02 — Capability · BC-1780.20
Market & Liquidity Risk
Know what the firm could lose from moves in market prices and whether it can meet its obligations under stress, and keep both within set limits. Trading itself is outside this lens, but measuring its risk is in scope; executing funding and cash positioning sits in Treasury.
- Market Risk Measurement
- Liquidity Risk Measurement
- Traded Risk
In scope
- Value-at-risk and sensitivity measurement
- Market risk limit monitoring
- Liquidity coverage and stable funding ratios
- Liquidity stress testing and contingency funding plans
Out of scope
- Executing funding and cash positioning, including a bank's own (see BC-230.10); this capability measures and limits them
- Interest rate risk in the banking book (see BC-1780.40)
Decomposes into · 4
- BC-1780.20.10Value-at-Risk & SensitivitiesCalculate VaR, expected shortfall and sensitivities for trading-book and other fair-value positions, and back-test the results against actual outcomes.
- BC-1780.20.20Market Risk Limit MonitoringSet market risk limits by desk, portfolio and risk factor, report usage daily and escalate breaches.
- BC-1780.20.30Liquidity Ratio MonitoringCalculate and forecast LCR, NSFR and internal liquidity metrics so the firm stays above regulatory and internal minimums.
- BC-1780.20.40Liquidity Stress & Contingency FundingModel cash outflows under severe scenarios and maintain a tested plan for raising funds if a liquidity squeeze happens.