Management of Bank's Funds - Striking the Right Balance
With this in mind, I think we can predict that one of the consequences of the credit crunch has been a complete re-evaluation of the treasury function. Whilst it has always been at the core of the bank, far too often it was treated as a simple "plain vanilla" operation that didn't receive the attention it deserved. With bank funding and liquidity now in ever sharper focus this attitude has gone.
One particular dilemma that faces senior managers when considering technology investment is, with markets and products changing so rapidly, how committed one should be to any given solution. In today's environment, with increased market regulations and ever greater reporting requirements, together with new instruments and products, banks requirements are complex and diverse - flexible solutions are a must. Multiple products, on a global basis, with different reporting for a wide variety of regulators mean fast and responsive mechanisms are vital.
In addition to the need to beef up existing platforms I think we can see that a key development in treasury functionality is going to be in "predictive analysis". By this I mean more use of algorithms that attempt to predict likely cash cycles in both banks and corporates. To get this analysis to work efficiently a large amount of data will have to be aggregated and normalised from a wide range of sources, both in house information as well as outside market data etc. This will need a significant investment in time and resources, but the potential gains are very attractive. Passive approaches will no longer do, active management is the norm and this will include much more forward looking analysis.
Key Challenges
• Banks can no longer operate with disparate and disconnected treasury operations over multiple incompatible platforms. The commercial and regulatory pressures are imposing much higher operational standards.
• Technology offers abound in the marketplace - but banks need to ensure flexibility to respond to changing demands of clients and regulators. It is vital therefore that their technology strategy is aligned with business objectives and client demands.
Final Thoughts
We can think of treasury management as a form of never ending evolution. At its heart it is a simple business, but the day to day reality is a complex mix of competing requirements and demands. Banks have to achieve two critical tasks, efficient plain vanilla services that are cost efficient and responsive, and at the same time create value generating additional services that gives superior customer service. These twin challenges need a carefully integrated strategy and a supporting technology that offers agility, flexibility, superior service which can be implemented economically! This is a tall order - but the alternative is unthinkable - banks increasingly sink or swim on the quality of their treasury management strategies.
Discussion Points
• If a liquidity crisis hits banks again are they fully prepared in terms of reporting and analysis software?
• Is there a "squeezed middle" in Bank Treasury? Do mid-tier banks have the double challenge of competing against global banks but trying to retain their differentiation through bespoke service?
• Could banks be dis-intermediated? Will credit risk fears drive depositors elsewhere?
One particular dilemma that faces senior managers when considering technology investment is, with markets and products changing so rapidly, how committed one should be to any given solution. In today's environment, with increased market regulations and ever greater reporting requirements, together with new instruments and products, banks requirements are complex and diverse - flexible solutions are a must. Multiple products, on a global basis, with different reporting for a wide variety of regulators mean fast and responsive mechanisms are vital.
In addition to the need to beef up existing platforms I think we can see that a key development in treasury functionality is going to be in "predictive analysis". By this I mean more use of algorithms that attempt to predict likely cash cycles in both banks and corporates. To get this analysis to work efficiently a large amount of data will have to be aggregated and normalised from a wide range of sources, both in house information as well as outside market data etc. This will need a significant investment in time and resources, but the potential gains are very attractive. Passive approaches will no longer do, active management is the norm and this will include much more forward looking analysis.
Key Challenges
• Banks can no longer operate with disparate and disconnected treasury operations over multiple incompatible platforms. The commercial and regulatory pressures are imposing much higher operational standards.
• Technology offers abound in the marketplace - but banks need to ensure flexibility to respond to changing demands of clients and regulators. It is vital therefore that their technology strategy is aligned with business objectives and client demands.
Final Thoughts
We can think of treasury management as a form of never ending evolution. At its heart it is a simple business, but the day to day reality is a complex mix of competing requirements and demands. Banks have to achieve two critical tasks, efficient plain vanilla services that are cost efficient and responsive, and at the same time create value generating additional services that gives superior customer service. These twin challenges need a carefully integrated strategy and a supporting technology that offers agility, flexibility, superior service which can be implemented economically! This is a tall order - but the alternative is unthinkable - banks increasingly sink or swim on the quality of their treasury management strategies.
Discussion Points
• If a liquidity crisis hits banks again are they fully prepared in terms of reporting and analysis software?
• Is there a "squeezed middle" in Bank Treasury? Do mid-tier banks have the double challenge of competing against global banks but trying to retain their differentiation through bespoke service?
• Could banks be dis-intermediated? Will credit risk fears drive depositors elsewhere?
