Intraday liquidity reporting Solutions from SWIFT to support compliance

with BCBS monitoring requirements

Compliance Forum Germany

Geertjan van Bochove, Manager Business Intelligence, EMEA

What is BCBS intraday liquidity about?

BCBS monitoring tools for intraday liquidity (2013) To enable banking supervisors to better monitor a bank's management of intraday liquidity

risk and its ability to meet payment and settlement obligations on a timely basis

• Detailed set of 7 monitoring tools

• Consider impact under 4 stress scenarios: own, counterparty, customer, market stress

• Report by systems, correspondent banks, currencies, branches and subsidiaries

Implementation • Internationally active banks, in all countries and for all currencies they operate in

• Report monthly to regulator, from 1st of January 2015

BCBS monitoring tools for intraday liquidity management was published in April 2013.

2008 financial crisis • Market turmoil that began in mid-2007 re-emphasised the importance of

liquidity to the functioning of financial markets and the banking sector

• September 2008, Basel Committee on Banking Supervision (BCBS)

published Principles for Sound Liquidity Risk Management and Supervision

Applicability Monitoring tools

All reporting banks 1. Daily maximum intraday liquidity usage

2. Available intraday liquidity at the start of the business day

3. Total payments

4. Time-specific obligations

Banks providing

correspondent

banking services

5. Value of payments made on behalf of correspondent

banking customers

6. Intraday credit lines extended to customers

Direct participants 7. Intraday throughput

BCBS monitoring tools for intraday liquidity management

As of January 2015

• Understand intraday exposure for your bank?

• Position of branches and subsidiaries?

• Produce report for BCBS?

How does this impact you?

Data sourcing

alternatives

BCBS | broad reporting requirements

BCBS

User

Self-clearing

RTGS reporting

Central Bank account

Nostro’s

> 20 accounts per entity

> 200 accounts per group

Reporting on customer credit

lines usage Group-wide

System A

Branch B

Request

Monthly Excel

E-banking

platforms

Intra-day liquidity usage (retrospective) 1-day’s of reporting messages mapped

* Balance of EUR denominated MT900 and MT910 received by group X from group Y (aggregated per 5 min interval)

Demo report

Sourcing the right data from the Swift network Liquidity messaging concept explained

You

Correspondent

Counterparty

End of day

balance (MT950)

Only 3% of cross-

border payments sent

from Germany are

confirmed

24% of domestic

payments are

confirmed

7

* Full year 2013, non-T2 flows, MT103 and MT202

Intra-day confirmations in Germany and Europe

15% of cross-border

payments received in

Germany are

confirmed

24% of cross-border

payments sent from

Europe are confirmed

15% of cross-border

payments received in

Europe are confirmed

USER

PROVIDER

USER

PROVIDER

20% of intra-

Europe payments

are confirmed

MT942 | Issues identified

Time-stamp of individual transactions missing

-300

-250

-200

-150

-100

-50

0

50

100

150

00:00

00:30

01:00

01:30

02:00

02:30

03:00

03:30

04:00

04:30

05:00

05:30

06:00

06:30

07:00

07:30

08:00

08:30

09:00

09:30

10:00

10:30

11:00

11:30

12:00

12:30

13:00

13:30

14:00

14:30

15:00

15:30

16:00

16:30

17:00

17:30

18:00

18:30

19:00

19:30

20:00

20:30

21:00

21:30

22:00

22:30

23:00

23:30

MT942 received at

5:00am | with non-

reported items

MT942 received at

5:00am | with non-

reported items MT942 received at

4:30am | all reported

through R-T messages

already

MT942 received at

4:30am | all reported

through R-T messages

already

MT942 received at

5:00am | with non-

reported items

MT942 received at

5:00am | with non-

reported items

MT942 statement:

- +25 (Coupon)

- +25 (cust pay)

- -25 (Tax)

- -25 (book trf)

Network complexity of intra-day reporting

DE HUB

(all BICs running

over the same

interface)

US entity

Other entities

running stand-

alone interface

USD

agent

CAD

agent

AUD

agent JPY

agent

RUB

agent

AUD

agent

JPY

agent

Client-

bank

Client-

bank

Client-

bank

User

Provider

BCBS monitoring tools- The pain points

Data availability

Understand intraday exposure across Nostro accounts for

all currencies

Reporting both globally and at the level of each legal entity

Vostros aggregated intraday credit lines usage

Resourcing to produce reports for BCBS

Short time line

Not a revenue generator

Duplication of efforts: centrally vs. Locally

Development needed at you institution

3) Reporting and analysis

- Normalize data

- Build BCBS reporting

- Build control check on data

coverage

2) Set-up technical infrastructure

- Collect data (FINInform)

- Route data

- Extract and parse relevant

information

- Safe store in database

Parsing

Database Database

Gateway /

Access

Reporting

Analysis

1) Source correct data from agents

- Analyze data gaps

- Define missing intra-day reporting

- Define business rules

- Go-out to correspondents

Data gap

analysis

Technical

set-up

Reporting

design

Regulatory reporting,

analytics,

management, etc.

Supporting the development of the

Intraday Liquidity reports

(2) Opening

balance

Statement

MT940/950

(3) Credit / Debit entries confirmations

Amount/ Date-time/ Currency

Correspondent BIC

MT900/910/ 942/ 103/202/ 545/ 547

(1) Closing

Balance

Statement

MT940/ 950

(8) Back/Forward

value

entries

(5) Balance

(7) Date/time message stamping

is different from value date?

Calculation

Indicate

discrepancy to

user through the

interactive

dashboards

(6) Matching

Discrepancy

between calculated

balance & MT950

BCBS

aggregated measures/

reports

Transactional reportsdetailed report per transaction +

transaction reference number

Report entries

& calculated balance

based on back value

items

(4) Identify duplicates

from 103/202/ 900/910

& reported again in 942 or

reported twice with 942

Specifications definition or

support to the

BCBS reports implementation

Specifications definition or

support to the

BCBS reports implementation

Intra-day liquidity reporting tool The scope

Liquidity reporting objectives:

Comply with the BCBS nostro reporting requirements

Provide a retrospective monitoring dashboard on cash positions

Enable the bank to do analytics on the data

Limit the investment and implementation time

We will not report to the regulator, this is the bank’s responsibility

The tool is currently not aimed at Real-Time monitoring

The tool does not include stress testing

13

User Nostro

14

Effective Intra-Day Liquidity Management =

quality data + business rules

Correspondent bank

Your institution

T +/- X

Messages can

be received on

the same, but

can also be

received a day

before

Statements

Some specific

flows will be

recorded only on

an end-of-day

statement,

without intra-day

advices

Difference in behavior Different correspondents and even accounts will have

different behavior in sending reporting flows M

T900

MT

910

MT

103

MT

202

MT

545

MT

547