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Modernising intra-day liquidity optimisation for commercial banks

Author

Listed:
  • Feuillette, Jeremie

    (FNA, UK)

  • Towning, Will

    (FNA, UK)

  • Soramäki, Kimmo

    (FNA, UK)

Abstract

Commercial banks are facing a period of exceptionally difficult funding conditions amidst a challenging economic environment. To address this, banks need to optimise their liquidity flows and usage. But existing liquidity optimisation and management methods fall short of materially reducing liquidity costs and can generate large operational risks. This paper describes how advanced analytics and algorithms can be used to optimise liquidity flows and usage in a real-time environment through payment resequencing. This approach can enable banks to significantly and consistently reduce liquidity usage and costs, potentially turning more effective treasuries into profit centres. This paper also describes the fundamental requirements for embarking on a modern liquidity optimisation project and also presents some recommendations for best practices in operational and technological infrastructure.

Suggested Citation

  • Feuillette, Jeremie & Towning, Will & Soramäki, Kimmo, 2023. "Modernising intra-day liquidity optimisation for commercial banks," Journal of Digital Banking, Henry Stewart Publications, vol. 8(1), pages 58-64, June.
    • Handle: RePEc:aza:jdb000:y:2023:v:8:i:1:p:58-64
    as

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    More about this item

    Keywords

    liquidity; optimisation; resequencing; networks; algorithms; simulation;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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