Intra-Day Liquidity

Objectives

By the end of the course, participants will be able to:

• Explain the liquidity management structures of various key currency payment systems
• Demonstrate an understanding of intra-day liquidity (IDL) and risk
• Apply how new Basel 3 regulations will impact IDL management
• Explain the process of managing IDL versus payment flows and position monitoring
• Explain the benefits of efficient IDL management
• Reflect on the practical examples and exercises covered

Methodology

The key concepts, learning points and calculations are explained through instructor-led teaching, with consolidation by individual and group exercises and case studies.

Agenda

• Introduction: IDL and the treasury environment — corporate treasury function; impact on liquidity risk; introduction of intra-day liquidity risk; brief overview of the Basel Accord (in particular Basel 3); Lehman's case study
• Regulatory requirements and Basel 3 disclosures — IDL monitoring tools; Prudential Regulation Authority requirements; case study (reporting intra-day payment flows under Basel 3); Bank of England 2007 reforms on Real Time Gross Settlement; framework for Bank of England operations in the sterling market; commercial money v central bank money; disclosure requirements under the Basel Accord; case study (Basel 3 reporting)
• Cost of liquidity and minimising opportunity cost — case study (currency payment instructions); cash clearing functions; liquidity savings mechanisms; efficiency and liquidity requirements; case study (impact of Lehman's on new capital requirements); regulatory stress testing and impact of ring-fencing; Clearing and Settlement Depositary Regulations (CSDR); overview of opportunity cost of collateral; strategy for minimising liquidity compliance costs
• Global payment systems and settlement flows — overview of payment systems; EURO1 / TARGET2; Zengin / BOJ; Fedwire / CHIPS; Swiss Interbank Clearing