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Intraday liquidity - BIS launches consultation on intraday liquidity management

2 July 2012

To read the report, click on this link.

Market reactions to the BIS consultation on intraday liquidity management indicators have been pretty negative, mentioning operational difficulties and an already high burden of compliance with the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) reporting. The new proposal aims at completing the intraday liquidity management framework initiated in the BIS Principles for Sound Liquidity Risk Management (September 2008).

A set of 8 indicators is proposed:
1) Daily maximum liquidity requirement: this is measured by looking at the net cumulative intraday liquidity position. The maximum requirement during the day should be reported on a daily basis;
2) Available intraday liquidity: banks would be required to report the amount of intraday liquidity available to them on a daily basis. This would in turn allow supervisors to verify whether a bank has enough intraday liquidity available to meet its normal intraday requirements;
3) Total value of gross daily payments;
4) Time-specific and other critical obligations, which need to be settled at a specific time during the day and would lead to reputational damage or financial penalties if not executed;
5) Value of customer payments made on behalf of financial institution customers;
6) Intraday credit lines to financial institutions;
7) Timing of intraday payments: average time of a bank’s daily payment settlement;
8) Intraday throughput, showing the proportion (by value) of outgoing payments that settle by specific times during the day.

It is unclear at this stage whether such indicators will eventually be retained, and whether they would become part of the regulatory liquidity standards (like the LCR). In any case, the inclusion of such indicators is not expected in the near term.