INTRADAY LIQUIDITY: HOW BANKS CAN MAXIMISE THE BALANCE SHEET BENEFITS OF THE JAN 15 BCBS DEADLINE

Specialist clearing, risk and regulatory practice Catalyst Development Ltd are advising clients to use the imminent Basel Committee for Banking Supervision (BCBS) intraday liquidity monitoring deadline to make immediate and significant balance sheet savings.

The deadline for compliance falls on 1st January 2015: in just 16 weeks’ time.  Despite this timeframe, Catalyst believe many non-correspondent banks have not yet begun monitoring, are overly reliant on their nostro providers, or are taking a highly manual and sub-optimal approach to reporting.

Catalyst’s latest white paper on Intraday Liquidity shows that banks have an immediate opportunity to reap the wider benefits of optimising collateral through rigorous intraday liquidity management, if they act now.

Written by market-leading clearing, risk and regulatory specialist Christian Lee and collateral expert Nick Nicholls, the whitepaper outlines the key areas banks need to consider in the remaining time available.

The authors examine each rule separately and set out how savings can be achieved, outlining a case which demonstrates that:

• the cost of liquidity alone can be as high as 200 basis points;
• the cost of setting aside a liquidity buffer will be as much as $20 million for every $1 billion held;
• Understanding credit exposure as and when it occurs will positively impact the bank’s RWA.

The authors go on to describe how moving to a model which allows intraday monitoring will achieve:

• greater understanding of intraday payment flows – leading to a reduced number of transactions and greater use of netting;
• reduced intraday short balances and greater payment control – leading to a smaller required liquidity buffer;
• Real time reconciliation of payment and receipts –  allowing for intraday alerts on credit lines.

The whitepaper is available to download in full from the Catalyst website:  http://www.catalyst.co.uk/risk-regulation/intraday-liquidity-reap-the-benefits-of-bcbs-readiness-now/