Day 1: Why Liquidity Matters - The Banking Risk That Moves Fast

Welcome to Session 1 of the Liquidity Management course from The Industry Portal. In this lesson we take a clear, practical look at what liquidity really means, why it sits at the centre of modern banking, and why even profitable and well capitalised institutions can collapse in days if they run out of liquidity.

This session breaks down liquidity in simple, professional terms. We explore how banks meet their daily obligations, how maturity transformation creates structural vulnerability, and why liquidity risk moves faster than credit or market risk. Using real examples from Northern Rock and Silicon Valley Bank, we show how solvent banks can fail simply because they cannot access cash quickly enough.

You will learn how liquidity risk emerges, why confidence matters, and how factors like funding withdrawals, market stress, and poor asset liquidity can trigger a crisis. We also introduce key concepts such as liquidity buffers, high quality liquid assets, funds transfer pricing, Treasury cash management, stress testing and the interplay between internal teams and external markets.

This session explains the role of Treasury, Risk and Finance functions, why regulators enforce rules like the Liquidity Coverage Ratio, Net Stable Funding Ratio and ILAAP, and how these frameworks protect banks from sudden shocks. We also look at how market conditions, funding dynamics, and investor sentiment shape day to day liquidity decisions.

By the end of this video you will have a solid understanding of why liquidity is a real time, high stakes risk and why it is fundamental to the stability of every bank. You will see how strong liquidity management supports both resilience and long term growth, and why effective liquidity planning is strategic as much as it is technical.

This is the foundation for everything we will cover in the rest of the course, from crisis case studies to stress testing, regulatory frameworks, climate risk, emerging technologies, and future liquidity trends. Watch the full series on The Industry Portal and build the skills needed to speak confidently about liquidity in modern banking.