In the wake of the 2008 financial crisis, the desire for real-time cash-balance liquidity reporting began to build. Fast forward, however, and its implementation within the banking industry remains limited. In this article for International Banker, Deutsche Bank’s Andreas Hauser argues that now is the time to revive this momentum.
For banks seeking to improve their visibility over liquidity flows, real-time reporting is their best strategy. When compared to global projects, such as the ISO 20022 migration, the cost of implementation is negligible and can be achieved relatively quickly. Investing early, rather than awaiting new developments or mandates, is a beneficial move for banks – and one that will be swiftly rewarded.
Despite being mooted more than a decade ago, widespread regulation mandating banks to adopt real-time cash-balance liquidity reporting has not materialised. With the exception of a handful of the world’s largest banks, few have taken it upon themselves to adopt these processes. Yet beneath this meagre enthusiasm lies a wealth of evidence that real-time liquidity reporting can offer significant benefits that extend well beyond simply monitoring intraday positions. The cost and effort of adoption, meanwhile, is negligible compared to other ongoing bank projects. As a result, while these other projects promise long-term benefits based on considerable investment, real-time reporting looks to be one area where banks can move quickly and effectively to bolster efficiency in the here and now.
But how did we get where we are today? The 2008 financial crisis highlighted several fundamental weaknesses in the global banking system. For example, banks – though typically only aware of their liquidity positions at the beginning and end of the day – were revealed to be highly sensitive to fluctuations during the day as well. To make matters worse, they were unable to react quickly to address them – an issue in a world where global money flow is almost 24/5.