This paper sets out in general terms the main elements of a model liquidity measurement and management framework. The framework strikes a balance between quantitative and qualitative factors used to assess liquidity, and provides a methodology for analysing balance sheet and off-balance-sheet activities consistently.

While this paper focuses on the use of the framework by large banks, the approach it describes appears to have broad applicability to bank liquidity measurement and control, even for small, strictly domestic banks. In particular, good management information systems, central liquidity control, analysis of net funding requirements under alternative scenarios, diversification of funding sources, and contingency planning are crucial elements of strong liquidity management at a bank of any size or scope of operations. The information systems and analysis needed to implement the approach, however, can probably absorb fewer resources and be much less complex at a smaller institution or one that is active in fewer markets than the large, internationally active banks contemplated in this paper.