5 Insights into BCBS248 – How Regulators Tackle Intraday Liquidity

rules and regulations book
Pete McIntyre, the liquidity expert

Written by Pete McIntyre

May 10, 2021

It’s three years since the Basel Committee published their BCBS248 requirements, which outlined the need for banks across the world to report formally on their intraday liquidity positions. This is a big deal for banks, requiring a complete rethink of their approach to liquidity management, with many questions asked of a bank’s data and technology capabilities.

But here is the confusing thing, how much pain (or gain?) a bank is currently feeling from BCBS248 has little to do with the bank’s business model and all to do with where in the world the banks sits.

How can that be? After all, just like its liquidity big brother Basel III, BCBS248 will cover the entire globe once fully adopted.

Those last three words are important, as what I am seeing in all my interactions with firms across the world, is that rollout of the BCBS248 regime is incredibly patchy and different regulators have differing priorities for BCBS248 regime and intraday liquidity risks in general.

There is little information available in the public domain as to individual regulator timetables and their detailed requirements, so defining the regulatory landscape is more of an art than a science.

1. Where is BCBS248 live now (as at May 2016)?

There are a handful of territories where the regulator requires BCBS248 monitoring today:

  • Switzerland went live 1/1/15, but only for the top six Swiss banks who FINMA have quietly been engaging with
  • India went live 1/1/15, theoretically for all banks
  • Hong Kong went live in October 2015, but in general only for locally-owned banks
  • In the UK, the PRA has had a ‘voluntary’ regime in place since October 2015, for those banks that it asks to ‘volunteer’

2. Where else will BCBS248 become live in 2016?

Often the regulator will build up the BCBS248 pressure on firms in private, but I am already aware of two territories where banks are being asked to report by the end of 2016, and I am sure that more will move in the next few months:

  • In Saudi Arabia the SAMA is pushing banks to a 1/1/17 deadline
  • Similarly the BRSA in Turkey is in the process of implementing the monitoring tools and expects this to complete in 2016

3. Where are regulators focusing on intraday liquidity without pushing BCBS248?

There are many territories where the regulator has dusted off the 2008 Sound Principles for Liquidity Management, where Principle 8 says “A bank should actively manage its intraday liquidity positions and risks”.

This can actually be a much more powerful lever for the regulators than BCBS248 compliance, as it means the bank must know its intraday indicators in real-time rather than weeks after the event!

I would include the following territories as falling into this category, although how aggressively the regulator utilises this lever is open to debate, it appears to vary by bank within a particular territory.

  • Singapore
  • China
  • Australia
  • Netherlands
  • Canada

4. Who deserves a special mention?

The position in the US is a little mixed, there is very little said in public about the BCBS248 regime currently, but the Fed is certainly putting significant pressure on the biggest banks to improve intraday capabilities.

A good example is SR14-1, where the Recovery and Resolution Preparedness regime is forcing the largest banks to up their game in their use and provision of intraday information. And the rumour on the street is that during 2016 the Fed put out formal guidance on BCBS248 and how they will implement the regime.

The story in Europe is frustrating to those who want regulatory support to drive intraday improvements. Up until recently the EBA appeared to be moving to a 2016 drive for compliance across the bulk of Europe. But then budget pressures forced their intraday regime into their 2017 work programme. Expect other territories to follow the UK PRA, by implementing temporary arrangements while waiting for a Europe-wide common approach.

5. What does all this mean?

Unless there is a major about-turn, then all regulators will adopt BCBS248, not just those mentioned above. It is just a question of when. So wherever the bank is regulated, there will be no hiding place.

And one thing that is for sure, once your regulator fires that starting pistol, ignorance of the agenda will be a poor enough excuse for failing to hit the timetable. All banks have been aware of the regime for three years already, and should be on top of their intraday liquidity risks now as part of good management practice.

So far, all the regulators that have implemented their own interpretation of the requirements have stayed pretty close to the BCBS248 guidance. If a bank in a ‘late adopter’ territory could today populate the example reporting templates in the BCBS248 paper, then they would be well on the way to satisfying their regulator when their time comes.

In my next post I will talk about the best regulatory guidance I have seen on BCBS248, so practitioners can start to get on top of what they need to do next.

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