The Committee of European Banking Supervisors (CEBS) has published an interim report on liquidity buffers and "survival" periods in response to a request from the EFC (Economic and Financial Committee).
This report presents the preliminary views on how CEBS could steer the approach the industry will use to calibrate the size of liquidity buffers over certain defined time horizons. It also considers further differentiation around currencies and legal entities.
CEBS's proposals are based on the understanding that a liquidity buffer is dependent on three dimensions:
- The severity and characteristics of the stress scenarios
- The time horizon fixed as a survival period
- The characteristics of the assets in the buffer
For conducting the stress tests a survival period of one month is tentatively suggested. On assets eligible for the buffer, CEBS emphasizes that they should ensure generation of liquidity immediately and should provide a reasonable predictability regarding the amount of liquidity that they can generate, via the use of haircuts if necessary.