| i. | Banks should detail the policies, procedures and action plans for responding to severe disruptions in the bank's ability to fund itself. The plan should be that which is contained within their Contingency Funding Plan (CFP) and it should be prepared as a standalone document and attached to the ILAAP document.
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| ii. | At a minimum, a bank should ensure that its Contingency Funding Plan (CFP) meets the followings:
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| | a) | Outlines strategies, policies and plans to manage a range of stresses.
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| | b) | Establishes a clear allocation of roles and clear lines of management responsibility.
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| | c) | Formally documented.
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| | d) | Includes clear invocation and escalation procedures.
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| | e) | Regularly tested and updated to ensure that it remains operationally robust; this testing is mainly qualitative in nature which tests process, procedures, and appropriate governance to undertaken action on timely basis. This should test the following:
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| | | - | Composition of liquidity crisis management team (LCMT).
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| | | - | Roles and responsibilities of LCMT.
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| | | - | Early warning signals using benchmark indicators i.e. Availability of credit lines, collection efficiency, positive cumulative outflow. These signals should have triggers based on 30% or 50% decline in collections for continuous three months.
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| | | - | Liquidity stress-test consisting of four early warning signals.
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| | | - | Minimum logistics and contact information.
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| | | - | Communication strategy with SAMA.
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| | | - | Undertaking only two transactions in interbank market or with SAMA to demonstrate it is working effectively.
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| | f) | Outlines how the bank will meet time-critical payments on an intraday basis in circumstances where intra-day liquidity resources become scarce.
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| | g) | Outlines the bank's operational arrangements for managing a retail funding run-off.
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| | h) | In relation to each of the sources of funding identified for use in emergency situations, is based on a sufficiently accurate assessment of the amount of funding that can be raised from that source; and the time needed to raise funding from that source.
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| | i) | Sufficiently robust to withstand simultaneous disruptions in a range of payment and settlement systems.
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| | j) | Outlines how the bank will manage both internal communications and those with its external stakeholders.
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| | k) | Establishes mechanisms to ensure that the bank's Board of Directors and senior management receive information that is both relevant and timely.
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| | l) | Clear escalation/prioritization procedures detailing when and how each of the actions can and should be activated.
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| | m) | Lead time needed to tap additional funds from each of the contingency sources.
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| iii. | In designing a contingency funding plan, a bank should ensure that it takes into account:
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| | - | The impact of stressed market conditions on its ability to sell or securities assets.
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| | - | The impact of extensive or complete loss of typically available market funding options.
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| | - | The financial, reputational and any other additional consequences for that bank arising from the execution of the contingency funding plan itself.
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| | - | Its ability to transfer liquid assets having regard to any legal, regulatory or operational constraints.
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| | - | Its ability to raise additional funding from central bank market operations and liquidity facilities.
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