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Intraday Liquidity: Creating Competitive Advantages Part 1

A raft of new liquidity regulations are changing the face of cash management. While some may view these regulations as an inescapable duty, compliance with these requirements has the potential to add new value for banks if you take the right approach.

Along with the overarching liquidity risk management requirements of Basel III, the Basel Committee For Banking Supervision (BCBS) has issued BCBS248: a set of regulatory guidelines for managing intraday liquidity positions and risk. Although it is not yet clear when banks will need to comply with this regulation, the principles of BCBS248 are already helping to shape a new cash management culture.

With liquidity risk top of mind, today’s cash managers are demanding constant, real-time access to accurate, detailed liquidity positions, plus the ability to project future  positions with new precision. The resulting transparency is critical for compliance, certainly – but it also introduces a range of additional benefits for cash management teams.

With accurate intraday and projected positions, cash managers can seize the opportunity created by unexpected surpluses or deficits, and optimize the distribution of funds for higher returns or reduced penalties. They can also better manage the significant challenges posed by counterparty, trading and settlement risk, preventing or responding to the breach of intraday or overnight limits.

The problem is that multiple systems, communicating many different message types, will be responsible for generating cash flows and payments required to produce these intraday positions. And for in-depth interrogation throughout the day, the data these systems produce must first be consolidated and collated. So, banks urgently need powerful data processing tools to automate the capture, presentation and validation of cash flow data, providing a real-time and forward-looking view of cash positions at both aggregated and granular levels. Cash managers also require the means to interact with payments linked to these cash positions, enabling them to respond proactively to intraday breaches or deviations from expected behavior.

The bottom line is that intraday liquidity positions and projections are only possible through visibility of and access to real-time cash flow information. By addressing the operational challenges involved in capturing, processing and validating cash flows, banks can take a more proactive approach to liquidity issues. In doing so, they are able to not only meet the necessary and stringent liquidity reporting requirements of BCBS248, but can also introduce cash management and operational benefits – turning compliance into a competitive advantage. 


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