Essential tool to help banks comply with regulation and reduce interbank transaction cost
SWIFT and the LITF (Liquidity Implementation Task Force), a group of large and medium size clearing banks, custodian banks and global brokers, released the industry standard for intraday liquidity. This standard will help banks in complying with intraday liquidity regulatory frameworks and in optimising liquidity monitoring of their correspondent banking accounts positions, through the provision of debit and credit confirmations at transactional level in real-time.
Today, around 35% of the cost of an international payment transaction is related to nostro- vostro reconciliation and liquidity, including the opportunity cost related to trapped liquidity*. In order to more efficiently manage their positions avoiding liquidity excess or unnecessary overdrafts, financial institutions first of all need better visibility of their liquidity positions on those accounts, on an intraday basis. The intraday liquidity standard made available today is a crucial component to allow banks to exchange this information on a transactional level in real time.
Developed by SWIFT in consultation with over 20 liquidity users and providers, the standard provides a common set of business rules and technical specifications applying to cash reporting in the interbank space, and includes nostro and custodian cash accounts. It supports real-time transaction-by-transaction liquidity reporting and resolves key data challenges caused by the lack of real-time reporting, timed confirmations and data accuracy.
David Gaselee, Head of Agency and Intraday Liquidity, Financial Institution Product Management at Barclays Corporate Banking, said: “The intraday liquidity standard developed by SWIFT and the LITF will help our clients manage their liquidity positions more efficiently. Through more streamlined and standardised reporting across the industry, we hope to be able to make real-time reconciliation much simpler and reduce costs.”
The intraday liquidity standard developed by SWIFT and the LITF will help our clients manage their liquidity positions more efficiently. Through more streamlined and standardised reporting across the industry, we hope to be able to make real-time reconciliation much simpler and reduce costs.
This standard is also used as basis for SWIFT’s DLT PoC on real-time nostro, recently announced as part of SWIFTgpi – the cross-border payments innovation initiative. The PoC, leveraging the common rulebook provided by the intraday liquidity standard, explores the use of distributed ledger technology to help banks manage their intraday positions and reconcile those nostro accounts more efficiently and in real time, optimising intraday liquidity, lowering costs and reducing operational risk.
As member to the DLT PoC, Société Générale fully supports this approach.
"Société Générale believes that standardization in the banking industry is key to the future as it helps reducing costs and building the necessary base for new services. We will fully adopt the IDL standard in due time in 2018. In addition, Société Générale is a member to SWIFTgpi’s DLT POC which dynamically changes the cross-border payments landscape by reducing uncertainty and risk.
We fully support both initiatives which contribute to improving the customer experience as part of our ongoing commitment to enhancing our correspondent banking services." - Didier Balland, Head of marketing for Correspondent Banking, Société Générale.
*McKinsey Global Payments Report 2016