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Projects > All Countries_since Apr10

The Liquidity Forecast Ladder is a model that

can dynamically quantify the level of liquidity

over an appropriate set of time horizons:

  • in a "business-as-usual" environment
  • during a liquidity crisis


The realization of the model in an MS Excel based tool allows financial institutions to measure, manage and stress test liquidity by projecting cash inflows and outflows arising from assets and liabilities in dependence of input variables whose influence can be tested under various scenarios.



Product features

The Liquidity Forecast Ladder consists of two

core components:

  • The Branch Liquidity Forecast Ladder covers two periods: the next N days (N <= 7) and from N+1st day until end of month
  • The Head Office and Consolidated Liquidity Forecast Ladder covers the above two periods and additional 11-month period (12 month total)


The cash flows projections are based on the detailed information such as:

  • contractually expected inflows from the debt service of performing borrowers, adjusted for anticipated arrears
  • contractually expected outflows for loan disbursal and maturing liabilities, with term deposits adjusted for the “roll over effect”
  • experienced level of stability (or “stickiness”) of customer funds with no contractual maturity
  • actual / forecasted levels of interest and foreign exchange rates

Below: Three templates from the Liquidity Forecast Ladder - the first one is taken from the Liquidity Ladder on Branch level whereas the other two templates belong to the Head Office & Consolidated Liquidity Forecast Ladder. All contractually expected cash flows and outstanding amounts - cells with white background - are automatically derived based on standard reports from the institution's accounting system and the current market parameters. Changing the parameter settings in the cells with blue background, the user can forecast all future cash flows under various scenarios.

Above: Each branch manager forecasts all cash flows for the branch's business over the next N (N<=7) days and from N+1st day until end of month. Based on this he/she decides on the amount to be requested from/ transferred to the Head Office or alternatively borrowed from/ invested into the market.

Above: All Branch Ladders are aggregated and the resulting surplus / deficit of cash is compared with that of the Head Office. This allows the treasurer managing cash transfer needs first internally and then by “going to the market” if needed.

Above: Projections of cash flows for the following 11 months are performed with the Consolidated Liquidity Forecast Ladder. These forecasts are based on the resulting numbers for the first two forecast periods and additional parameter settings allowing to incorporate:

  • the business plan in a “business-as-usual” environment
  • an adjusted strategy concerning the loan portfolio, savings & deposits, bank loans, etc. in a liquidity crisis.