Managing intraday liquidity is a complex, critical activity that has become increasingly important to banks due to a more stringent regulatory environment, the rising opportunity cost of holding excess liquidity, and changes in the payments clearing and settlement landscape.
Although guidance has thus far been relatively non-prescriptive, both US and global regulators have recently begun to address more in-depth concerns related to intraday liquidity management. Further, as interest rates rise and the opportunity cost of holding excess liquidity increases, many banks will benefit from more sophisticated tools to measure cash positions while still planning for the intraday credit and payment needs of their clients. In particular, growing client expectations for earlier availability of funds, more accurate liquidity reporting, and self-service payment options all call for greater control over intraday liquidity.
While the largest and most complicated firms have begun to invest in advanced intraday liquidity management tools, considerable work remains for other banks that are less likely to have made upgrades, such as regional and foreign banks.
This A closer look analyzes the following questions: