Chris Skinner's blog

Shaping the future of finance

Basel breakfast to start the day? [#SIBOS]

Chris Skinner Author Avatar

Basel III’s unintended consequences

So, after the innovations in Poland, I go to a bankers’ breakfast meeting all about Basel III this morning.  Someone had to.  More specifically, the breakfast debated the requirement for intraday liquidity reporting.

If you’re not up-to-speed with all of this, then it would do you no harm to read my last blog about it.  The gist is that, from January 1st 2015, the Basel Committee on Banking Supervision requires that all banks report their liquidity coverage positions on a monthly basis, moving to a daily basis in the not too distant long-term (July 2016).

This seems a trivial need, but it raises lots of questions like:

How do you calculate liquidity? 

Accounting standards differ in Europe, America and Asia, with the EU viewing loans and mortgages as being on-balance sheet whilst the US regards them as off-balance sheet.  Equally, with different geographies, product structures and organisational systems, how can you see the total enterprise liquidity position when there is no enterprise position?

How do you report liquidity?

Most companies have no internal liquidity management system.   In fact, it wasn’t until the Global Financial Crisis hit that we even thought about liquidity risk.  Now banks are being asked to prove they have liquidity coverage, which actually means that they can prove they can cover their counterparty exposures for thirty days, and they need to have a system to report it.  They don’t have one, so what do you do?

Reporting is far easier if you have systems.

Here’s another key part of this area: you cannot report your intraday liquidity position if you don’t have the systems to do it.  It’s like driving down a muddy road in the rain without windscreen wipers.  Many banks have no idea of their real-time liquidity positions, but would like to.  The Financial Services Club, for example, has run several surveys in this area LINK and found that most banks – 75% or more – have no enterprise, real-time liquidity view.

What was interesting in the dialogue with the bankers is that some viewed this as a small change, others saw it as radical.  All the banks said that the change was fundamental, in terms of internal reporting, but the difference in the incremental versus transformational was their position in managing risk before the crisis.  Some banks had liquidity reporting before, but many did not, and that is where part of the issue lies.

The banks were actually critical of the technology community, wondering why they had been so slow to respond.  How come none of the tech firms had offered ‘LCR-in-a-box’, they asked, as they did this with so many other regulatory requirements (SEPA, MiFID, Volcker etc.).  LCR – Liquidity Coverage Ratios – along with Leverage Ratios and Net Stable Funding Ratios are a core transformational change in internal reporting and real-time requirements for information sharing, and the sloth with which the technology community has responded to these needs have been shocking.

I think I actually know why there was such sloth as one of the major tech firms turned to me at this point, and said it was because they didn’t have the internal understanding.  They are a technology service provider, a developer, a cloud service provider and more, but they are not a bank.  They do not provide risk services and have an awareness of the regulatory needs of banks, but becoming a liquidity management expert organisation is not on the agenda.

We then talked a little bit about the cost of intraday liquidity reporting.  As mentioned, some see this as low cost but, intriguingly, one bank talked about the total budget required to implement real-time reporting is massive.  The London-based investment markets, for example, estimated that real-time liquidity reporting would cost them £2 billion in systems change.  That’s massive and who pays?  Do we really think the banks will pay?  No way!  The customers will pay.

Finally, we talked about whether this was really necessary.  That was interesting, as most of the banks said they already had a pretty good handle on their intraday liquidity positions before the Basel requirement came through, so who is this really aimed at?  It’s aimed at the regulator’s peace of mind.  The regulator does not want to be lumbered with another crisis where the banks have no idea if they can survive for the next week due to counterparties pulling the rug. 

That’s fine, but does it solve that problem?

Not really.   It gives the regulator the knowledge but the problem is systemic risk, and that is not addressed within the current regulatory change.  That proved an interesting point, as the folks in the room then said that the systemic risk requirements will be part of the Basel IV.  Basel IV will seek to build alerts and blocks to countries whose total portfolio of liquidity exposures are greater than the sum of the parts.

Oh-err.  That’s an even more fundamental shift in focus.

All in all, it was an interesting session, with the highlight for me being when one bank said: “this is no big deal”.

Everyone else in the room laughed.

Ah well, it’s now off to hear about clouds on the horizon.  Seems very apropo ...



The SIBOS BlogCategories
Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

Intelligent Money: Our Future Is Where We Do Not Think About Money, As Our Money Thinks For Us

What is the future?

Learn more

Learn more about Chris

About Chris Skinner

The Past, Present And Future Of Banking, Finance And Technology

Fintech expert Chris Skinner: countries need digital transformation to remain competitive

Join me on Linkedin

Follow Me on X!

Hire Chris Skinner for dinners, workshops and more

Learn directly from from one of the most influential people in technology, gain insights from the world's most innovative companies, and build a global network.

Chris’s latest book

Order now

Chris Skinner’s ‘Digital For Good’ Book Launch Event – CFTE

Top 50 Global Thought Leaders and Influencers on FinTech 2023

Chris Skinner
Commentator, CEO of The Finanser and best-selling author at The Finanser

Thinkers360 Thought Leader

Contact Me

Global Awards

Lifetime Achievement Award

Global 100 - 2024 Winner

Chris Skinner - Financial Markets Advisor of the Year - The Finanser - UK 2023

Best Financial Markets Advisor of the Year 2023

30 Best Regtech Blogs and Websites 2023

Kids creating the future bank | TEDxAthens

Captain Cake and the Candy Crew

Captain Cake Winner of a Golden Mom’s Choice Award


Alex at the Financial Services

Gaping Void's Hugh MacLeod worked with the Finanser