230

500
2.230
1.730

0
2.030
2.030

300
4.500
4.200

1.200
5.500
4.300

The way to surmount deficit of net liquidity position:
The bank needs to understand that the amount of capital held for liquidity is a source
of unprofitable capital and even if the bank holds a certain amount of capital to cover
liquidity risk, a market shock can cause the bank to use up all that capital to offset
the liquidity.
-> Bank should have strategies for liquidity managers from manager asset and
liability of itself instead of a holding amount of capital for the liquidity risk because
liquidity risk will affect assets and liabilities first.

16


4.1. First strategy
 Asset liquidity management strategies:
+ Bank should to hold the liquid assets and be profitable. When bank needs
liquid, can buy and discount them to receive money.
Example: Discount Treasury bills to Central Bank.
 Assets that bank should hold:
- Treasury Bills
- Fed funds loan to other institutions
- Purchase of liquidity securities under a repurchase agreement
- Placing correspondent deposits with various depository institutions

- Municipal bonds and notes
- Fed agency securities
- Negotiable certificates of deposit
- Eurocurrency loans
-> Treasury Bills were used widely in banking system because the liquidity
of them is very high and central bank usually helps bank to supply funds for
liquidity by buy T.Bills with role of last borrower for commercial banks.
4.2. Second strategy: Borrowed liquidity management strategies:
- When bank needs liquidity, bank can borrow from central bank and other
commercial bank through discount window or interbank market. This
solution was used widely because time for transfer money in interbank
market is fast and the loans from borrow in interbank market mainly shortterm loans, so banks with idle funds also want to lend for other bank needs
liquidity so as to receive high overnight rate and the relationship among
banking system.
Bank can borrow from sources:
1. Fed fund borrowings
2. Selling liquid, low risk securities under a repurchase agreement
3. Issuing negotiable CDs
4. Issuing Euro currency deposits
5. Securiting advances from the Federal Home loan bank
6. Borrowing reserves from discount window of central bank
4.3. Third strategy: Balanced liquidity management strategies:
- Under a balanced liquidity management strategy, some of the expected
demands for liquidity are stored in assets, while other anticipated liquidity
needs are backstopped by advanced arrangements for lines of credit from
potential suppliers of funds.
- Long-term liquidity needs can be planned for and the funds to meet these needs

17

can be parked in short-term and medium term assets that will provide cash as
those liquidity needs arise.

18