Intraday Liquidity Monitoring: Increasing Liquidity Resilience

Geopolitical tensions and market volatility have once again exposed a critical vulnerability for financial institutions: Liquidity risk. 

Last Friday, new US tariffs triggered steep declines in US and UK markets, followed by significant movements as this week has progressed with the Cboe’s Volatility Index (VIX) currently reporting a 5-year high. For many banks, the rapid shifts of recent days will have served as a stark reminder of their vulnerability to disrupted liquidity flows during periods of market stress. 

Adding to the pressure, just one week earlier, Reuters reported, the European Central Bank (ECB) had warned Eurozone banks that they should prepare for liquidity shocks amid geopolitical uncertainties. These developments emphasise the urgent need for banks to implement robust inter- and intraday liquidity management controls to weather unpredictable market disruptions.

Meeting the ECB’s Intraday Liquidity Risk Management Principles

In November 2024, the ECB identified seven “Sound Practices for Managing Intraday Liquidity Risk” designed to help banks under European Banking Supervision to manage intraday stress outflows. The principles focus on critical objectives, including the need for real-time liquidity monitoring, strengthening intraday liquidity forecasting, proactive payment outflow management, and rigorous stress testing to assess resilience under adverse conditions.

Banks that have yet to align their intraday liquidity risk management with ECB guidelines may now be re-evaluating their priorities. However, compliance will likely prove challenging for many due to the constraints of their legacy infrastructure. To help, we’re launching a series of articles exploring advancements in intraday liquidity technology.

From real-time monitoring to stress testing, we’ll cover how modular, interoperable solutions can equip banks with the tools to mitigate intraday liquidity risks and achieve compliance. This first instalment focuses on how Baton’s cutting-edge technology simplifies real-time intraday liquidity monitoring – an essential step toward robust intraday liquidity management.

For a deeper dive I invite you to download our recent white paper: Managing Intraday Liquidity Risk: Meeting the ECB’s Intraday Liquidity Risk Principles

Challenges of Intraday Liquidity Monitoring 

In today’s volatile markets, timing is everything, so it’s essential financial institutions can make informed, data-driven liquidity risk management decisions based on accurate, up-to-date insights. For this, they need to conduct real-time intraday liquidity monitoring. 

Yet, the continued reliance on outdated processes and siloed systems producing inconsistent and fragmented data means many firms are unable to achieve a consolidated real-time view of liquidity positions held across their firm or the balances held with other venues, such as CCPs.

It’s not that institutions cannot produce real-time liquidity data; many do; it’s that they often face difficulties quickly aggregating this data so it can be swiftly analysed alongside other critical information, such as historical client or market data. This type of analysis can prove vital in identifying early warning indicators or firm-wide risks.

Gaining real-time visibility into account balances held across external institutions such as CSDs, Carry and Clearing Brokers, CCPs, and other venues is often fraught with additional challenges because the data is received in various formats and requires differing access protocols. Furthermore, internal and external data processors and sources often refresh at different intervals, and many banks rely on once-a-day batch-based processes to aggregate this information, resulting in incomplete or outdated liquidity insights.

How Baton’s Modular Technology Supports Real-Time Intraday Liquidity Monitoring

Baton’s Intraday Liquidity Management Solution provides financial institutions with a real-time, consolidated firm-wide view of liquidity positions, tracking payment flows, balances, exposures, and obligations, detailed historical insights and customisable real-time alerts. When paired with Baton’s Balance Manager, it extends cash balance monitoring and management to funds held with external venues. Together, these tools help institutions proactively manage and mitigate intraday liquidity risks.

Here are just some of the ways Baton’s technology can support institutions keen to meet the real-time monitoring requirements of the ECB’s November guidelines. With the tools and capabilities provided users can:

Pinpoint intraday liquidity risks

With a real-time, enterprise-wide view of liquidity sources, balances, exposures and obligations by client, account and currency, users can instantly access the data needed to pinpoint liquidity risks and detect unusual settlement activity.

Achieve Real-time, Firm-wide, Consolidated Liquidity Monitoring

Monitoring current balances, inbound and outbound payments and collateral via the Baton dashboard, users benefit from a consolidated and accurate enterprise-wide view of what’s happening right now. This real-time view can be configured to provide all information at the individual counterparty, currency, product, and legal entity level.

The data can then be overlaid with the user’s choice of information, including intraday and short-term liquidity and balance projections, recent trend lines, scheduled obligations and time-sensitive payments. This enables users to anticipate potential upcoming issues, allowing for more accurate forecasting.

End-of-Day Projection Monitoring

By analysing historical data and real-time payment flows, Baton’s technology can generate accurate end-of-day balance projections for each currency. This can help treasury managers anticipate upcoming currency positions and take proactive steps to optimise balances or address potential funding needs to avoid a shortfall.

Identify Available Collateral

Users can also access a consolidated, real-time view of pre-pledged and all qualifying collateral across currencies. This enables treasury managers to more efficiently allocate collateral to support currency-specific intraday funding requirements or use these funds to address potential shortfalls.

Monitor Inbound and Outbound Payment Status’

By continuously reconciling inbound and outbound payments, users can monitor the settlement status of payments in real-time. They can also view outstanding obligations, including the time they become due, along with payments received by individual counterparties throughout the day. This proactive approach to monitoring means firms are better equipped to intervene should delays or issues arise. With recently reconciled liquidity now easier to identify, Treasury Managers can also allocate available funds more effectively, enabling urgent liquidity needs to be met more efficiently.

Implement Automatic Alerts Based on Pre-Set Conditions

Users can set configurable thresholds for various metrics, alerting users when conditions are met. Thresholds could include, for example, the level of real-time currency balances, when specific time-sensitive payments are approaching their deadline or if end-of-day projections are being met. Being alerted to these situations enables users to take timely action and escalate issues quickly.

Be Alerted to Changes in Market and Counterparty Behaviours

Baton’s anomaly detection tools compare real-time data with historical patterns to identify and alert users when market or counterparty behaviour deviates from expected norms. These deviations can serve as critical early warning signals.

For instance, if a counterparty that typically settles payments at the same time each day suddenly fails to do so, it may indicate that the firm is experiencing potential liquidity challenges or other issues are emerging. With this insight, institutions can proactively manage the situation, including activating additional payment controls or adjusting the sequencing of outbound payments to strengthen financial resilience.

Drill Down for Prompt Payment Investigation

Users can drill down and trace the complete lineage of individual payments or exposures with access to granular time-stamped transaction details to investigate an issue’s root cause and tools to ensure that ownership of each issue is assigned and comments or remarks are retained. Such issues could include unexpected balance movements; with Baton’s tools, the issue can also be analysed alongside other historical data, allowing users to make informed decisions quickly during critical situations.

Building Liquidity Resilience Through Technology

Many institutions will likely face challenges meeting the ECB’s sound practices for managing intraday liquidity risk. However, advanced solutions like Baton’s real-time intraday liquidity management platform offer firms the tools they need to overcome these challenges, with modular solutions that can be extended to support evolving future business requirements.

While this article highlights Baton’s real-time capabilities for intraday liquidity monitoring, historical insights, and proactive alerting, these features are just one part of Baton’s comprehensive intraday liquidity risk management solution. In future articles, we’ll explore how these capabilities support intelligent, automated workflows, analysis tools and controls to help firms precisely forecast intraday liquidity demand, execute the automated, optimised and conditional release of outbound payments and conduct comprehensive stress testing and scenario-building.

Take the Next Step Towards Real-Time Intraday Liquidity Management

Ready to dive deeper? Download our white paper Managing Intraday Liquidity Risk, for an in-depth exploration of the ECB’s seven sound practices. Discover how financial institutions can adopt Baton’s modular technology to achieve compliance and transform intraday liquidity management with precision and ease.