Intraday Liquidity Reporting: Meeting the Challenges

Intraday liquidity reporting creates a potential risk that arises from financial institutions (FIs) not having insight into their intraday liquidity positions in order to meet payments settlement deadlines throughout their business day. This information really needs to be instantaneous if it is to be effective.

FIs face a real challenge in meeting the reporting requirements imposed by Basel Committee on Banking Supervision (BCBS). As of January 2015, BCBS requires that banks start using monitoring tools for reporting. The purpose of this requirement is to enable banking supervisors to monitor banks’ intraday liquidity risk and to assess their ability to meet payment and settlement obligations on a timely basis under both normal and stressed conditions, according to the progress report on Basel III implementation issued by BCBS in April 2013.

The monitoring tools used will depend on the category the bank is put under based on the following:

  •  Tools applicable to all reporting banks.
  •  Tools applicable to reporting banks that provide correspondent banking services.
  •  Tools applicable to reporting banks that are direct participants.

Liquidity Guidelines

In July this year the European Banking Authority (EBA) issued an updated version of the reports templates for the additional monitoring metrics for liquidity. In turn, the same month saw SWIFT publish a white paper addressing the requirements and showing the importance of taking accelerated steps by FIs to be ready for the BCBS reporting. In the US, the Bankers Association for Finance and Trade-International Financial Services Association (BAFT-IFSA) issued a paper last October that provided key recommendations about the liquidity coverage ratio (LCR).

Providing an effective reporting and integration solution can help FIs identify targets and get real-time observation of their payment behaviours to have better control over internal business information. It’s important for banks to establish an effective reporting solution, especially a monitoring tool, to handle all SWIFT traffic types in real-time covering confirmations and securities.

As per the BCBS guidelines, banks have to monitor the net balance of settled payments during the business day per account – either with the central bank or over their account held with a correspondent bank. With the proper reporting software, FIs are able to display, investigate, monitor and report all confirmations, securities and daily balances over an extended retention period. Furthermore, banks should have access to real-time statistical information through a set of different dynamic reports, enabling them to have a full view of the total amount of financial transfers either sent or received by the correspondents’ FIs on the spot.

Ultimate Success

Through adopting a proper payment integration tool, FIs can calculate the total gross payments sent or received in the large value payment system (LVPS) and delivery versus payment (DVP) in securities settlement across any account(s) held with a correspondent bank(s), together with periodical statistical information. The solution should improve the operational efficiency by offering comprehensive, informative reports, and by facilitating analysis, investigations and audits in an advanced and flexible manner, without any performance impact on the real-time financial messages flows.

To meet the requirements, banks need to report information on an individual currency basis; an easy-to-read dashboard tool can provide real-time charts for all payments based on certain currency. The recommended solution should also be able to generate real-time alerts to end-users for any set of conditions that can be defined based on financial transfers, where operational users can build business scenarios to get a notification based on the business elements of the financial messages and on the type of transfer – whether cash settlement, securities, trade finance or confirmation of credit/debit.

Based on the feedback from key players in the financial industry, it is anticipated in the short term that supervisors will start providing more instructions regarding the needed requirements scope and imply suitable timelines; especially for banks that encounter difficulties in making their data available. However – and despite the efforts that will be exerted by the target banks, which are under pressure now in finding the best solution to tackle the issue of preparing the data – banks will end up with an effective way to manage their intraday liquidity risk and perform their trading payments smoothly.


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