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Are you ready for real-time liquidity?

The thought provoking report from  Deutsche Bank on “Preparing for real-time liquidity” is based on the belief that payments and treasury technology and infrastructure providers that support them, will increasingly operate in “real-time” and that has huge consequences for liquidity management.

Vision of the real-time treasury

The report describes how there are five factors driving real-time treasurY:

Source & Copyright©2018 - Deutsche Bank 

The report stresses that, “However, the progress towards a real-time treasury environment is neither steady nor linear, with each of these issues impacting on industry participants in different ways and to varying degrees.”

It picks out how local payments, e.g. instant payments, will be different from cross-border payments which will just be faster. 

Understanding the challenges

The report examines that that industry participants need for “real-time” may differ, quoting: 

  • Sandra Laielli, Chair, Liquidity Working Group, Bankers Association for Finance & Trade (BAFT): “For many institutions - banks and corporates alike - the demand is not necessarily for “real- time” liquidity, but rather “just-in-time” liquidity, with the ability to forecast flows to meet financial obligations precisely without liquidity spikes or the need for large buffers.”
  • Harry Newman, Head of Banking, SWIFT: “Over the next two to three years, definitions and understanding of real-time liquidity is likely to coalesce across the industry; however, this will require a concerted effort to seek co-operation and consensus.”

The issues in regulation of intra-day liquidity and how prioritising real-time liquidity varies between the players are discussed.

Real-time for corporates 

The corporate treasurers real-time liquidity challenges and focus are:

Source & Copyright©2018 - Deutsche Bank 

The discussion of the centralisation of liquidity and in-house banking, using BAT as a case study example, is useful. The investment and funding options show the issues.

The suggestions on how to adopt a “more dynamic approach to liquidity management, by:

  • reviewing existing cash pooling arrangements to understand the potential for complementary techniques such as virtual accounts and OBO solutions;
  • considering the cash flow profile of the business and opportunities to smooth this profile, such as by using more predictable collection methods;
  • reviewing cash flow forecasting arrangements and process and/ or technology enhancements that could lead to greater accuracy;
  • reviewing bank communications to assess the value of more frequent account updates, including looking at dashboard and “cockpit” solutions from treasury management system (TMS) and enterprise resource planning (ERP) providers to enable real-time oversight and alerts;
  • working with partner banks to understand available solutions and advisory services
  • evaluating back office systems and processes in treasury and SSCs to understand the impact of real time processing and liquidity management.”

Are useful pointers.

What to do next?

The final two section “Embracing Innovation” and “Shaping the industry through collaboration” show how corporates, fintechs and banks are scrambling to work out what to do. 

BAT’s, Philip Stewart accurately sums what is happening, 

  • “The future of transaction banking could be fundamentally different as new technologies and real-time, 24/7 market practices emerge. For example, versatile, real-time integration could transform the concept of digital banking, including ‘banking as a service’ platforms that deliver a range of information and transaction services in a convenient, real-time way. In this new environment, banks will need to consider their role, whether as platform provider, either directly or with a fintech partner, or as deliverer of services through it.”

The conclusion and the plea

The report concludes that “rapid industry successes such as SWIFT gpi demonstrate that collaboration is both achievable and effective to deliver transformational, industry-wide initiatives.” So they propose:

  • “Today, pioneering industry participants should focus our collaborative efforts on exploring and expanding on the potential for an equivalent initiative for the exchange of liquidity – a Global Liquidity Innovation or GLI initiative. A global liquidity portal that spans the banking community is a compelling and timely proposition, solving many of the challenges, and unlocking the opportunities associated with real-time liquidity.”

They explain how it could be done:

  • “For example, the objectives of SWIFT gpi included predictability of flows, traceability of transactions and transparency of charges. These same objectives would be relevant to the development of a GLI. There are already shoots emerging in the development of this type of solution. For example, EBA Clearing presented a proof of concept of a liquidity dashboard with SWIFT earlier this year. This dashboard provides an overview of a bank’s payment capacity and position both in EURO1 and in RT1 based on existing EURO1 and RT1 APIs.”

The report ends with a plea and call for action:

  • “For a ‘GLI’ approach to be successful, it will require collaboration, open platforms to which users can easily connect, and consensus on how the industry must adapt and reinvent itself to support real-time, 24/7 clearing and settlement, and how liquidity risk management will be transformed.”

CTMfile take: Quiet report with important pointers and then an explosive ending which could have even more impact than SWIFT’s Global Payments Initiative.


This item appears in the following sections:
Cash & Liquidity Management
Cash Concentration in Liquidity Management
Global Cash & Liquidity Management
Liquidity Risk Management

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