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• Determining the alternative sources of funding liquidity and/or assets subject to necessity.

• Determining the impact of the bank's liquidity management on net earnings position.

Step 6

Preparing an Asset/Liability Management Internal Control Questionnaire which should include the following: -

1. Whether the board of directors has been consistent with its duties and responsibilities and included: -

   • A line of authority for liquidity management decisions.

   • A mechanism to coordinate asset and liability management decisions.

   • A method to identify liquidity needs and the means to meet those needs.

   • Guidelines for the level of liquid assets and other sources of funds in relationship to needs.

2. Does the planning and budgeting function consider liquidity requirements?

3. Are the internal management reports for liquidity management adequate in terms of effective decision making and monitoring of decisions.

4. Are internal management reports concerning liquidity needs prepared regularly and reviewed as appropriate by senior management and the board of directors.

5. Whether the bank's policy of asset and liability management prohibits or defines certain restrictions for attracting borrowed means from bank related persons (organizations) in order to satisfy liquidity needs.

6. Does the bank's policy of asset and liability management provide for an adequate control over the position of contingent liabilities of the bank?

7. Is the foregoing information considered an adequate basis for evaluating internal control in that there are no significant deficiencies in areas not covered in this questionnaire that impair any controls?

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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.