ASIFMA and SmartStream warn on fragmentation in Intraday Liquidity Management

The Asia Securities Industry & Financial Markets Association (ASIFMA) and its member firm SmartStream Technologies launched a paper discussing the challenges and opportunities of Intraday Liquidity Management (ILM). SmartStream is a financial Transaction Lifecycle Management solutions provider.

The paper includes input from the industry experts such as Keith DeSouza, executive director for Liquidity and Funding at DBS in Singapore, Simon Gray, partner at Baringa Partners; Nadeem Shamim, global head of Cash and Liquidity at SmartStream Technologies, and Philippe Dirckx, managing director of Fixed Income at ASIFMA.

Since the Global Financial Crisis, the regulatory framework has evolved significantly requiring banks to measure, monitor and report their exposures from a market, credit, and liquidity perspective. This had a significant impact on their balance sheet and capital, which has led them to review their risk management models, reassess their operating model and optimize their cash management.

“With respect to the challenges faced, our paper identifies a few reasons as to why ILM cannot be managed in a more efficient and streamlined way as well as the costs associated with cash,” said Nadeem Shamim of SmartStream in a statement.

“Fragmentation is probably the main element that has prevented banks from managing their ILM more efficiently. This fragmentation can be found at many levels: at the regulatory, treasury, operations, technology, data and organizational levels,” added ASIFMA’s Philippe Dirckx in a statement.

Evolution and Impact of the Payment Architecture

The payment landscape is rapidly changing and developing with instant payments and Distributed Ledger Technology (DLT) becoming ubiquitous while central banks and securities market infrastructures are shortening their settlement cycles. This could lead to further fragmentation of liquidity pools unless financial institutions upgrade their technologies and back-office applications.

Solutions around Emerging Trends and Problems

The development and relative affordability (or cost flexibility) of cloud computing allows financial institutions to consolidate data historically siloed in various systems and locations. To digest this consolidated data, banks will have to leverage new technologies such as artificial intelligence or machine learning to move from historical data-based modelling to forecasting/predictive modelling.

“Banks are facing a challenging environment, whether from a macro-economic, regulatory, operational or technology perspective, as the cost of managing their intraday liquidity has increased. ILM solutions and SaaS models reduce the total cost of ownership and the cost barrier to implementing the latest tools in managing liquidity and stress testing,” said Shamim.

“This is a unique opportunity to explore new technologies and operating models that can help address these challenges and implement tools to manage and monetize their liquidity risk proactively and efficiently,” said Dirckx.

Read the full paper

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