Franchise viability risk and Systemically Important Bank: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Classify page.)
 
imported>Doug Williamson
(Add links.)
 
Line 1: Line 1:
''Liquidity risk - banking.''
(SIB).


Franchise viability risk arises when a firm takes actions, despite having no legal obligation to do so, in order to preserve its reputation, and where these actions cause unforeseen liquidity outflows.
A bank whose disorderly failure would, because of its:


Failing to take these actions may damage the firm’s franchise, which could impede access to wholesale markets or cause significant outflows.
(i) Size,
(ii) Complexity, and


The associated outflows are uncertain before the event, as there is no associated contractual obligation.
(iii) Systemic interconnectedness


cause significant disruption to the wider financial system and to economic activity in its (main) country or region of operation.


An example is agreeing to requests from debt investors to buy back debt immediately, before its contractual maturity.


 
For this reason, SIBs are subject to more stringent regulation and capital adequacy requirements than other institutions.
Sometimes abbreviated to ''franchise risk.''




== See also ==
== See also ==
* [[Bank]]
* [[Bank]]
* [[Franchise]]
* [[BSBY]]
* [[Funding]]
* [[Capital adequacy]]
* [[Funding liquidity risk]]
* [[Financial institution]]
* [[Funding risk]]
* [[Global SIFI]]
* [[ILAA]]
* [[Regulation]]
* [[ILAAP]]
* [[Systemic risk]]
* [[Liquidity]]
* [[Systemically Important Financial Institution]] (SIFI)
* [[Liquidity Coverage Ratio]]
* [[Too Big To Fail]]
* [[Maturity mismatch]]
* [[OLAR]]
* [[Prudential Regulation Authority]]
* [[Reputational risk]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_frameworks]]
[[Category:Liquidity_management]]
[[Category:Risk_reporting]]

Revision as of 16:26, 17 March 2022

(SIB).

A bank whose disorderly failure would, because of its:

(i) Size,

(ii) Complexity, and

(iii) Systemic interconnectedness

cause significant disruption to the wider financial system and to economic activity in its (main) country or region of operation.


For this reason, SIBs are subject to more stringent regulation and capital adequacy requirements than other institutions.


See also