This document summarizes an overview of intraday liquidity management. It discusses measuring and forecasting daily liquidity flows, monitoring positions against available resources, arranging sufficient intraday funding, mobilizing collateral, and dealing with disruptions. It also outlines control indicators for monitoring intraday liquidity requirements and available resources. Charts show an example intraday liquidity profile and quantitative tools are discussed for monitoring intraday positions. Potential stress scenarios and effective management methods are also summarized, along with examples of regulatory reports used for monitoring and reporting intraday liquidity.

1. BCBS 248
Intraday Liquidity Management
Nikat Malik
November 2013
All Rights Reserved

2. Intraday Liquidity Management - Overview
Effectively manage the Bank’s intraday liquidity positions and risks to meet payment and
settlement obligations on a timely basis under both normal and stressed conditions.
Operational elements in a bank’s strategy to manage intraday liquidity risk are its ability to:
• measure expected daily gross liquidity inflows and outflows;
• anticipate the intraday timing of these flows where possible;
• forecast the range of potential net funding shortfalls that might arise at different points
during the day;
• monitor intraday liquidity positions against expected activities and available resources
(balances, remaining intraday credit capacity, available collateral);
• arrange sufficient intraday funding to meet its intraday obligations;
• mobilise collateral as necessary to obtain intraday funds;
• deal with unexpected disruptions to its intraday liquidity flows.
Apply quantitative tools to monitor bank’s intraday liquidity position
Define intraday liquidity sources and usage
Develop intraday liquidity stress scenarios
BCBS 248 - Intraday Liquidity Management

3. Intraday Liquidity Management – Control Indicators for Intraday Liquidity
Indicator
Requirement
Objective
Daily maximum liquidity
requirement
Difference between payments received
and payments made
Indicate largest negative net
cumulative position during the day
Available intraday liquidity Amount of intraday liquidity available at
the start of day
Application of available intraday liquidity
to daily maximum requirement
Total payments
Total value of gross daily
payments made and received
Indicates scale of a bank’s payment and
settlement activity
Time-specific obligations
Volume and value of time
specific and critical obligations
Indicates obligations to be settled at a
specific time
Value of customer
payments made on behalf
of correspondent banking
customers
The gross value of daily
payments made and settled on behalf of
five largest customers by value
Indicates constituents of a correspondent
bank’s payment flows and assesses
concentration on the bank’s position
Intraday credit lines
extended to customers
The total sum of intraday credit lines
extended to customers and credit utilised
Indicates extent of concentration in
Bank’s provision of intraday credit
Intraday throughput
The value of payments required to settle
by certain time points during the day
Identifies specific times when a bank is
vulnerable to a risk event
BCBS 248 - Intraday Liquidity Management

4. Intraday Liquidity Management - Liquidity Profile
Intraday Liquidity Profile
4000
3000
GBP Millions
2000
1000
0
-1000
-2000
-3000
9am
10am
11am
12 noon
1pm
2pm
3pm
4pm
5pm
Outflow
-1000
-1200
-1500
-1100
-2000
-1000
-2500
-2200
-2000
Inflow
3000
2500
1500
2000
1000
500
1800
2200
2900
BCBS 248 - Intraday Liquidity Management

5. Intraday Liquidity Management - Quantitative Tools
Direct Participant tools to monitor Bank’s intraday liquidity position:
Daily maximum intraday liquidity usage:
Monitor’s intraday liquidity usage in normal conditions, by monitoring the net balance of all
payments made and received during the day over their settlement account, either with the
central bank or a correspondent bank. The largest net negative position during the business
day determines the maximum daily intraday liquidity usage.
Available intraday liquidity at the start of the business day:
Monitor’s amount of intraday liquidity available at the start of each day to meet intraday
liquidity requirements in normal conditions including break down of the liquidity sources
available to the bank and collateral management method.
Total payments:
Monitor’s the overall scale of a bank’s payment activity by calculating the total of gross
payments sent and received in the LVPS and/or with correspondent banks.
Time-specific obligations:
Monitor’s time specific obligations by calculating the total value of time-specific obligations
settled each day and report largest daily total values and the average daily total value.
BCBS 248 - Intraday Liquidity Management

6. Intraday Liquidity Management - Liquidity Sources and Usage
Own sources
• Reserve balances at the central bank;
• Collateral pledged with central bank or ancillary systems that can be converted into intraday liquidity;
• Unencumbered assets on a bank’s balance sheet that can be freely converted into intraday liquidity;
• Secured and unsecured, committed and uncommitted credit lines available intraday;
• Balances with other banks that can be used for intraday settlement.
Other sources
• Payments received from other large-value payment system (LVPS) participants;
• Payments received from ancillary systems such as CLS, retail payment systems, etc.;
• Payments received through correspondent banking services.
Usage
• Payments made to other LVPS participants;
• Payments made to ancillary systems;
• Payments made through correspondent banking services;
• Secured and unsecured, committed and uncommitted credit lines offered intraday;
• Contingent payments relating to a payment and settlement system’s failure (e.g. emergency liquidity provider)
In correspondent banking, customer payments made across accounts held by the same correspondent
bank do not give rise to intraday liquidity source or usage as is not linked to payment/settlement systems.
BCBS 248 - Intraday Liquidity Management

7. Intraday Liquidity Management - Stress Scenarios
Own Financial Stress: a bank suffers, or is perceived to be suffering from, a stress event
• For a direct participant, own financial / operational stress may result in counterparties deferring
payments or withdrawing intraday credit lines. My require the Bank to fund its payments from its
own sources.
• For banks that use correspondent banking services, an own financial stress may result in intraday
credit lines being withdrawn by correspondent banks or own counterparties deferring payments.
Counterparty Stress: a counterparty suffers a stress event which prevents it from making payments
• A counterparty stress may result in direct participants and banks that use correspondent banking
services being unable to rely on incoming payments from the stressed counterparty.
Customer Bank’s Stress: a customer bank of a correspondent bank suffers a stress event
• A customer bank’s stress may result in other banks deferring payments to the customer.
Market-Wide Credit or Liquidity Stress
• This may have adverse implications for the value of liquid assets that a bank holds to meet its
intraday liquidity usage. A widespread fall in the market value and/or credit rating of a bank’s
unencumbered liquid assets may constrain its ability to raise intraday liquidity from central bank.
• In a worst case scenario, a material credit downgrade of the assets may result in the assets no longer
meeting the eligibility criteria for the central bank’s intraday liquidity facilities.
BCBS 248 - Intraday Liquidity Management

8. Intraday Liquidity Management - Management Methods
Effective intraday liquidity management methods:
System Basis
• Banks can manage their payment and settlement activity on a system-by-system basis.
• Banks can use direct intraday liquidity bridges between LVPS, which allow excess liquidity
to be transferred from one system to another.
Currency Basis
• Banks can manage their intraday liquidity on a currency-by-currency basis .
• Banks can also use cross-currency basis which has the ability to transfer funds intraday
with minimal delay using foreign exchange swaps markets.
Collateral Basis
• Banks can use collateral on a cross-currency or cross-system basis to manage intraday
liquidity, provided collateral can be transferred intraday freely where required.
Organisational Basis
• Intraday liquidity can also be managed by applying monitoring tools at an individual legal
entity level, and can be applied between several legal entities where no impediments or
constraints to transferring intraday liquidity exist between them.
BCBS 248 - Intraday Liquidity Management

9. Intraday Liquidity Management - Implementation Model
Regulatory Report / Internal Reporting & Contingency Plan
Stress Test – unexpected movement/early warning indicator/timing
Cash Flow Maturity Ladder / Behavioural Adjustment
Market Data
Liquidity Analytics
Customers
Calculation Engine
Transaction Data
Retail
Wholesale
Corporate
Wealth
Private
Settlement
Correspondent
Model Implementation Strategy based on – Liquidity Usage, Payment Schedule, Collateral
Management, Concentration Risk by Currency and Counterparty, Peak Demand Management
BCBS 248 - Intraday Liquidity Management

10. Intraday Liquidity Management - Reporting
Direct Participant Report - RTGS/CREST/CHAPS/CLS
15 Oct 2013
(in millions)
Maximum 2 Day Max 3 Day Max Average
Daily Maximum Intraday Liquidity Usage
Largest positive net cumulative position
Largest negative net cumulative position
Minimum 2 Day Min 3 Day Min Average
Available Intraday Liquidity At Start Of The Business Day
Central bank reserves
Collateral pledged at the central bank
Collateral pledged at ancillary systems
Unencumbered liquid assets on a bank’s balance sheet
Gross Total credit lines available
Total credit lines available - secured
Total credit lines available - committed
Balances with other banks
Maximum 2 Day Max 3 Day Max Average
Total Payments
Gross payments sent
Gross payments received
Maximum 2 Day Max 3 Day Max Average
Time-Specific Obligations
Total value of time-specific obligations
Intraday Throughput
Average
08.00 am
09.00 am
10.00 am
11.00 am
12.00 noon
13.00 pm
14.00 pm
15.00 pm
16.00 pm
17.00 pm
BCBS 248 - Intraday Liquidity Management

11. Intraday Liquidity Management - Reporting
Correspondent Banking Services Provider Report
31 Oct 2013
(in millions)
Maximum 2 Day Max 3 Day Max Average
Value of Payments Made on Behalf of Correspondent Banking Customers
Total gross value of payments made on behalf of correspondent banking customers
Minimum 2 Day Min 3 Day Min
Intraday Credit Lines Extended to Customers
Total value of credit lines extended to customers
Total value of credit lines extended to customers - Secured
Total value of credit lines extended to customers - Committed
Total value of credit lines extended to customers - Peak Usage
BCBS 248 - Intraday Liquidity Management