Liquidity Risk

Liquidity risk is the risk of loss resulting from the inability to meet payment obligations in full and on time when they become due.

Liquidity risk is inherent to the Bank's business and results from the mismatch in maturities between assets and liabilities. It may be related to funding – impossibility to obtain new funding – and to markets – inability to sell or convert liquid assets into cash without significant losses.

The CEB manages liquidity risk in a prudent manner, holding a liquidity reserve of highly rated liquid securities to cope with periods of extreme market conditions during which new funding would become inaccessible. The funding strategy is an important element of liquidity risk management, with the CEB diversifying its debt issuance programs, funding markets and investor base to avoid over-reliance on individual markets or funding sources. 

The CEB measures liquidity risk using internal metrics and regulatory indicators complemented by qualitative analysis in line with Basel and EU regulations. It defines its risk appetite based on the Survival Horizon metric, which measures the period during which it can meet its payment obligations arising from ongoing business operations under severe stress scenarios, and also by meeting the regulatory requirements for the Liquidity Coverage Ratio and the Net Stable Funding Ratio.

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