Basel Intraday Liquidity Framework: Basel Committee Publishes Final Document on Monitoring Tools for Intraday Liquidity Management

Sullivan & Cromwell LLP - April 29, 2013

The Basel Committee on Banking Supervision (the “Basel Committee”), in consultation with the Committee on Payment and Settlement Systems, recently published a final document concerning supervisory monitoring tools for intraday liquidity management (the “Intraday Liquidity Document”). The Intraday Liquidity Document complements the Basel Committee’s overall liquidity risk management framework by setting forth a new set of metrics (or “monitoring tools”) intended to enable national supervisors to monitor banks’ intraday liquidity risk and ability to meet payment and settlement obligations on a timely basis under both normal and stressed conditions. The tools are also intended to benefit authorities responsible for the oversight of payment and settlement systems.

The Intraday Liquidity Document’s prescribed framework includes:

  • detailed design and reporting items for each of the intraday liquidity monitoring tools, which are intended to provide information to identify and monitor reporting banks’ intraday liquidity risk under normal conditions; and
  • planning for stress scenarios, which would require reporting banks to assess potential adverse impacts of certain stress conditions and discuss responses to such impacts with their respective supervisors.

The document also addresses other monitoring and reporting matters, which arise from differences within and among banking organizations with regard to systems, currencies, organizational structures and jurisdictions of operation. The framework contemplates monthly reporting by banks commencing on January 1, 2015 (to coincide with the Basel Committee’s implementation timeline for the Liquidity Coverage Ratio under Basel III).

This intraday liquidity framework was initially proposed in a consultative document issued by the Basel Committee in July 2012 (the “Consultative Document”). Reflecting comments received in response to the Consultative Document, the Intraday Liquidity Document makes several noteworthy changes and clarifications to the initial proposal, including:

  • The scope of application of the regime has been further clarified.
  • One of the monitoring tools in the initial proposal (addressing settlement timing of intraday payments) has been removed, and the data reporting requirements for several of the other monitoring tools have been changed and, in a number of cases, reduced.
  • The requirement to report the likely impact of stress scenarios on a routine basis has been removed.

Like all Basel Committee pronouncements, national supervisors would have to implement the Intraday Liquidity Document in their respective jurisdictions. The U.S. federal banking agencies have not yet addressed whether, or to what extent, U.S. banking organizations will be subject to the intraday liquidity framework.