10 Counterbalancing Strategies

The Counterbalancing Strategy module of Oracle Financial Services Liquidity Risk Measurement and Management aids banks in developing contingency funding plans to address the liquidity hotspots observed during stress scenarios of varying magnitudes. A counterbalancing strategy or a contingency funding plan refers to certain measures undertaken by banks to minimize or nullify the gaps identified under the BAU and Stress conditions. The purpose is to identify the large negative and positive liquidity gaps across defined time buckets and apply counterbalancing actions that will reduce the gaps.

A range of counterbalancing strategies, consisting of one or multiple counterbalancing positions covering the fire sale of marketable and fixed assets, creation of new repos, rollover of existing repos and raising fresh deposits or borrowings, can be defined easily in order to bridge the liquidity gaps observed under different business conditions. This module enables banks to dynamically assess and update their contingency funding plans based on the changing market and business conditions thereby ensuring complete preparedness to combat potential liquidity shocks.

The application, gives you the option of applying five different types of counterbalancing positions to generate new cash flows and manage huge negative and positive liquidity gaps. These include:

• Sale of Marketable Assets
• Sale of Other Assets
• Rollover of Existing Repo’s
• New Repo’s
• New Funding

The liquidity gaps and other metrics, calculated post counterbalancing, are displayed in the Liquidity Risk dashboard of ALM Analytics for each counterbalancing strategy definition.

Note:

Counterbalancing strategies are applied to the liquidity gap results of a specific execution of an existing contractual, business-as-usual or stress Run.