Only 39% of banks can confirm daily liquidity status, says Swift

Only 39% of banks can confirm payments from foreign accounts in real time, according to a survey from Swift

Only 39% of banks can confirm payments from foreign account service providers in real-time, according to a survey by the Society for Worldwide Interbank Financial Telecommunication (Swift).

Swift said this prevents banks from meeting the Basel Committee on Banking Supervision’s rules around intraday liquidity.

The guidelines from BCBS state banks should know their combined daily inputs and outputs, and be prepared to deal with any disruptions to intraday liquidity. Banks are expected to begin monitoring this using the BCBS monitoring tool in January 2015, with full implementations by 2017.

But according to Swift, 32% of banks have not started the implementation process of using BCBS monitoring systems.

Catherine Banneux, senior market manager at Swift said: “The industry is moving in the right direction, but with a large number of banks still evaluating or without a plan for their BCBS liquidity monitoring project, there is a lot more progress to be made.”

Legacy IT obstructs overview

According to survey findings, 89% of those asked think banks should work collaboratively to reduce the cost of implementation.

The BCBS had similar requirements in 2007 when it implemented international regulations requiring banks to ensure they have enough cash reserves to cover the financial cost of problems in the business, including fraud and IT failures.

Many banks are reluctant to update legacy IT, and have trouble implementing new IT systems as it is difficult to ensure that new and old systems integrate.

One senior IT professional in the UK banking sector said knowing bank liquidity on a daily basis is a substantial challenge.

“So much money moves so quickly that every second of the day they have different amounts of money available. The banks are always receiving and paying money. There are so many transactions that if banks had to say how much money they have at a given time it would be very hard.”

But they have been under a tremendous amount of legislative pressure to change the way they handle data following the financial crisis.

Financial services regulation is an industry in itself, with thousands of regulations published over the last few years, but organisations could streamline the process of meeting regulations by getting IT involved in the process earlier.

IT departments and their suppliers need to be closer to the decision-making processes, according to industry experts, and research has found that many banks still aim to maintain legacy systems and make incremental changes as opposed to core systems replacement.

But as banks invest in updated services such as payments technology, banks will need to invest in the core IT that underpin payments if it is to work, such as settlement and authorisation systems.

Read more on IT efficiency and sustainability