Data Management Issues Delay Liquidity Risk Progress, Finds Survey

Critical data management issues continue to impede the successful development of effective liquidity risk management strategies and most of these issues can only be resolved through collaborative solutions, according to a new white paper from SWIFT.

The findings of the white paper ‘Managing Liquidity Risk: Collaborative Solutions to Improve Position Management and Analytics’ are taken from a market survey of 40 cash, liquidity and liquidity risk managers at financial institutions around the world.

Respondents to the research identify six key data management challenges that must be overcome in order to provide management with the information needed to successfully manage liquidity risk and meet regulatory requirements in this area.

Improving liquidity risk management requires a ‘dashboard’ and analytics – both which need to be fed with data. Intraday liquidity management is an integral part of an improved liquidity risk management strategy because insufficient intraday data can lead to late identification of gaps between forecasted and real inflows and outflows and positions.

Such gaps would generate substantial financial costs as a result of over-collateralisation, intraday credit line costs, higher funding costs, overdraft charges and higher liquidity buffers. So the business case to invest in real-time management of liquidity goes beyond regulatory compliance and risk mitigation: it can save a bank real money.

Survey respondents indicate they lack the following:

  • A view on intraday cash position across currencies (93%).
  • Ready-made liquidity risk analytics and business intelligence (91%).
  • Advanced interactive cash and collateral management functionalities within payments infrastructures (89%).
  • An ability to build predictive positions (88%).
  • An intraday view of unencumbered collateral positions including margin calls (88%).
  • An ability to manage and report liquidity positions at a firm-wide level (82%).

Survey respondents also identify five top-priority collaborative developments that would address these challenges. Some of these could be implemented in a relatively short timeframe. They are:

  • Industry best practice for intraday cash reporting.
  • Common reporting standards and liquidity monitoring and control standards for use across high-value payments systems.
  • Standard margin call solutions to support the implementation of intraday feeds in liquidity management applications.
  • Industry best practice for collateral reporting for liquidity management purposes.
  • A central ‘payment tracker/adviser’ platform providing transactional statuses.


Related reading