Sibos 2014: Why Banks are Struggling with Liquidity Reporting

Meeting the steadily increasing demands on intraday liquidity reporting presents a challenge to financial institutions, said April Frazer of Wells Fargo, who chaired a session on the issue. In 2013, the Basel Committee published a series of monitory tools on liquidity requirements, which complemented the liquidity ratios set out in the Basel III regime.

However, progress must be accelerated if banks are to be ready for Basel Committee on Banking Supervision (BCBS) reporting by the start of 2016. “Real-time liquidity management could prove a complex project,” said Frazer. A SWIFT survey asked banks if they’ve started or planned a project for complying with BCBS liquidity intraday monitoring requirements received a definite ‘no’, with 37% reporting that they had not even commenced preliminary work on implementing the rules.

“The fact so many of us have not started working on this yet is not entirely surprising,” said Anurag Bajaj of Standard Chartered. “There is a real lack of understanding among banks and, similarly, very little has been done to help regulators understand what intraday liquidity tools should deliver.”

According to Joel Feazell, head of intraday liquidity management at Bank of New York Mellon, the lack of understanding is largely due to the uncertainty over whether intraday liquidity reports are principally a reporting issue or a liquidity management issue.

Frazer added that conversations with the regulators suggest that the fundamental issue is one of governance, with management taking precedence over reporting as the overriding aim is to avoid another financial crisis.

History of little use

Christian Goerlach of Deutsche Bank suggested that historic data is of little use to banks in managing risk. “DB has dedicated intraday liquidity risk management,” he said. “But collecting historic data is like driving a car using the rear view mirror; it means that you’re not looking ahead to the next curve.

Goerlach believes that collaboration between the banks is essential in defining the new standards expected of them and one area could be building a data bank of information contributed by all the banks into a single system.

However, Frazer expressed scepticism in winding up the session.”If we could get all the regulators around the world to agree [to one single standard], I’d be shocked,” she said. “More likely it will vary according to individual jurisdictions and with different timelines applying.”

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