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Intraday Liquidity Reporting

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Presentation from SWIFT Compliance Dy 2014 in Frankfurt

Published in: Economy & Finance, Business
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Intraday Liquidity Reporting

  1. 1. Intraday liquidity reporting Solutions from SWIFT to support compliance with BCBS monitoring requirements Compliance Forum Germany Geertjan van Bochove, Manager Business Intelligence, EMEA
  2. 2. 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
  3. 3. 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?
  4. 4. 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 usage Group-wide System A Branch B Request Monthly Excel E-banking platforms
  5. 5. 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
  6. 6. Sourcing the right data from the Swift network Liquidity messaging concept explained You Correspondent Counterparty End of day balance (MT950)
  7. 7. Only 3% of cross- border payments sent from Germany are confirmed 24% of domestic payments are confirmed 7 * Full year 2013, non-T2 flows, MT103 and MT202 Intra-day confirmations in Germany and Europe 15% of cross-border payments received in Germany 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 20% of intra- Europe payments are confirmed
  8. 8. MT942 | Issues identified Time-stamp of individual transactions missing -300 -250 -200 -150 -100 -50 0 50 100 150 00:00 00:30 01:00 01:30 02:00 02:30 03:00 03:30 04:00 04:30 05:00 05:30 06:00 06:30 07:00 07:30 08:00 08:30 09:00 09:30 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 MT942 received at 5:00am | with non- reported items MT942 received at 5:00am | with non- reported itemsMT942 received at 4:30am | all reported through R-T messages already MT942 received at 4:30am | all reported through R-T messages already MT942 received at 5:00am | with non- reported items MT942 received at 5:00am | with non- reported items MT942 statement: - +25 (Coupon) - +25 (cust pay) - -25 (Tax) - -25 (book trf)
  9. 9. Network complexity of intra-day reporting DE HUB (all BICs running over the same interface) US 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
  10. 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
  11. 11. 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 DatabaseDatabase 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.
  12. 12. Supporting the development of the Intraday Liquidity reports (2) Opening balance Statement MT940/950 (3) Credit / Debit entries confirmations Amount/ Date-time/ Currency Correspondent BIC MT900/910/ 942/ 103/202/ 545/ 547 (1) Closing Balance Statement MT940/ 950 (8) Back/Forward value entries (5) Balance (7) Date/time message stamping is different from value date? Calculation Indicate discrepancy to user through the interactive dashboards (6) Matching Discrepancy between calculated balance & MT950 BCBS aggregated measures/ reports Transactional reports detailed report per transaction + transaction reference number Report entries & calculated balance based on back value items (4) Identify duplicates from 103/202/ 900/910 & reported again in 942 or reported twice with 942 Specifications definition or support to the BCBS reports implementation Specifications definition or support to the BCBS reports implementation
  13. 13. Intra-day liquidity reporting tool The scope  Liquidity reporting objectives:  Comply with the BCBS nostro reporting requirements  Provide a retrospective monitoring dashboard on cash positions  Enable the bank to do analytics on the data  Limit the investment and implementation time  We will not report to the regulator, this is the bank’s responsibility  The tool is currently not aimed at Real-Time monitoring  The tool does not include stress testing 13 User Nostro
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  15. 15. 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 behavior Different correspondents and even accounts will have different behavior in sending reporting flows MT900 MT910 MT103 MT202 MT545 MT547

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