Intraday Funding and Liquidity Costs Are Still Too High. Here’s Why.

$350m a year in intraday liquidity costs – much of which is driven by operating inefficiencies

For many institutions, 10-30% of total liquidity buffers relate to intraday liquidity¹. Recent analysis of 2024-2025 annual accounts and LCR disclosures across 10 large global banks suggests the cost of this intraday liquidity exceeds $350 million annually – highlighting the sheer scale of a problem that most institutions still haven’t solved.

Despite years of post-Basel reforms, intraday liquidity management represents one of the single largest opportunities to improve capital efficiency and drive cost savings in wholesale banking.

Historically overlooked, intraday liquidity is now moving firmly into focus. It’s attracting board-level attention, increased supervisory scrutiny, and is becoming a key enabler (or constraint) for firms keen to access emerging intraday FX swap and repo markets. These markets offer the potential to reduce intraday liquidity costs and, in some cases, generate a source of return. But capturing this opportunity will require a level of visibility, precision and control many institutions currently lack.

The opportunity is clear. The challenge is how, because reducing intraday liquidity costs requires the ability to continuously observe and control liquidity flows in real time as conditions evolve.

The Structural Cost of Passive Intraday Liquidity Management

Most treasury functions operate robust liquidity frameworks with clear governance, but many struggle to dynamically measure and manage liquidity as payment flows evolve throughout the settlement day.

Liquidity data is often fragmented across accounts, currencies and payment systems. Reconciliation between ledgers and statements is delayed, visibility into inbound payment timings is limited, and payment release doesn’t always account for real-time funding conditions.

As a result, treasury teams make settlement decisions based on expected liquidity positions rather than verified balances. The consequences are increasingly predictable:

• Limited real-time liquidity visibility → Conservative liquidity planning → Excess intraday liquidity buffers
• Inadequate forecasting precision → Uncertain funding requirements → Increased variance and associated funding costs
• Reactive payment controls → Payments released without regard to available liquidity → Higher peak intraday liquidity use
• Manual reconciliations → Delayed decision-making → Higher operational costs
• Unscalable netting processes → Incomplete netting coverage → Inflated gross exposures and higher intraday liquidity usage

Without real-time visibility and control over payment flows, institutions often fall into a costly cycle where this uncertainty is reflected through increased capital use. With, for example, surplus balances sitting idle in certain accounts while others rely on external funding to avoid a shortfall. This is often due to a lack of visibility and an inability to mobilise the right funds, to the right location, at the right time.

Why the Current Model Is Becoming Increasingly Unsustainable

Instant payments, extended trading hours, and real-world institutional adoption of tokenised assets are pushing markets towards continuous settlement, where liquidity positions could shift 24/7. In this environment, simply relying on larger capital buffers to absorb uncertainty becomes an expensive substitute for operational control.

At the same time, intraday FX swap and repo markets are emerging, enabling institutions to borrow, lend and optimise liquidity for defined windows within the settlement day, turning idle balances into a source of return.

However, participation will require far greater precision than many firms can achieve today. Treasury teams will need to know exactly when and where liquidity will be available or required, and be able to act on that insight immediately. In practice, fragmented data, delayed reconciliations, and rigid payment processes would prevent this from happening, potentially causing liquidity to be misallocated, delayed decisions and missed opportunities. 

As intraday markets scale, the gap between institutions that can operate with precision and those that cannot will become increasingly visible.

Moving From Passive Monitoring to Active Intraday Liquidity Control

Forward-looking treasury teams are moving beyond passive monitoring towards active intraday liquidity control by bringing together three critical capabilities:

Real-time liquidity visibility

Treasury teams need a consolidated, enterprise-wide view of balances, exposures and obligations across accounts, currencies and entities. When flows and balances are continuously reconciled and monitored in real time, decisions can be based on actual, verified liquidity data rather than on expectations.

Continuous intraday liquidity forecasting

By combining historical settlement behaviour with live payment flows and scheduled obligations, treasury teams can forecast expected inflows, identify potential shortfalls and anticipate peak funding requirements throughout the day. Confident forecasting improves funding precision, reducing liquidity swings, unplanned overdrafts and unnecessary buffers. 

Active control of payment outflows

When payment releases can be dynamically sequenced, prioritised, throttled or conditionally triggered based on available liquidity, treasury teams can actively manage settlement flows. This reduces peak intraday liquidity usage, avoids unnecessary pre-funding of settlement balances and improves utilisation of exposure and settlement risk limits.

Together, these capabilities allow treasury teams to move from reacting to liquidity events to actively shaping liquidity outcomes.

Importantly, this transition does not require a multi-year transformation. Many institutions are implementing these capabilities incrementally, starting with specific payment flows or currencies and delivering measurable improvements in liquidity usage within relatively short timeframes.

The Role of Netting in Liquidity Optimisation

Netting is one of the most effective mechanisms for reducing gross settlement funding requirements – it reduces the need to pre-fund settlement balances, and compresses exposures across counterparties. When combined with real-time liquidity visibility and dynamic payment sequencing, it also helps treasury teams control peak intraday liquidity usage, allowing institutions to operate with smaller buffers.

Operational costs fall as well. Compressing settlement volumes reduces transaction processing charges, reconciliations, and investigative work into settlement breaks.

In practice, the greatest benefits arise when netting, real-time monitoring, forecasting and payment orchestration operate together, allowing liquidity to be recycled throughout the settlement day and materially reducing the capital required to support settlement activities. 

The Shift Treasury Leaders Are Now Making

For decades, intraday liquidity management has primarily been treated as an operational, risk and prudential discipline. That’s now changing. Leading treasury teams increasingly view liquidity optimisation as a means to improve balance sheet efficiency.

With real-time visibility and dynamic settlement control, institutions can:

• Reduce intraday liquidity buffers
• Lower funding costs and credit usage
• Compress settlement volumes through netting
• Improve utilisation of exposure and settlement risk limits
• Release capital for more productive use

These same capabilities also enable firms to build operations that support digital and tokenised assets and participation in emerging intraday FX swap and repo markets. 

For treasury leaders, the question is no longer whether intraday liquidity optimisation is possible, but how quickly their institution can move from passive monitoring to active liquidity control.

Institutions already making that shift are demonstrating that intraday liquidity can be managed far more precisely than traditional operating models allow.

¹The benchmark work here is Oliver Wyman (2018). Intraday Liquidity – Reaping the Benefits of Active Management.