New opportunities in intraday liquidity
There has never been a greater need for banks to monitor and manage their intraday and overnight liquidity provisions.
The regulators, still reeling from the deficiencies exposed by the global financial crisis of eight years ago, have undertaken a wholesale review of the way that liquidity is provided, paid for and monitored. They want to make sure that banks can meet their obligations, especially when the market is stressed, and traditional sources of liquidity have dried up.
“For instance, if you are settling a trade of French vs Italian government bonds there was always some daily imbalance. Before T2S this imbalance was a concern, but now we will have a single cash account with the Bank of France and we can settle all these international trades via them. So T2S for me is going to bring about the end of liquidity holes in 23 or 24 domestic markets in Europe. Intraday liquidity risks are therefore reduced. This means there will be less need of a buffer and our cash forecasting will be improved.”