Within banks, effective business resource management needs a detailed understanding of how financial resources (including cash and securities) are being used by individual business lines and how the combination of those business lines contribute to overall requirements.
However, those tasked with improving resource allocations often lack the reliable data that would make a crucial difference to intraday funding decisions. Whilst they can often easily access intelligence relating to historic end-of-day positions, for example the value and composition of the firm’s collateral posted to CCPs at 5pm yesterday, or what their closing nostro balance was, they frequently lack a real-time view of their current funding requirements and what’s driving the internal use of financial resources right now. As a result, the team’s ability to proactively reduce same day funding requirements for the business is extremely limited.
But it doesn’t have to be this way.
With access to both real-time and historical time-stamped data relating to inflows and outflows, business resource management teams could view current account balances and transactions settled at the counterparty and product level, alongside the original underlying transaction data. They could then use this intelligence to construct and review intraday cash flows at the nostro / currency (or custodian / security) business, legal entity and counterparty level. Baton’s Core-Payments® solution offers firms the opportunity to do exactly that.
“They could then use this intelligence to construct and review intraday cash flows at the nostro / currency, business, legal entity and counterparty level”
Take for example the scenario whereby a bank finds out it has gone overdrawn on a particular currency, such as Thai Baht. With the intraday time-stamped data Core-Payments offers, the firm could quickly, easily and accurately determine the event that caused the incident – such as a given counterparty failing to make a payment – take immediate action to rectify the situation and orchestrate the necessary settlements.
Time-stamped data at a counterparty and currency level could also be used to identify behavioural patterns driving funding requirements. An example of which might include using time-stamped data to identify counterparty relationships that create a funding drain through late or failed payments or the ability to anticipate inbound payments with a high degree of confidence so the firm can then profile anticipated funding requirements.
“Time-stamped data at a counterparty and currency level could also be used to identify behavioural patterns driving funding requirements”
Benefiting from the continuous calculation of real-time settlement risk exposure and a clear view of current and forecast funding requirements, the business can then define and orchestrate automated settlement strategies and processes to more efficiently conserve balances. These automated strategies and completely configurable processes could include:
- Processes to increase netting and thereby reduce funding requirements
- Scheduling and sequencing payments
- Splitting payments
- Setting up processes to automatically hold payments, based on configurable criteria
- Linking payments with receipts so that a payout in a hard-to-fund currency doesn’t inadvertently create an overdraft situation
- Automating conditional payments at the currency and/or counterparty level
- Identifying settlement types or characteristics that are problematic, and using time-stamped data as the basis for a discussion with the business area or counterparty responsible, in order to mitigate the issue(s)
In addition to this when seeking to achieve an optimal state with regard to securities, it is vital that organisations have real-time views into all relevant holdings. A clear understanding of securities sources and uses becomes a game-changer as firms seek to enhance margins.
“The business can then define and orchestrate automated settlement strategies and processes to more efficiently conserve balances”
Imagine the scenario –
- an organisation can take a real-time view into which assets are held in each location
- the encumbrance status of each asset is clearly identified
- an immediate view into any restrictions related to an asset is created
- an assessment on the optimal use of each asset is delivered
Days of flying partially blind and relying on aged data becomes a thing of the past. An organisation can ultimately enhance the mechanism by which their exposures across a multitude of business lines are extinguished.
These are just some of the many ways that the ability to access real-time data can be used to improve the efficiency of how financial resources are allocated across financial institutions.
I hope that you have found this blog useful in explaining how access to real-time, time-stamped data can improve financial resource management. To learn more about Core-Payments, please don’t hesitate to contact me at [email protected]