It argues that where banks have invested in a complete review and overhaul of their liquidity controls and systems, adopting dynamic, proactive management of their resources, theyâve been able to achieve a genuine competitive advantage, profiting substantially from their optimised processes.
During one review, an unnamed major investment bank discovered a staggering US$14 billion of unused collateral it was subsequently
able to put back to work.
The Liquidity Gap is the work of Rule Financialâs Liquidity Management practice led by former banker David Goucher.
"While the liquidity crisis may be over, the storm hasnât passed. Prices are still above pre-crisis levels and there is a serious possibility of a further liquidity event....â says Goucher in the document, âMany banks have appreciably improved their liquidity reporting
capabilities and are able to comply with the FSA reporting requirements, but few have significantly enhanced their internal liquidity and collateral management capabilitiesâ.
The paper draws on the legend that âCobblersâ children have no shoesâ suggesting that although the major banks have the ability to offer their customers an excellent service, they can be guilty of not applying state-of-the-art standards to their own risk and liquidity
Dr Chris Potts, Rule Financialâs recently appointed CEO, commented: âWe hear a lot of aspirational talk about âthought-leadershipâ nowadays but The Liquidity Gap really delivers. Itâs a timely and very interesting piece of analysis and a good read too. Weâre looking forward to discussing some of its conclusions with our growing customer base in the investment banking sector, in both London and New Yorkâ.