Intraday Liquidity Management

Blockchain Scope for Intraday Liquidity Management

Liquidity Management, across the world, continues to be a key function for bank treasures, and there’s no second thought in this.

As Corporate Banks or Financial Institutions seek to have a safe and secure platform for enabling more robust monitoring as well as measuring capabilities of cash management.

Blockchain platform enables banks to have a secured network and enable Intraday/End of day Liquidity Management System.

In this post, we will elaborate on various participants using in Liquidity Management system in the banking system.

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As Corporate Customers

Being Corporate Customer, avail intraday sweeping as well as the end of day sweeping approach in Liquidity Management system to pool their funds from various sub-accounts to respective master accounts.

According to the customer contract agreement, the bank will set up the sweeps like currency, source and target accounts, sweep frequency timings, and the system automatically starts sweep transactions through a swift message to the respective account depending on frequency setup.

These are traditional methods the banks follow across the globe with the help of a swift network.

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The Banks

As banks are involved in treasury operations for their day-over-day operation-involving buy/sell/foreign exchange and Securities.

Bank would prefer having an intraday liquidity management system for accessing cash/securities amid the day-over-day treasury operation.

This will help the bank to meet the payment as well as settlement obligation with banks/counterparts Custodians/Central Banks as well as other financial institutions.

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Current State of Liquidity Management System

Central Banks monitor the liquidity situations and slowly increase or decrease interest rate for managing capital regulation as well as Forex position of the country.

Banks make a treasury position throughout the market where there are chances identified according to their needs depending on several factors like interest rate, political stability as well as liquidity position.

Corporate customers levy on the bank for managing all their intraday payments as well as receipts to clients, central counterpart clearinghouses, custodians as well as financial markets.

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Blockchain Platform Liquidity Management Systems

Bank Treasury team requires a potent and secure system to get seamless real-time integration with securities as well as the treasury system.

Since blockchain technology has the capability by creating a real-time virtual ledger which records data changes for supporting instantaneous payment and settlement between the parties involved in the respective market.

Intraday LMS with Blockchain

Across the world, banks are adopting the blockchain platform for various banking operations. They can capitalize with help of blockchain technology for implementing the intraday liquidity management solutions

These will help banks with the following advantages –

  1. Banks can lend money on the blockchain platform
  2. Real-time payment
  3. Faster reconciliation of settlements and accounts
  4. Reduced risk of failure of counterpart payments
  5. Transaction status captured in real-time
  6. Ease of Regulatory Reporting with accurate data
  7. Audit Trail is captured for future references

Overall Blockchain platform has offered great features such as real-time recording of the transaction with enhanced security, audit and accuracy.

Since this platform is new to the market, banks need to have a detailed analysis before its implementation. How it will influence the cryptocurrency industry is yet to be seen.

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