The management of intraday liquidity – defined by the Committee on Payment and Settlement Systems (CPSS) as “funds that can be assessed during the business day, usually to enable financial institutions to make payments in real time” – is now in the spotlight. Sources of this type of liquidity include central bank reserve balances, liquid assets on the balance sheet, payments received and balances with other banks that could be used for same-day settlement. The newly intensified focus on the management of such funds heralds a shift from banks’ historical focus on end-of-day liquidity positions, and comes as result of two key factors.
First, the fact that advances in banking technology – in going a long way to mitigate counterparty and settlement risks – have inadvertently shifted hazards that would have once come under these umbrellas into intraday liquidity management.
