Banks are urged to speed up preparations for intraday liquidity reporting requirements that will be a matter of compliance as early as January 2015. According to SWIFT's new white paper released July 24, only 20% of correspondent banking payment instructions are currently confirmed with credit/debit confirmation messages that are key in monitoring intraday liquidity.

"To achieve the level of detail required by the retrospective BCBS (Basel Committee on Banking Supervision) measures, banks will need to build the intraday position for each of their accounts with real-time credit/debit confirmations," notes Catherine Banneux, senior market manager, banking, at SWIFT. "This is a critical component of the monitoring requirements that will differ according to a bank's size and profile. Progress needs to accelerate in order for banks to be ready for BCBS reporting."

The BCBS in April 2013 issued a set of intraday liquidity indicators that banks will need to monitor and report, starting as early as January 2015. The implementation of these monitoring requirements in different countries will be decided by national regulators, of which many seem willing to grant an extension until January 2017.

Some of the indicators banks will need to track include the daily maximum intraday liquidity usage, available intraday liquidity at the start of the business day, total payments and time-specific obligations. Those institutions providing correspondent banking services must also report the value of payments made on behalf of their correspondent banking customers and intraday credit lines extended to them. Monthly reports based on these intraday liquidity positions must be furnished to the regulator and on an ad hoc basis. There are no specific requirements with respect to intraday liquidity ratios that need to be upheld, though.

The measures seek to complement liquidity requirements with a longer time horizon, including the liquidity coverage ratio (LCR) that requires banks to hold amounts of highly liquid assets equal or greater than their net cash outflows over a 30-day period.

Many banks depend on end-of-day reports produced by SWIFT (known as MT950 reports) to obtain a view of their daily balances. But these will not suffice to monitor flows throughout the day. The immediate solution will be for banks to adopt existing intraday reporting solutions, most likely the SWIFT debit or credit advices (MT900s and MT910s) and base reports on these.

At the moment, only a fifth of correspondent payment instructions sent via SWIFT are confirmed with these messages, swift now points out. By value, 55% of transactions are reported on an intraday basis - but with wide disparities between currencies. The ratio is just 28% for the renminbi but 66% for the yen, for instance.

While national binding guidelines for compliance have yet to be published in many countries, including Hong Kong and Singapore, the short implementation time frame and expected strain on IT and business resources call for urgent attention to the issue, SWIFT notes.

"Banks need to take a pragmatic approach to the BCBS reporting," Wim Raymaekers, head of banking and treasury markets at SWIFT, says. "There is a fair amount of uncertainty about the reporting requirements across jurisdictions. While that is being ironed-out, banks should start preparing by leveraging the infrastructure and data formats they already have in place to feed their central intraday liquidity transaction database."

The use of instant debit and credit advices is relatively low because SWIFT charges for these messages and not all banks found them to be critical. Reacting to concerns from the industry, bank-owned SWIFT announced in September it will reduce fees for financial transaction messages by 20%, starting January 1 2014. The price cuts are part of a strategy to halve fees by 2015.