Structural Liquidity Profile (SLP)

 Structural Liquidity Profile (SLP) is a concept used by 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 asset and liabilities and provides an indication of the bank’s ability to meet its obligations over time.

 As per BB guidelines, the SLP is calculated by comparing the maturity profile of a bank’s assets and liabilities and analyzing the gap 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.