PROCESSES, SYSTEMS AND REPORTS Robustinternalcontrolprocessesandsystemsunderlietheoverallapproachtoidentifying,measuring,aggregating,controllingand
monitoringliquidityriskacrossDBS.In2014,wecompletedthedevelopmentofanin-houseintegrateddataplatformthatserves toaggregaterelevantsourcedatainacompleteandaccuratemannerthatfacilitatestimelyandgranularreportingofliquidityriskfor
internalandregulatorypurposes.
Theday-to-dayliquidityriskmonitoring,controlreportingandanalysisaremanagedbytheRMGMarketandLiquidityRiskunit–an independentliquidityriskmanagementfunctionthatreportstotheCRO.Thisgroupcomprisesriskcontrol,riskanalytics,production
andreportingteams.
7.2 Liquidity Risk in 2014
Forthepurposeofriskmanagement,weactivelymonitorandmanageDBS’liquidityproilebasedonthecashlowmaturity mismatchanalysis.
Inforecastingthecashlowsundertheanalysis,behaviouralproilingisnecessaryincaseswhereaproducthasindeterminatematurityor thecontractualmaturitydoesnotrealisticallyrelecttheexpectedcashlows.Anexamplewouldbematurity-indeterminatesavingsand
currentaccountdepositswhicharegenerallyviewedasasourceofstablefundingforcommercialbanksandconsistentlyexhibitedstability evenunderhistoricalperiodsofstress.
Aconservativeviewisthereforeadoptedinthebehaviouralproilingofassets,liabilitiesandoff-balancesheetcommitmentsthat haveexhibitedcashlowpatternsthatdiffersigniicantlyfromthecontractualmaturityproileshownunderNote42.1ofourFinancial
Statementsonpage175.
ThetablebelowshowsDBS’behaviouralnetandcumulativematuritymismatchbetweenassetsandliabilitiesovera1-yearperiodunder anormalscenariowithoutincorporatinggrowthprojections.DBS’liquidityisobservedtoremainadequateunderthematuritymismatch
analysis,amidstsustainedgrowthinloanssupportedlargelybystablesourcesoffundsfromdepositsgatheringandtheissuanceof mediumtermnotesandcommercialpapers.
In SGD million
a
Less than 7 days 1 week to 1 month
1 to 3 months 3 to 6 months
6 months to 1 year
As at 31 Dec 2014 Net liquidity mismatch
21,364 6,553
7,767 8,404
10,803
Cumulative mismatch
21,364 14,811
22,578 30,982
41,785
As at 31 Dec 2013
b
Net liquidity mismatch
18,638 2,642
7,052 10,539
11,800
Cumulative mismatch
18,638 15,996
23,048 33,587
45,387
a Positive indicates a position of liquidity surplus. Negative indicates a liquidity shortfall that has to be funded b As the behavioural assumptions used to determine the maturity mismatch between assets and liabilities are updated from time to time, the liquidity mismatches
may not be directly comparable across past balance sheet dates
7.3 Liquid Assets
Liquidassetsareassetsthatarereadilyavailableandcanbeeasilymonetisedtomeetliquidityshortfallsundertimesofstress.Suchassets areinternallydeinedunderthegovernanceoftherelevantoversightcommittees,takingintoaccountassetclass,issuertypeandcredit
rating,amongothercriteria,beforetheyarerelectedasavailablefundsunderthecashlowmaturitymismatchanalysisusedtomanage liquidityriskwithintherisktolerance.
Inadditiontothecharacteristicsoftheliquidassets,thetreasuryfunctionwithinDBSshouldbeabletooperationallymonetisethepoolof liquidassetstomeetliquidityshortfallsundertimesofstress.Afurtherrequirementisthattheseliquidassetsareunencumberedbybeing
freeoflegal,regulatory,contractualorotherrestrictions.
Inpractice,liquidassetsaremaintainedinkeylocationsandcurrenciestoensurethatoperatingentitiesinsuchlocationspossessadegree ofself-suficiencytosupportbusinessneedsaswellasprotectagainstcontingencies.ThemainportionofDBS’liquidassetsiscentrally
maintainedinSingaporetosupportliquidityneedsinsmalleroverseassubsidiariesandbranches.Internally,DBSsetsarequirementto maintainitspoolofliquidassetsaboveaminimumlevelasasourceofcontingentfunds,takingintoaccountprojectedstressshortfalls
underitscashlowmaturitymismatchanalysisandotherfactors.
G O
VER N
A N
C E
ThetablebelowshowsDBS’encumberedandunencumberedliquidassetsbyinstrumentandcounterpartyagainstotherassetsinthesame categoryunderthebalancesheet.Figuresarebasedonthecarryingamountasatthebalancesheetdate.
Liquid Assets Others
d
Total In SGD million
Encumbered Unencumbered Total Average
c
[1] [2]
[1] + [2]
As at 31 Dec 2014 Cash and balances with central banks
a
7,666
7,347 15,013
13,633 4,504
19,517
Due from banks
b
-
12,563 12,563
11,478 29,700
42,263
Government securities and treasury bills
2,093 27,331
29,424 31,032
270 29,694
Banks and corporate securities
623 23,300
23,923 22,405
13,840 37,763
Total
10,382 70,541
80,923 78,548
48,314 129,237
a Unencumbered balances with central banks comprise holdings that are unrestricted and available overnight. The encumbered portion represents the mandatory
balances held with central banks b Liquid assets comprise nostro accounts and eligible certificates of deposits
c Total liquid assets reflected on an average basis over the four quarters in 2014 d ‘Others’ refer to assets that are not recognised as part of the available pool of liquid assets for liquidity management under stress due to but not limited to
inadequate or non-rated credit quality, operational challenges in monetisation for example, holdings in physical scrips, among other considerations
Inadditiontotheabovetable,collateralreceivedinreverserepotransactionsamountingtoSGD4,001millionarerecognisedforliquidity managementunderstress.
Ascanbeobservedfromthetable,DBS’fundingstrategyinthenormalcourseofitsbusinessdoesnotrelyoncollaterisedwholesale funding.Instead,liquidassetsaremaintainedasasourceofcontingentfundstomeetpotentialshortfallsthatmayariseundertimes
ofstress,asassessedunderregulatorystandardsandourinternalmeasures.
7.4 Regulatory Requirements