Liquidity Supervision

The Banque centrale has been handed the mission to supervise the liquidity risk of market operators by the law of 24 October 2008.

1. Legal framework
   In conformity with article 127(2) and (5) of the Treaty on the Functioning of the European Union, the Banque centrale du Luxembourg (BCL), as a member of the Eurosystem, has the mission to define and implement the monetary policy of the Union and to contribute to the smooth conduct of policies pursued by the competent authorities relating to the prudential supervision of credit institutions and the stability of the financial system. (...)
2. Principles / basic standards
   The applied framework for liquidity surveillance is in alignment with standards and decisions of the European Central Bank (ECB) and rules issued by other international regulatory institutions with competence in financial stability matters; i.e. the framework is in line with the recommendations of the Committee of European Banking Supervisors (CEBS) and the sound principles for liquidity risk management of the Basel Committee on Banking Supervision (BCBS). (...)
3. Definition: liquidity and liquidity risk
   For the purpose of prudential supervision, liquidity is defined as: “The ability of a market participant to finance its assets, to satisfy the demands of its counterparties and to fulfil any arising obligations without incurring undue losses. (...)
4. Scope of liquidity supervision
   According to the aforementioned Regulation, market operators within the scope of BCL’s liquidity supervision are (...)
5. Publication of regulation BCL 2009/N°4
   Regulation of the Banque centrale du Luxembourg 2009/N°4 of 29 April 2009 concerning liquidity surveillance (...)

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