Structural Liquidity Profile (SLP) is a concept used by the Bangladesh Bank (BB) to assess the long-term liquidity position of banks and their ability to withstand changes in market conditions.
The SLP is a measure of the maturity profile of a bank's assets and liabilities and provides an indication of the bank's ability to meet its obligations over time.
As
per the BB guidelines, the SLP is calculated by comparing the maturity profile
of a bank's assets and liabilities and analyzing the gaps or mismatches between
the two. The SLP calculation takes into account all assets and liabilities on
the bank's balance sheet, including loans, deposits, investments, and other
sources of funding.
The SLP is calculated by dividing the bank's assets and liabilities into time buckets, usually ranging from less than 1 month to more than 5 years. For each time bucket, the bank calculates the total amount of assets and liabilities maturing within that period and then compares the two to determine any gaps or mismatches.
The
SLP analysis provides the bank with information on its overall liquidity
position and helps it to identify any potential vulnerabilities or areas of
risk. Based on the SLP analysis, the bank can take steps to manage its
liquidity risk, such as adjusting the maturity profile of its assets and
liabilities, diversifying its funding sources, and implementing effective risk
management practices. Overall, the Structural Liquidity Profile (SLP) as per BB
is an important tool used by banks to assess their long-term liquidity position
and manage their liquidity risk effectively. The SLP helps banks to ensure that
they have adequate liquidity to meet their obligations over time and maintain
financial stability.