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Report BFA - Bankia 2014 / Risk managementFinancing and liquidity risk

Structural liquidity risk consists of the uncertainty, in adverse conditions, of the availability of funds at reasonable prices to enable the institution to meet the obligations undertaken and finance the growth of its investment business.

The institution focuses on three main areas to monitor this risk. Firstly, the liquidity gap, classifying asset and liability transactions by maturity and taking into consideration any residual maturity. This calculation is performed for recurring commercial activity and for the funding requirements of the institution’s on-balance sheet portfolios. The second area is the financial structure, identifying the relationship between long-term funding, and the diversification of finance activity by type of assets, counterparties and other categories. Thirdly, pursuant to the current regulatory approach of stress ratios, the institution is determining metrics that can be used to forecast and obtain a snapshot of the aforesaid ratios over a longer time horizon. Alongside all this, the institution has a clearly defined contingency plan setting out warning mechanisms and procedures to be followed if the plan has to be triggered.

During 2014, the Operational and Market Risks Unit developed and launched the Financing and liquidity Policy Manual, approved at the ended of 2013. The policies therein establish a series of limits and procedures, which were adhered to in 2014. The institution has modelled metrics to monitor liquidity risk in normal and adverse liquidity conditions, which have served as a benchmark for setting thresholds in accordance with the Risk Appetite Framework.

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