Banks falling behind on liquidity monitoring says Swift

Fewer than a third of banks are at the implementation stage of projects implementing the Basel intraday liquidity monitoring rules that come into force next month – and most believe that industry collaboration will be needed to achieve a successful outcome.

According to a survey by Swift, 89% of respondents think a collaborative approach by banks is either “essential or very important to help reduce the overall implementation cost for the industry and increase the pace at which the intraday liquidity data challenges can be solved”.

While 68% of respondents have started a project, only 31% are at the implementation stage. Meanwhile, 37% have started an initial evaluation of their readiness, leaving 32% of banks currently without a process. The survey also shows that many countries have not yet translated the tools into detailed requirements, steering the industry towards a short term pragmatic approach.

Only 39% banks have their payments confirmed in real-time by their Nostro service providers, which is a critical step for banks to meet the intraday liquidity monitoring rules set out by the Basel Committee on Banking Supervision in April 2013. The BCBS recommendation intends for banks to start using the monitoring tools for reporting from January 2015, with full implementation by January 2017.

The survey of 150 industry professionals evaluates the implementation status of the BCBS monitoring tools for intraday liquidity at financial institutions. The survey also captures market views on collaborative solutions as a means to drive down implementation costs.

Additional key findings from the report include:

• 74% of banks will use the credit/debit confirmations (the Swift MT 900/910 messages) in the first instance to build their liquidity monitoring tools
• 42% of respondents confirmed that they do not have a global view of the intraday liquidity usage for their Nostro accounts
• 89% of market participants surveyed are supportive of a collaborative approach to reduce the overall implementation cost for the industry and speed up issues resolution.

Catherine Banneux, senior market manager at Swift said: “The industry is moving in the right direction, but with a large number of banks still evaluating or without a plan for their BCBS liquidity monitoring project, there is a lot more progress to be made.”

The report says that the fact that 74% of banks will use the MT 900/910 credit/debit confirmations to build their liquidity monitoring tools means that the data sourcing approach planned by banks for the implementation of the BCBS monitoring tools is consistent, which the authors find “rather reassuring as this confirms that collaboration could deliver substantial benefits”. Swift will include a specific date, time and time zone field for the message types MT 900/910 in the 2015 FIN release.

Swift has also been supporting the Liquidity Implementation Task Force in the development of an intraday liquidity reporting rule book aimed at creating and supporting the adoption of a common industry business practice for intraday liquidity messaging, as well as initiating the development of an industry ‘best practice’ on data management.