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Step 3

The banks future development and expansion plans, with focus on funding and liquidity management aspects has to be looked into. This entails: -

• Determining whether bank management has effectively addressed the issue of need for liquid assets to funding sources on a long-term basis.

• Reviewing the bank's budget projections for a certain period of time in the future.

• Determining whether the bank really needs to expand its activities. What are the sources of funding for such expansion and whether there are projections of changes in the bank's asset and liability structure?

• Assessing the bank's development plans and determining whether the bank will be able to attract planned funds and achieve the projected asset growth.

• Determining whether the bank has included sensitivity to interest rate risk in the development of its long term funding strategy.

Step 4

Examining the bank's internal audit report in regards to quality and effectiveness in terms of liquidity management.

Step 5

Reviewing the bank's plan of satisfying unanticipated liquidity needs by: -

• Determining whether the bank's management assessed the potential expenses that the bank will have as a result of unanticipated financial or operational problems.

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* Contributed by -
Sayonton Roy,
MBA (Finance), IMT Ghaziabad,
Currently working as Consultant - Global Financial Services (Risk and Business Solutions Group) at Ernst & Young, Mumbai.