Think of an oversized intraday liquidity buffer as a heavy anchor—both protective and restrictive. While the anchor ensures stability, too much weight hinders your bank’s agility and responsiveness.
A 2023 report from the Basel Committee indicated that the world’s largest banks held a staggering $4 trillion in liquidity buffers, with up to 30% allocated solely to managing payments and settlements. This highlights the importance of effective intraday liquidity management. As interest rates have risen sharply since the COVID-19 pandemic, the cost of maintaining these buffers has increased. With central banks like the European Central Bank (ECB) enforcing minimum reserve requirements without providing interest on those reserves, banks face a growing opportunity cost for holding excessive liquidity.
“If your institution struggles with inadequate tracking of real-time balances, you will also struggle with accurate liquidity forecasting. A lack of effective tracking systems can result in a foggy understanding of available liquidity, causing difficulties in predicting cash flow needs. This leads to higher costs as banks attempt to correct imbalances and ensure compliance with regulatory requirements.” —Barry Lewis, Associate Partner, Elixirr
When information travels at the speed of light, slow is not your friend
Factors such as shorter settlement times and instant payment schemes, like FedNow and the European Union Instant Payment Regulation, are transforming liquidity management.
Banks no longer have the luxury of waiting until the end of the day to assess liquidity positions—they must adapt to instant settlement mechanisms that move capital in real time. As these systems gain traction, the need for efficient, real-time liquidity monitoring becomes crucial to minimise unnecessary buffer sizes and ensure that banks remain agile and competitive.
“It’s surprising how little has changed in the industry regarding real-time liquidity management. In 1992, many banks relied on Excel spreadsheets to track their cash and liquidity positions. Fast forward to 2023, and it’s shocking that some banks still use the same manual processes, despite the advances in technology and the speed at which the financial landscape now moves. This lack of progress is especially concerning given the critical need for real-time insights in today’s fast-paced and interconnected world.” —Moorad Choudhry, Chairman, DCRO Stakeholder Supervisory Board, Author, “The Principles of Banking”
In this high-speed environment, an oversized buffer will weigh down growth, trapping liquidity that could otherwise be deployed in investments, lending, or market opportunities. The challenge is finding the balance between maintaining enough liquidity to meet intraday obligations while reducing the drag of excess reserves.
Balancing stability and agility: The need for real-time liquidity management
At Planixs, we recognise that reducing inefficiencies hinges on real-time data. Our intraday liquidity management solutions give banks the insight needed to dynamically adjust liquidity buffers based on actual payment flows and projected liquidity demands. This proactive approach helps treasuries manage liquidity more effectively, lowering the costs of maintaining excessive buffers while still adhering to regulatory requirements.
Deloitte reports that many banks face challenges in tracking liquidity in real time across various accounts and currencies, limiting their ability to respond effectively to market changes. Planixs addresses these issues by offering a consolidated, real-time overview of all liquidity positions, enabling more accurate forecasting and optimised management.
Pete McIntyre of Planixs states, “Many banks still over-provision liquidity buffers due to outdated systems that lack real-time visibility. This often leads to an over-allocation of capital that could be better utilised in revenue-generating activities such as lending or investing. By implementing Planixs’ solutions, banks can more accurately assess their liquidity needs throughout the day, minimising the need for costly buffer reserves.”
Real-time data delivers real-world value
The real-world value of our solutions can be seen in the significant savings and operational efficiencies we’ve delivered for our clients. A prominent global bank needed an intelligent solution for intraday liquidity management. The bank achieved three primary objectives:
- Intraday Liquidity Management Develop a holistic view of intraday activities across various currencies, time zones, and legal entities.
- Funding and Forecasting Optimisation Enhance the ability to measure, project, and control the full spectrum of intraday liquidity risk.
- Regulatory Compliance Align with the Basel Committee’s BCBS248 intraday monitoring regime to ensure robust regulatory reporting.
“Real-time data bridges the gap between theory and practice, providing senior management (and regulators) with deeper insights on the funding structure which fosters greater confidence. It allows them to accurately identify and monitor areas of stability and vulnerabilities, ensuring that the organisation remains in a safe and sound position at all times by putting into effect appropriate early warning indicators.” —Sridhar Aiyangar*, Group Head, Balance Sheet and Liquidity Management, Bank ABC
Another client with multi-region operations struggled with intraday liquidity management. Planixs’ solution provided real-time visibility and alerts, enabling the client to optimise liquidity, reduce risk, and lower their liquidity buffer, while improving control and processes.
What leading banks say
These three quotes are from clients of ours, banks like Santander, AIB, and Lloyds, demonstrating how implementing Realiti capabilities can generate value exceeding $tens of millions per annum:
1. According to one client “Companies not using Realiti are limiting their treasuries from tapping into this powerful source of real-time liquidity data, and therefore, they’re at a massive disadvantage. Choosing to manage liquidity the ‘old-fashioned way’ or manually when Realiti exists doesn’t make any sense.”
2. Another client highlights that, “If you’re paying your treasury staff to manually manage liquidity data, essentially, you’ll be paying skilled professionals to do basic administrative tasks.”
3. Describing the platform’s benefits, a client notes, “The platform’s additional features open up new opportunities by offering real-time visibility into counterparties, optimising funding, and identifying excess liquidity for new products.”
We are seeing a paradigm shift in how financial institutions manage liquidity and navigate the complexities of modern-day transactions. Realiti has proven its value to financial institutions (FIs) repeatedly. The insight and analytics available from this data are transformational across all business units of the bank including Treasury, Operations, Risk, Front Office and Office of the CFO.
In short – don’t guess, know.
*Views expressed are personal.
