Liquidity risk management needs a collaborative approach, says SWIFT representative

16 September 2011

Effective liquidity risk management requires a collaborative approach between banks and financial institutions, a SWIFT representative has said.

Catherine Banneux, senior market manager, banking markets at SWIFT made the comments following the recent publication of the Managing liquidity risk white paper.

The research identified a number of concerns surrounding data management which SWIFT stated will hinder the implementation of an effective liquidity risk management infrastructure.

Ms Banneux said that liquidity risk was not a priority for many institutions before the global credit crash occurred in 2008.

“It was initially a consequential risk which many organisations believed would be eliminated by addressing other types of risk such as market, operational and credit/counterparty risks. However, the crisis demonstrated that this wasn’t the case and organisations need to be more proactive in this area.”

The study revealed six barriers to effective data management; these included ready access to liquidity analytics and business intelligence, an intraday view of cash across currencies and an intraday view of the unencumbered collateral positions that could be mobilised in a timely manner. Issues extend to the lack of automation of the margin call process for over-the-counter (OTC) trading which has an effect on collateral position management.

Ms Banneux stated that solutions to these issues identified by the study participants are related to best practice and standardisation in terms of intra-day cash and collateral reporting.

A Liquidity Implementation Task Force consisting of nineteen global banks and a similar UK group started by nine brokers have been created to look into tackling these solutions.

The SWIFT representative said that the two groups will be looking to come up with a “pragmatic approach” to these issues.

She said: “It will take time but I’m convinced there is a real appetite from the industry among liquidity, cash, and treasury practitioners to sit round a table to solve these problems.”

By Jim Ottewill

A specific panel at Sibos will discuss the various issues surrounding liquidity risk management

Liquidity Risk - Have we learned lessons from the last crisis?
Tuesday 20 September 16:00 - 17:00 Conference room 1

Click here for more information on the panel

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