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Who has accountability for Liquidity Management?

Very few banks have mastered the art of accountability when it comes to liquidity management. Corporate treasury and finance generally are responsible for the function in most institutions, depending on the purpose for which liquidity is being managed, but often neither has it firmly in its domain.

A lack of clear accountability may help explain why there has been, at least in the United States, little focus on solving challenges to payments liquidity – challenges that can lead both to inefficiencies that add unnecessary costs and delays in workflows and to incurring borrowing charges in the intra-day market due to accidental overextensions around operations funding.

Challenges also exist around settlement aspects that could lead to banks’ unfortunate exposures to counterparty failures, as well as around being able to provide information corporate customers need around their liquidity positions.

Dealing with the fall-out from the credit crisis, of course, has played a role in keeping this issue on the back-burner. Yet the credit crisis has also changed the nature and scale of the liquidity management challenge. But what’s at stake here ultimately amounts to nothing less than global competitive advantage. Think about this: In a world where real-time information drives everything from stock trades to web advertising decisions -- and soon enough even energy usage – many banks’ payments liquidity decisions are based on what was going on at the close of business yesterday, or what happened this time last week, last month, or even last year.

Banks must create an environment of accountability that will enable them to move from performing macro-level payment decisions through manual integration of data from disparate sources, to a real-time understanding of their own and their customers’ positions in order to be best-in-class at responding to today’s market dynamics.

Tony D. Smith

Strategic Consultant for the ACI Worldwide wholesale banking products