Liquidity risk

The risk that the credit institution becomes unable to fulfil its payment obligations at any time. A credit institution can show its liquidity position by comparing its payment obligations and incoming payments. A liquidity risk may arise due to an incongruence of incoming payments and outgoing payments. Liquidity risks can be subdivided into maturity risk (the risk of delayed repayment), withdrawal risk (the risk of unexpectedly high outflows), structural liquidity risk ( risks from follow-up financing) and market liquidity risk.

In the Insurance Supervision Act 2016 (VAG 2016) liquidity risk is defined as the risk that insurance and reinsurance undertakings are unable to realise investments and other assets in order to settle their financial obligations when they fall due.

In the Investment Fund Act of 2011 (InvFG 2011) liquidity risk is defined as the risk that a position in the UCITS portfolio cannot be sold, liquidated or closed out soon enough at limited cost and that the ability of the UCITS to meet its redemption and disbursement obligation at any time in accordance with article 55 para 2 is impaired.