There’s nothing like a new regulation to get banks thinking about their processes. But while compliance may be an initial catalyst for change, it’s not always enough to drive a wholesale, strategic transformation.
Take the intraday liquidity monitoring guidelines of the Basel Committee on Banking Supervision, also known as BCBS 248. These global recommendations, now officially in force, have certainly prompted the closer tracking of payment flows and funding levels.
How many banks, though, have gone beyond their regulator’s monthly reporting requirements to fulfill the true intentions of BCBS 248: to establish a robust operational framework for intraday liquidity monitoring? If before they’ve lacked an incentive to ditch short-term manual workarounds, there’s now a new trend in town – the faster payment scheme.
Growing fast in number around the world, faster payment schemes allow consumers and businesses to make instant payments from one account to another. For banks, however, they also deliver an unprecedented, ready flow of up-to-the-minute data – and a more compelling reason to invest in capturing payment flows as they happen, through a comprehensive intraday liquidity monitoring solution.
The benefits will be many. With the right monitoring tools, you will increase your visibility of positions, inflows and outflows, allowing you to improve liquidity management, maximize positive interest on surpluses and minimize interest charges on shortfalls. By transferring positive balances on nostro accounts that are beyond defined limits, you can also better manage counterparty risk. You could even be in a position to provide early payments, thus improving customer satisfaction, charge for providing liquidity or reduce your liquidity buffer.
The question is, how to make all of this happen? A multitude of complex operational requirements translate into four key steps that intraday liquidity management systems must support.
The solution needs to be able to integrate data from multiple sources of liquidity. It also needs the flexibility to support data from different systems, in various formats and at irregular frequencies. Some but not all data will be available in real time.
Data will often need to be enriched and normalized to add references, static information, security details and so forth. Transactions might be received more than once for the same cash event so duplicate checking is essential. A matching engine will be required to reconcile projections against external confirmations and statements. As transactions enter the system, positions must be automatically revised.
Once processed, data has to be presented for a range of reporting purposes. So your solution will need to provide flexible data views, including dashboards and key performance indicators that are relevant to particular users. Front-office teams and cash managers, for example, will be interested in liquidity dashboards that present global positions by currency. Operations teams, on the other hand, will need access to granular data to see the status of confirmations and mismatches.
On the presentation of data, the system must allow users to take (or automate) action – when issues occur, limits are breached or business rules or thresholds are reached. An intraday liquidity management solution must also be able to integrate with and provide outputs to other systems. While not a payment system per se, it should be able to interact with payment systems by applying rules and tagging payments for hold or release, as well as providing data for regulatory reporting.
Powerful, highly automated tools will be prerequisite to managing these challenges. But for a truly strategic intraday liquidity management solution, you need a single platform to manage the four key steps of integration, processing, presentation and action. By sourcing, processing and making data available to different regions and departments through one solution, you’ll be better placed to go further than regulation alone could take you.
So, why not try tapping into the opportunities – and value – that faster payment data flows can offer? It could make a refreshing change. Cheers!