Annual Report 2012 - National Savings Bank

128ASSESSING AND MANAGING OUR RISK FACTORSRISK MANAGEMENTindicates that the Bank is much belowthe industry averages. However, thisimplies that the Bank is sound in termsof liquidity since lesser funds are tied upin least liquid assets, though the Bankhas room for further improvements inthe ratio. As such, the Bank is capableof maintaining the liquidity levels wellabove the statutory requirement of 20%even in extreme stress conditions.The graph below indicates the impacton the Liquid Asset Ratio when theliquid liabilities are reduced by 10%,20% and 30% respectively while settlingthose liabilities through liquid assets.Apart from the liquidity ratios, the Bankuses maturity gap analysis to managethe liquidity risk, depending on thecontractual maturities of assets andliabilities. The maturity gap analysisshows that the Bank is exposed to there-pricing risk which is inherent in theBanking industry. The majority of theliabilities fall within less than 12 monthsmaturity buckets which are re-pricedin shorter intervals and the assets thatare residing at more than 12 monthsmaturity buckets are re-priced at longerintervals. Therefore, the Bank tries tomanage liquidity risk through managingthe mismatches in maturities.(%)80757065605550Impact on Stress Test to LARJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecActual10%20%30%NATIONAL SAVINGS BANK . ANNUAL REPORT 2012