Liquidity risk

Liquidity risk is defined as the risk that maturities of assets and liabilities may not match. The Group is exposed to liquidity risk as it has to use available cash on a daily basis to make payments, extend loans and repay liabilities.

Gap analysis for different time horizons is the main tool for managing liquidity risk. The Group manages two types of liquidity risk — statutory liquidity risk and physical liquidity risk.

Statutory liquidity risk is the risk of possible failure to meet statutory liquidity ratios. The Bank prepares weekly liquidity ratio forecasts, which are monitored for compliance with both regulatory restrictions and the more conservative internal limits set by the Bank. Throughout 2011, the Bank’s liquidity ratios were significantly better than the statutory requirements.

Compliance with liquidity ratios

Liquidity ratios Threshold set by the Bank of Russia Sberbank’s internal limits Liquidity ratio values at the reporting date, %
      2011 2010
N2 More than 15% 15% 50.8 80.6
N3 More than 50% 55% 72.9 103.0
N4 Less than 120% 110% 87.3 78.0

Physical liquidity risk is the risk that any amount expressed in any currency may fall short of obligations imposed upon the Bank. The key processes involved in managing physical liquidity risk include the following:

  • Forecasting cash flows by type of currency in order to define the amount of capital required to cover the liquidity gap;
  • Forecasting the structure of assets and liabilities based on scenario analysis in order to ensure the required level of liquid assets in the medium and long term;
  • Monitoring liquidity sources in order to evaluate the maximum amount of capital the Group can raise from various sources denominated in various currencies;
  • Diversifying sources in terms of currency (based on maximum amounts, costs and borrowing periods);
  • Conducting stress testing and developing action plans to recover required liquidity in the event of adverse market conditions or in a crisis.

Short-term physical liquidity risk management involves cash flow forecasting and monitoring available liquidity sources. The Bank’s immediate liquidity needs are primarily ensured through direct repurchase agreements with foreign banks and the Bank of Russia. Midto long-term liquidity is managed across Sberbank based on quarterly funding plans. Trade finance, bond issuance and syndicated loans are the main source for covering mid- to long-term funding requirements.

    History

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