In late 2005, the IIF established a Special Committee on Liquidity Risk. The Special Committee is chaired by Ahmass Fakahany, Vice Chairman and Chief Administrative Officer of Merrill Lynch, and Chris Grigg, Chief Executive of Barclays UK Business Banking, is the vice chairman. It includes representatives from about 40 of the largest global financial institutions. The objective of the Special Committee was to develop a perspective and Recommendations on liquidity risk measurement, monitoring, management, and governance at financial institutions.

This focus is timely, as it has been noted for some time that while a vast body of regulatory and academic literature exists about credit, market, insurance, and operational risks, relatively less attention has been given to liquidity risk. Moreover, a proper distinction between the various types of liquidity risk and corresponding risk measurement models and outputs is not always made. Concerns have also been expressed that the lack of harmonization of liquidity requirements and practices at the international level has resulted in suboptimal prudential and competitive conditions. To address these concerns and to perform a review of industry practices, the IIF established a Special Committee on Liquidity Risk.

In the course of preparing its Recommendations, the Special Committee also considered the integration of liquidity risk with other existing risk-management processes, namely, market, credit, and operational risk management. In addition, it addressed the relationship between liquidity risk and capital adequacy requirements, including the obligation to take liquidity into consideration for the purposes of Pillar 2 of Basel II, Supervisory Review Process.

On March 12, 2007 the Special Committee released a report defining good practice standards and stressed the usefulness in intensifying the dialogue with regulators on a modernization of liquidity risk management rules. The report Principles of Liquidity-Risk Management contains more than 40 recommendations on liquidity risk management to the financial services industry and to the regulatory authorities.