An approved provider must develop, implement and maintain a liquidity management strategy (LMS) in the format specified in the strategy including the minimum level of liquidity.
The Liquidity Standard, section 43-44 of the Fees and Payments Principles, states that any provider holding at least one refundable deposit during the financial year must:
- maintain sufficient liquidity to ensure they can repay refundable deposits that may be due in the following 12 months
- implement and maintain a written LMS that identifies:
- the minimum level of liquidity (expressed as an amount in whole dollars) that is required so a provider has adequate liquidity to repay refundable deposits when they are due
- the factors the provider has considered in determining the minimum level of liquidity
- the format in which the provider will maintain the minimum level of liquidity.
The common forms of evidence that are required from an approved provider to confirm they can maintain minimum liquidity are an LMS, bank statements or lines of credit balances.