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34LIQUID GOLD (Continued from Page 33) data must be normalized. Only then cananalysis of the information begin.Amassing information from correspondent banks will also present a challenge as these, like their customers, generally employ systems and processes that operate on an end-of-day basis and so are not geared up to providing real-time information. In addition, time stamping by correspondent banks is rare. The quality of reporting among correspondent banks can also vary considerably. Network latency further complicates matters: Delays may occur in the routing and transposition of cash flow messages from correspondent banks, potentially preventing a customer bank from pinpointing its precise liquidity position at a specific moment in time.Clearly, correspondent banks will have to improve systems and processes if they are to provide their customers with the level of reporting detail required. Indeed, the ability to provide accurate, up-to-the-minute information is likely to become a significant advantage and an important differentiating factor among correspondent banks competing for business.Correspondent banks will themselves also need to report to national supervisors. This includes supplying information on the value of payments made on behalf of their customers, as well as on the three largest intraday credit lines extended to customers. They also will have to indicate whether lines are secured or committed and give details on the peak usage of these lines. Again, this is likely to put significant pressure on correspondent banks’ existing systems and processes.Additionally, financial institutions will need to consume, consolidate and aggregate information provided through their network of correspondent and central banks in order to understand, manage and report on their own intraday liquidity risk.Jan. 1, 2015, is fast approaching and, although regulators have indicated that systems may not have to be fully ready until Jan. 1, 2017, it is essential that banks take action promptly. Indeed, forward-thinking institutions are already putting in place appropriate systems and processes and some are a considerable way along the road to achieving readiness.At SmartStream, we believe that, although some financial institutions may wish to take a short-term, tactical approach to satisfying impending regulatory requirements, the greatest gains can be made from implementing a strategic solution.ADVERTORIALOur Intraday Liquidity Management application reflects this view and has been designed to deliver long-term operational and business benefits for financial institutions.The solution — which is being implemented by an international bank, within its cash management operations — provides the reporting tools needed to meet the intraday liquidity monitoring requirements defined by Basel III and to satisfy Dodd-Frank measures.The application is part of SmartStream’s TLM Cash and Liquidity Management software solution, for we strongly feel that the intraday liquidity management function should reside within a bank’s cash management operations and not elsewhere in the organization. Cash management is, in our opinion, the natural home for the emerging art of intraday liquidity management.Importantly, the Intraday Liquidity Management solution enables financial institutions to move away from operational processes focused on end-of-day settlement information, providing them with complete visibility of all liquidity positions and exposures, in real time. It delivers both an actual and predictive view of a bank’s positions and, by comparing these throughout the day, can identify anomalies and alert cash managers to potential problems.Offering an open, flexible and configurable workflow model that can accept cash flow data — of the broadest range — across the whole transaction life cycle, Intraday Liquidity Management enables banks to evidence their cash settlement and funding positions to the regulators at any point in the day and prove that they are actively managing liquidity and can readily react to stresses.Implementing this type of strategic solution — we believe — will enable banks to reap important business and operational benefits. Real-time visibility of intraday liquidity allows organizations to identify exposures as early as possible and act upon them, and so a more proactive and predictive approach to decision making can be taken. Critically, banks can also optimize the way they manage funds, maximizing use of intraday liquidity and avoiding expensive overdraft facilities. The performance of correspondent banks can be scrutinized more easily too. And these are significant advantages — after all, what bank does not want to be aware of its real-time liquidity exposure and what bank does not want to know that all trading activity is funded?FALL 2014 | FTF NEWS MAGAZINE