1. SWIFT solutions for Liquidity risk management
Catherine Banneux, Senior Market Manager, SWIFT Bart Claeys, Product Manager, SWIFT

2. Liquidity risk management: The drivers
Global financial crisis
More stringent liquidity risk regulations
Global: BIS
Principles for Sound Liquidity Risk Management and Supervision (2008)
Principles for sound stress testing practices and supervision (2009) International framework
Higher global minimum capital standards (9/2010)
Europe CEBS
Guidelines on Liquidity Buffers & Survival Periods (2009)
Guidelines on Stress Testing (CP32 – 2009)
US Interagency policy statement on funding and liquidity risk management (03/2010)
FSA - Strengthening liquidity standards (Policy Statement19/6 – 10/2009)
Related regulations: regulatory pressure towards central clearing for derivatives (e.g. Dodd – Frank act in the US – 2010)
Liquidity risk management - October 2010

3. Regulatory systems and control requirements
Bottom up risk strategy implementation
Regulatory reporting (i.e. daily in/outflows by counterparty)
Stress tests: identify unexpected movements, set-up early warning indicators, calculate forward exposure
Risk management
Management capability
Position management, both current and predictive
Flow control (identify, prioritize, re-route, block)
Predictive analytics measure daily in/outflows, anticipate intra-day timing
Global versus local
Increased focus on intra day position management for both cash and collateral
Liquidity risk management - 9 September 2010

4. SWIFT 2010 Survey
80% of Financial Institutions are investing in improving liquidity risk management
Source: SWIFT survey, June treasury, liquidity and liquidity risk managers at financial institutions.
Full survey report available from swift.com
Liquidity risk management - October 2010

5. Analytics & forecasting
SWIFT 2010 Survey
Liquidity Risk Management 4 Major operational issues
Data integration
Intra-day visibility
Need for:
- Standardisation (80%)
- Integration services (57%)
60% have less than 50% transactions reported intra-day
Need to improve
Analytics & forecasting
Global position
87% want more traffic data and business insights
68% have difficulty building timely firm-wide position
Overdraft charges
Intra-day credit lines costs
Oversized liquidity buffers
Costly emergency funding
Risk non-compliance
TO REDUCE
Liquidity risk management - October 2010

6. SWIFT Services that can support your liquidity risk management
Intra-day visibility
Data integration
Intra-day reports
Early advices
Underlying process automation
Consulting services
SWIFT solutions
Analytics & forecasting
Global position
Watch
FINInform
Liquidity risk management - October 2010

7. The Dynamic Interdependent ECO System Liquidity Management
Brokers
Banks
Corporates
Fund Managers other clients
Users of liquidity information.
Need info online
« As it Happens »
Global Financial Institutions
ACH
Securities MI
CSD
CCP
Retail MI
RTGS
Providers of liquidity information.
Some monitoring tools, some without...
Providers of liquidity information.
Some monitoring tools, some without...
Liquidity risk management - October 2010
Interoperability of standards & systems should achieve better liquidity management

8. SWIFT supports integrated & real-time liquidity management
Liquidity Function
Major Flows - Examples
Payment flow control : cancel, modify priority
Modify standing order
Get/return reservation
Liquidity credit transfer
Limit management
Collateral substitution
Management
Notice to receive
Trade notification/ Trade leg statement
Predictive
Notifications
Monitoring reports
Pending transactions report
Pending/ forecasted balance report
Margin report/ Collateral &Exposure statement
Monitor all in/out payments
Confirmation of debit/credit
Intra-day cash transaction report (*)
Intra-day securities holdings report (*)
Current
(*) Including underlying cash & securities collateral
Liquidity risk management – October 2010

9. Overview of the high value payment market infrastructures using SWIFT
Central & Eastern Europe
Albania
Azerbaijan
Bosnia & Herzegovina
Bulgaria
Croatia
Hungary
Romania
Western Europe
Denmark
EBA Clearing
TARGET2
Norway
Sweden
Switzerland UK
North America
Canada
US (TCH)
Middle East
Bahrain
Israel
Jordan
Kuwait
Oman
UAE (DIFC)
Asia Pacific
Australia
Fiji
Hong Kong
New Zealand
Philippines
Singapore
Sri Lanka
Thailand
Central & Latin America
Bahamas
Barbados
Chile
Dominican Rep.
Guatemala
Trinidad & Tobago
Venezuela
Africa
Angola Algeria Botswana
Central African States (BEAC) Egypt
Ghana Kenya Lesotho
Mauritius Morocco Namibia
Senegal Sierra Leone South Africa
Swaziland Tanzania Tunisia
Uganda Zambia Zimbabwe
West African States (BCEAO)
Live systems as of September 2010
Liquidity risk management – October 2010
Systems with advanced monitoring

10. Improvement of RTGS liquidity management functions: A key challenge for the industry
For the MI operating the RTGS
MI liquidity movements
Forced payments
Queue management
Gridlock processing
Increase liquidity against collaterals
Change the limit
For the RTGS Direct participant
Monitor their queues and accounts
Suspend or cancel their own payments
Change payment priority
Change alerts
Transfer funds between their accounts
Liquidity risk management – October 2010

11. SWIFT Intra-day Cash-Reporting Service: Standardised Data - Improved liquidity visibility
SWIFT (ISO) Business Standards to support intra-day/real time information MT
Debit /credit confirmation (MT 900/910)
Interim transaction report (MT 942)
Interim balance report (MT 941) MX
Debit/credit Notification (camt054)
Account report (camt 052)
Available November 2011
NotificationToReceive (camt.057) NotificationToReceiveStatusReport (camt.059) NotificationToReceiveCancellationAdvice (camt.058)
Intra-day Reporting
Structured, granular information on underlying transactions, transaction date/time
Based on threshold
Within specific time ,event-driven or periodic
Position Management
Additional account and currencies balances/projected balance
Business practice development (rule book)
New Third party application certification
Liquidity risk management – October 2010

12. SWIFT Collateral Management Service: Standardised Data - Improved liquidity visibility
Current position
Existing Intra-day Reporting Messages
MT535: Holdings of underlying securities collateral
MT 942 /camt052: Holdings of underlying cash collateral
New Intra-Day/Real-time Messages
Cross Asset Class Margin Calls
Margin Disputes
Collateral Reports
Available
December 2010 (pilot)
March 2011 (live)
Predictive position ISO 20022
Liquidity risk management – October 2010

13. SWIFT’s solution for CCP to clearing member messaging: Supporting a consolidated view on positions
Accord matching
Exchange or MTF
Exchange or MTF
CCP1
CCP2
Clearing Member
Clearing Members
New ISO messages to cover
Trade management
Position & settlement management
Margin management
Default funds contribution for equities and fixed income
Live: May 2011
CSDs
Key (SWIFT flows)
CCP to settlement (ISO15022)
CCP to Clearing Member (ISO20022)
Accord to CCP (ISO15022)
Liquidity risk management – October 2010
Interoperability flows (under review)

14. SWIFT Copy Service - FINInform Standardised, Scalable Data – Global liquidity View
Monitor payments & intra- day reports on liquidity positions sent to branches
Guaranteed real-time copy delivery, confidentiality of sensitive information through partial copy
Simple No action or development by sender or receiver
Flexible Full or partial copy, filtering on message content
MT103, 202
MT 900,910, 942,535
Any bank
Branch FIN Inform user
MT096
MT103, 202 MT 900, 910,942,535
Headquarter Copy destination
Liquidity risk management – October 2010

15. SWIFT Integration consulting services
Assessment
Implementation
Assessing cash and liquidity business / operational processes
Intra-day position management
Predictive position management
Payment flow control
Assessing underlying related processes
Guidance for potential process improvements in line with new liquidity risk regulation
Business layer – Formal modeling of cash & liquidity processes and data flows (by type of instrument)
Middle layer - Technical model representation
Messaging layer – Data mapping with SWIFT messages and integration with your applications
Connectivity layer - Configuration, deployment and testing support
Liquidity risk management – October 2010

16. Watch Value Analyser Online insights into amount & currency
Ordering possible now!
First data publication (December 2010)
Allowing you to:
Monitor the total value per currency of your cash flows
Identify your SWIFT market share from a value or currency perspective
Measure your counterparty exposure
Perform customer risk analysis
Liquidity risk management – October 2010

17. Historical view of my business
Watch Value Analyser – Business insights
Yearly evolution of Payments business in Europe per currency
Monitor Your Business
“What is the regional breakdown of the Payments value that you exchanged over the past years? …
Which currencies?”
Perform a similar analysis for each business line, country, entity…
More to come: daily peaks, average daily peak with timing
Liquidity risk management - 9 September 2010

18. Monitoring of the evolution
Watch Value Analyser – Market insights
Market share evolution of EUR Payments business from France
Track Evolution
“How is our market share in EUR payments from France evolving? …
Is the market evolving in a similar way?”
Perform a similar analysis for other business flows, currencies…
Preliminary alerting options
Liquidity risk management - 9 September 2010

19. Counterparty exposure analysis
Watch Value Analyser – Customer risk analysis
Counterparty reciprocity analysis per currency
Customer Risk Analysis
“Who are your main counterparties? …
What is the direction of exposure towards them?
Liquidity risk management - 9 September 2010

20. Monitor counterparty exposure over time
Watch Value Analyser – Customer Risk Analysis
Monthly evolution of exposure with counterparties
2010/Oct /Nov /Dec /Jan /Feb /Mar /Apr /May /Jun /Jul /Aug /Sep /Oct
Trend Analysis
“With which entities do you have the biggest exposure? …
Do you see any trends?”
Total EUR amount
More to come: analysis of daily in/outflow per counterparty
Liquidity risk management - 9 September 2010

21. Q&A ?
Liquidity risk management – October 2010

22. More info? SWIFT experts
On overall liquidity (risk) initiative Catherine Banneux
Intra-day reports & copy service Catherine Banneux
RTGS liquidity management Stéphane Ernst
Collateral Management Banu Apers
CCP to clearing member messaging Joe Halberstadt
Watch initiative Bart Claeys
Visit our stand
Main conference session - Liquidity risk management: The challenges at hand- 4pm, room 2
Other related sessions
“The power of business analytics” – Tue 26 Oct, 17 pm
“SWIFT for Payment Market Infrastructures: Efficient support to successfullyrenew payment clearing and settlement systems – Wed 27 Oct, 14 pm
“Transforming Collateral Management: How bi-lateral and tri-party messages can mitigate counterparty and credit risk” – Thur 28 Oct, 11 am
PowerPoint Toolkit – 23 October 2008 – Confidentiality: restricted

23. Thank you
Liquidity risk management – October 2010

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