A Review of Liquidity Risk Management and Stress Testing Practices in Global Financial Institutions

This critical review examines how global financial institutions manage liquidity risk and design and validate liquidity stress tests, synthesizing theory, regulatory design, stress-testing methodology, and institutional implementation practice into a single, integrative account. The review screened 250 supplied sources against explicit inclusion criteria (topical scope, publication date through 2020, verifiable indexing, and citation-balance limits) and applied thematic coding, rather than statistical meta-analysis, to a core working set of approximately 50 DOI-verified studies, organized around liquidity resilience, scenario design, and contingency funding. The synthesis shows that funding-liquidity risk and market-liquidity risk interact through fire-sale and network-contagion channels that neither the Liquidity Coverage Ratio nor the Net Stable Funding Ratio fully internalizes on its own, that stress-testing methodology (scenario design, cash-flow modeling, and model validation) has advanced unevenly relative to regulatory design, and that implementation outcomes, governance quality, data infrastructure, and cross-jurisdictional practice, explain more of the variation in institutional resilience than compliance with any single formal metric. Beyond synthesizing this evidence, the review integrates regulatory buffers, stress severity, governance quality, and contingency-funding capacity into a single decision-cycle framework, develops four testable propositions connecting these elements, and sets out a research agenda emphasizing longitudinal, cross-jurisdictional, and validation-focused designs capable of testing them.