Intraday liquidity reportingSWIFT view on regulatory measures, impact and pragmatic solutions

Singapore Business Forum

Geertjan van Bochove, Manager Business Intelligence

What is BCBS intraday liquidity about?

BCBS monitoring tools for intraday liquidity (2013)To enable banking supervisors to better monitor a bank's management of intraday liquidity risk and its ability to meet payment and settlement obligations on a timely basis• Detailed set of 7 monitoring tools• Consider impact under 4 stress scenarios: own, counterparty, customer, market stress• Report by systems, correspondent banks, currencies, branches and subsidiaries

Implementation• Internationally active banks, in all countries and for all currencies they operate in• Report monthly to regulator, from 1st of January 2015

BCBS monitoring tools for intraday liquidity management was published in April 2013.

2008 financial crisis• Market turmoil that began in mid-2007 re-emphasised the importance of

liquidity to the functioning of financial markets and the banking sector• September 2008, Basel Committee on Banking Supervision (BCBS)

published Principles for Sound Liquidity Risk Management and Supervision

Applicability Monitoring tools

All reporting banks 1. Daily maximum intraday liquidity usage

2. Available intraday liquidity at the start of the business day

3. Total payments

4. Time-specific obligations

Banks providing correspondent banking services

5. Value of payments made on behalf of correspondent banking customers

6. Intraday credit lines extended to customers

Direct participants 7. Intraday throughput

BCBS monitoring tools for intraday liquidity management

As of January 2015

• Understand intraday exposure for your bank?

• Position of branches and subsidiaries?

• Produce report for BCBS?

How does this impact you?

Data sourcing alternatives

BCBS | broad reporting requirements

BCBS

User

Self-clearing

RTGS reporting

Central Bank account

Nostro’s

> 20 accounts per entity

> 200 accounts per group

Reporting on customer credit

lines usageGroup-wide

System A

Branch B

Request Monthly Excel

E-banking platforms

Intra-day liquidity usage (retrospective)1-day’s of reporting messages mapped

* Balance of EUR denominated MT900 and MT910 received by group X from group Y (aggregated per 5 min interval)

Demo report

Sourcing the right data from the Swift networkLiquidity messaging concept explained

Debit (MT900)

Credit (MT910)

You

Correspondent

Credit (MT910)

Counterparty

Debit (MT900)Payment

(MT103/MT202)Payment

(MT103/MT202)

End of day balance (MT950)

7

Only 16% of cross-border payments sent

from Singapore are confirmed

* Full year 2013, non-T2 flows, MT103 and MT202

Intra-day confirmations in Singapore vs. Europe

14% of cross-border payments received in

Singapore are confirmed

24% of cross-border payments sent from

Europe are confirmed

15% of cross-border payments received in Europe are confirmed

USER

PROVIDER

USER

PROVIDER

MT942 | Issues identifiedTime-stamp of individual transactions missing

0:00

0:30

1:00

1:30

2:00

2:30

3:00

3:30

4:00

4:30

5:00

5:30

6:00

6:30

7:00

7:30

8:00

8:30

9:00

9:30

10:00

10:30

11:00

11:30

12:00

12:30

13:00

13:30

14:00

14:30

15:00

15:30

16:00

16:30

17:00

17:30

18:00

18:30

19:00

19:30

20:00

20:30

21:00

21:30

22:00

22:30

23:00

23:30

-300

-250

-200

-150

-100

-50

0

50

100

150

MT942 received at 5:00am | with non-

reported itemsMT942 received at 4:30am | all reported

through R-T messages already

MT942 received at 5:00am | with non-

reported items

MT942 statement:

- +25 (Coupon)- +25 (cust pay)- -25 (Tax)- -25 (book trf)

Network complexity of intra-day reporting

UK HUB(all BICs running over the same

interface)

SG entity

Other entities running stand-alone interface

USD agent

CAD agent

AUD agent

JPY agent

RUB agent

AUD agent

JPY agent

Client-bank

Client-bank

Client-bank

User

Provider

Liquidity Implementation Task Force Cash, liquidity, and treasury practitioners, together with some GTB, product management representatives

17 Banks

• Bank of New York• BBVA• BNP Paribas• Citi• CommerzBank• Danske Bank• Deutsche Bank• Handelsbanken• HSBC• ING• Intesa San Paolo• JP Morgan• Lloyds• RBS• Standard Chartered• State Street• UBS

10 Brokers

• Bank of America Merill Lynch• Barclays Capital• Citi• Crédit Suisse• Goldman Sachs• HSBC• Jefferies• Morgan Stanley• Newedge• Standard Bank

Market practice for SWIFT Intraday Liquidity ReportingIndustry forum to establish business practice for SWIFT services and encourage a consistent and standardised implementation of liquidity management services globally

Deliverable: real-time liquidity reporting rule book sharedwith the PMPG

Some key principles Purpose : improve reporting for regulatory but also risks

purposes Finality of reporting on accounts movements – MT900/910 to

be used Timing of reporting - as soon as debit/credit entries are posted

on the account. . Message time stamping taken as a reference to build the

intraday liquidity position Standardised approach: mirroring reporting approach for

Nostro/ Vostro’s accounts

10

BCBS monitoring tools- The pain points

Data availability Understand intraday exposure across Nostro accounts for

all currencies Reporting both globally and at the level of each legal entity Vostros aggregated intraday credit lines usage

Resourcing to produce reports for BCBS Short time line Not a revenue generator Duplication of efforts: centrally vs. Locally

Development needed at you institution

3) Reporting and analysis- Normalize data- Build BCBS reporting - Build control check on data

coverage

2) Set-up technical infrastructure- Collect data (FINInform)- Route data- Extract and parse relevant

information- Safe store in database

Parsing

Database

Gateway / Access

Reporting

Analysis

1) Source correct data from agents- Analyze data gaps- Define missing intra-day reporting- Define business rules- Go-out to correspondents

Data gap analysis

Technical set-up

Reporting design

Regulatory reporting, analytics, management, etc.

13

Effective Intra-Day Liquidity Management = quality data + business rules

Correspondent bank

Your institution

T +/- X

Messages can be received on the same, but can also be

received a day before

Statements

Some specific flows will be

recorded only on an end-of-day

statement, without intra-day

advices

Difference in behaviorDifferent correspondents and even accounts will have

different behavior in sending reporting flowsM

T900

MT

910

MT

103

MT

202

MT

545

MT

547