LIQUIDITY RISK FROM CAIIB SYLLABUS 2022

LIQUIDITY RISK | MODULE D: MARKET RISK OF CAIIB RISK MANAGEMENT| IMPORTANT NOTES 2022

This article discusses the Liquidity risk from CAIIB Syllabus 2022 and CAIIB risk management study material applicable for Nov 2022. 

IIBF conducts various flagship courses, and CAIIB is one of them. CAIIB exam is held twice a year, in June and November. CAIIB exam Nov 2022 consists of two mandatory subjects, which include ABM and BFM, along with one elective paper. You can choose this elective subject from the options of six subjects which include – risk management, human resource management, central banking, rural banking, information technology, and retail banking. Here we will focus on the risk management CAIIB study material for Nov 2022 later in this article. 

CAIIB EXAM NOV 2022 DATES 

IIBF has released CAIIB exam dates for Nov 2022. The dates of the 2022 CAIIB Exam are November 27, December 4, and December 10, 2022. You can register for this CAIIB exam Nov 2022 from September 30, 2022, to October 20, 2022.

Now that we are done discussing the dates of the CAIIB exam Nov 2022, we will discuss a bit about Module D: Market Risk Of CAIIB Risk Management and what it includes. 

Read Also: CAIIB RISK MANAGEMENT PATTERN, PASSING CRITERIA

MODULE D: MARKET RISK OF CAIIB RISK MANAGEMENT

Market risks are discussed in this module. Its types, how to go about it, how to handle it, etc., are discussed. Also, it focuses on the following topics, which include: 

• Liquidity risk
• Interest rate risk
• Foreign exchange risk
• Price risk (Equity)
• Commodity risk
  • Standardized duration method,
  •  Internal measurement approach – VAR

Now that we are done discussing Module D: Market Risk Of CAIIB Risk Management, we will discuss one of the most important topics of risk management which is Liquidity risk.

LIQUIDITY RISK

The capacity of a bank to fulfil its cash and collateral obligations without suffering intolerable losses is known as liquidity. Liquidity risk is the threat to a bank’s financial position or very existence posed by its failure to fulfil obligations, whether actual or perceived. Liquidity risk management includes all of a bank’s procedures and methods for:

Examine whether it can meet its cash flow and collateral requirements (in both normal and stressful circumstances) without negatively affecting its ongoing business operations or overall financial situation.

Reduce that risk by coming up with plans and taking the proper steps to make sure the money and collateral are there when they’re needed.

LIQUIDITY RISK IN COMPANIES 

Liquidity measurement ratios are used by creditors, managers, and investors to assess the risk of a business. They frequently contrast the liquid assets reported on a company’s financial statements with the short-term obligations.

If a company’s liquidity risk is too high, it will need to sell off assets, generate more income, or find another way to close the gap between its cash on hand and its debt commitments.

THE DIFFICULTIES OF EFFECTIVE LIQUIDITY RISK MANAGEMENT

• There isn’t a centralised perspective of liquidity. Siloed departments and business units make it difficult for a company to comprehend its liquidity situation or the effects of illiquid assets and asset classes across regions, business units, and asset classes.
• Limited analytical skills. Without adequate analytical capabilities, businesses have a very difficult time estimating the cash flow from the underlying transactions, especially when those transactions are in the millions.
• Not enough stress testing. They are ill-prepared for the effects of market shocks because too many firms routinely overlook trading and funding liquidity issues in stress testing, making it difficult for them to rapidly exit positions or seek new capital.
• Getting over the compliance mentality. Businesses risk missing out on potential business benefits if they place too much emphasis on the regulatory requirements for managing liquidity risk.

EXAMPLE OF LIQUIDITY RISK

When the housing market is weak, a Rs. 90 lakhs home might not sell because there is little demand, but when things turn around, the home might fetch more money than its asking price. If the owners need money right away and have to sell the house during a downturn in the market, they can get less for it and lose money on the deal.

Before investing in long-term illiquid assets to protect themselves against liquidity risk, investors should assess if they can convert their short-term debt obligations into cash.

Read Also: CAIIB RISK MANAGEMENT MOCK TEST 2022

CAIIB RISK MANAGEMENT STUDY MATERIAL 2022

Learning sessions will provide you with world-class CAIIB study material 2022, which our experts make. This CAIIB study material for Nov 2022 includes various services like:

• Risk management recorded video lectures can be downloaded and seen later at your convenience.
• Live sessions are also held, but they cannot be downloaded. 
• Our Risk Management Lectures use both Hindi and English languages to explain the concepts. 
• Short and important notes are complementary to our paid video lectures in the form of epdfs which can be accessed on our apps. These notes discuss all the modules, including Module D: Market Risk Of CAIIB Risk Management. 
• Risk management Mock tests are also available for you to practice. These tests will help you get an idea about the level of difficulty of questions that you will eventually face in the CAIIB exam in Nov 2022. 
• Memory recalled questions are also included in our CAIIB study material Nov 2022.
• Case studies are also covered in our CAIIB mock tests Nov 2022.

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