Victoria BOE Speaker Q&A

Speaker Q&A

Victoria Saporta, Executive Director, Prudential Policy, Bank of England

Victoria BOE L&F

What are you most excited about for the future and what can the next generation of liquidity risk managers look forward to?

As we complete the last of the post-crisis regulatory reforms, I am looking forward to turning our focus to working with other regulators and industry to identify evolving and emerging risks as a part of the PRA’s ‘horizon scanning’ process; a strategic priority recently highlighted by my colleague at the PRA Sam Woods. To my mind, emerging risks are at the perimeter of our horizon and something we should be aware of in our planning and preparation. By contrast, evolving risks are things that we are already aware of, but which changes in circumstances or different perspectives cause us to re-evaluate the threat. Monitoring firms’ responses to the regulatory framework and assessing their consistency with both the spirit and letter of the rules is one practical example of how we are keeping an eye out for some of these risks. From the PRA’s perspective, an awareness of both emerging and evolving risk is a key to deciding when and where dynamic adjustments to the prudential liquidity framework are warranted to ensure that the resilience that policy makers injected into the system post-crisis endures and that it remains fit for purpose as the financial sector evolves.

What in your opinion is going to be the biggest challenge for the liquidity risk industry as we move forward?

My colleague at the Bank of England, Dave Ramsden, noted earlier this year that ‘fintech’ is being adopted by incumbents and is also enabling new players and business models to enter the market, increasing competition. I anticipate that responding to the changes brought by evolving technology will present both opportunities and challenges for the liquidity risk management going forward. For example, adjusting to the transformation of the payments landscape, the unbundling of financial services activity and value chains, and the consequences of these changes for the stability of banks’ funding and presumed effectiveness of management actions in stress. Similarly, liquidity risk managers should be scanning the horizon and considering the implications of initiatives such as Open Banking and the second Payment Services Directive (PSD2) for banks’ business models and liquidity. 

Please can you give us a glimpse into what you will be discussing in your keynote address?

Following my speech at the Westminster Business forum last year,[1] I intend to set out my present and future priorities for maintaining ‘dynamic resilience’ in liquidity regulation and more broadly in the future financial regulatory framework.

Speaking of sessions, which of the other sessions at Liquidity & Funding Risk are you looking forward to?

The ‘WAR Games’ session, challenging participants to react to an unfolding liquidity risk scenario, sounds very useful. Holding a sufficient buffer of highly liquid assets for use in a time of stress is important, but it is also relevant to consider the most effective way to deploy these resources as a part of a broader strategy.

Earlier this year, the PRA became the first regulator in the world to publish supervisory expectations for managing the financial risks from climate change. So I also hope this prompts some active discussion in the ‘Managing the liquidity risks for banks posed by climate change’ session.

 

[1] https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/prudential-bank-regulation-present-and-future-speech-by-vicky-saporta.pdf?la=en&hash=F85C7BD791E8463C18D3BA6C803E36A8A96911B7