Liquidity Risk

Liquidity Risk is the potential difficulty an organization or individual may face in converting assets into cash quickly without significantly impacting their market price. It arises when there is an insufficient market for an asset or when a firm cannot meet its short-term financial obligations due to the inability to access cash. Liquidity risk can be categorized into market liquidity risk (related to the trading environment of an asset) and funding liquidity risk (related to the ability to obtain funding). Effective management involves maintaining sufficient cash reserves, diversifying funding sources, and regularly assessing market conditions to ensure that liquidity needs can be met.

Basel scope:

Pillar 2

Capital requirements:

Not Mitigated by Capital