Sibos - Liquidity Management

If like me you attended the Sibos Vienna Conference your liver will by now be  just about moving along the path to recovery, and in the meantime I have the opportunity to reflect on a very hectic week. 

I went to the conference with an open mind, ready for discussion, full of anticipation, but with market events over the weekend when Sibos opened it turned out to be a very interesting conference.

A normal Sibos Monday morning is a pretty routine process; turn up at the conference, turf out  pockets for the lost badge, apologise to the resident heavy and head for the queue with the other recalcitrant’s to have ones picture taken again. Snapped with best profile, hair combed over and a pasted on smile, you head for the entry doors. Another look at the new pass and you're in, bright new gleaming stands with a few jaded bankers that have jetted in on a last minute red eye.

Enter the halls and front and centre is Barclays, then RBC and then hang a left to pass RBS into Hall B. (There was so many of us we were split up into three halls).  Leap onto our own stand, quick run down of the day’s strategy and then off we go, shaking hands, smiling, old friends, new friends, the rapid bonding that is Sibos begins.  But, this year is different, Lehman’s has bit the dust and the air is rife with rumour, some bankers are still at home cleaning up the debris of their Lehman’s transactions.

The week moves up a gear.

I made a number of appointments to discuss the BIS paper ‘Principles for Sound Liquidity Risk Management and Supervision’ and with all that was going on around me it seemed perfect timing. Central banks, Commercial banks, investment banks, I talked to them all.  I focused on some core themes; e.g. Sound management of liquidity risk. Based upon a robust liquidity risk management framework, availability of liquid assets to withstand stress events, ‘auditability’ of  liquidity risk management framework and liquidity positions and necessary supervisory measures to limit potential damage to the financial system’.

These are fundamental principles for the management and supervision of liquidity risk and in the BIS paper spells it out in 16 further principles. I asked banks “How are you going to comply if your systems are not real time?  You cannot manage what you cannot see!”

There was a lot of interest in this topic, many were not aware of the paper so it was very useful for both parties.  Some maintained that they would not change their modus operandi, which I found hard to believe as it is based on a predictive position keeping system. I.e.  I close my office at 17.30 and trust that all my payments and receipts will be as per my prediction and everything will be okay tomorrow.  That’s all fine and dandy, but in the current climate would you not prefer to know where your funds are, or aren’t and have the ability to cover accounts intra day. Tomorrow’s reconciliation and repair is a damn sight harder and more costly if your counterparty has hit the rocks over night.

All banks now have the ability to see their accounts in real time 24x7, and the Regulators now know they have this ability because I’ve shown them. Should make for some interesting future conversations.

As the week progressed more news hit the street, now HBoS, and the rumours continue..

 Every bank will need a strategy for their Liquidity and Risk management tools and to comply they must be real time; it will prove crucial to your survival.

 Now for all those keen to know, the food and drink were great, the hosts hospitable,  I beat a certain very competitive vendor on the grand Prix simulation and won an IPod shuffle from a nice American Bank. Can’t wait for Hong Kong.