The Asia Securities Industry & Financial Markets Association (ASIFMA), the region’s leading financial industry group, and its member firm SmartStream Technologies, the financial Transaction Lifecycle Management, launched a paper discussing the challenges and opportunities of Intraday Liquidity Management (ILM).
The white paper is based on a recent webinar that included the following industry experts:
- Keith DeSouza, Executive Director – Liquidity and Funding at DBS in Singapore
- Simon Gray, Partner at Baringa Partners
- Nadeem Shamim, Global Head of Cash and Liquidity at SmartStream Technologies
- The panel was moderated by Philippe Dirckx, Managing Director – Fixed Income at ASIFMA.
Fragmentation at many levels
Since the Global Financial Crisis, the regulatory framework has evolved significantly requiring banks to measure, monitor and report their exposures from a market, credit, and liquidity perspective.
“With respect to the challenges faced, our paper identifies a few reasons as to why ILM cannot be managed in a more efficient and streamlined way as well as the costs associated with cash,” said Shamim of SmartStream.
“Fragmentation is probably the main element that has prevented banks from managing their ILM more efficiently. This fragmentation can be found at many levels: at the regulatory, treasury, operations, technology, data and organisational levels,” said ASIFMA’s Philippe Dirckx.
This had a significant impact on their balance sheet and capital, which has led them to review their risk management models, reassess their operating model and optimize their cash management.
The topic of Intraday Liquidity Management (ILM) has become even more prevalent today with rising interest rates and the pandemic which has brought major challenges to banks, their clients and their supply chains.
Evolution and Impact of the Payment Architecture
The payment landscape is rapidly changing and developing with instant payments and Distributed Ledger Technology (DLT) becoming ubiquitous while Central Banks and Securities Market Infrastructures are shortening their settlement cycles. This could lead to further fragmentation of liquidity pools unless financial institutions upgrade their technologies and back-office applications, according to the speakers.
Solutions around Emerging Trends and Problems
The development and relative affordability (or cost flexibility) of Cloud computing allows financial institutions to consolidate data historically siloed in various systems and locations. To digest this consolidated data, banks will have to leverage new technologies such as Artificial Intelligence or Machine Learning to move from historical data-based modelling to forecasting/predictive modelling.
“Banks are facing a challenging environment, whether from a macro-economic, regulatory, operational or technology perspective, as the cost of managing their intraday liquidity has increased. ILM solutions and SaaS models reduce the total cost of ownership and the cost barrier to implementing the latest tools in managing liquidity and stress testing,” said Mr. Shamim.
“This is a unique opportunity to explore new technologies and operating models that can help address these challenges and implement tools to manage and monetize their liquidity risk proactively and efficiently,” said Dirckx.
