About Us  |  Search  | FAQ  | Contact Us
Real Time
Home
Banking
STP
Risk Management
BCM
CLS
Human Resources
e-commerce
Features
Smarts Cards
Interviews
Optimise CRM
Data Warehousing
Disaster Recovery
Swift Messaging
Securities
M-commerce
Africa
Finance
BPM & Workflow
Capital Markets
Global Custody
Outsourcing
 

 

 

 

Real-time information, real-time visibility

www.gresham-computing.com

Everyone will remember the well-publicised collapse of Barings Bank. What was not made quite so public was the fact that it took most banks weeks to finalise their global position post Barings liquidation. This was because there were no means to automatically consolidate all the information together from the various different branches and subsidiaries, there was no one single real-time view of liquidity!

Delivering value in an increasingly competitive world
Banks today need to make decisions quickly, the Barings disaster is a classic example of the lack of real-time access to information. Having information fast, which is up-to-date and accurate will make the difference to a bank's ability to survive in this increasingly competitive world. It's quite simple, banks can only trade their excess liquidity if they are aware that such funds are actually available!

Today, it is not uncommon for banks to offer a variety of services such as currency dealing, multiple currency settlement, trading of various financial instruments, equity and custody trading as well as other additional services. Until recently major clients, such as financial institutions, would be happy with information daily or up-to-date give or take an hour or so, but this is all changing. Clients will 'shop' around for the most competitive deal and are less loyal and much more dema- nding. And, unless banks improve their services they will loose their clients to those that do. The issue is real-time visibility for both the banks and their clients to enable quick and informed decisions to avoid a recurrence of the Barings episode as well as take advantage of intra day trading opportunities.

Speed, accuracy of information and integrated services, backed by guarantees through a service level agreement are the core elements in the game plan to gain, retain and sustain satisfied clients.

This article explores some of the issues that are preventing banks from providing these services to their clients. It looks at the changing face of the client and provides one answer to effectively manage Intra and Inter-bank trading.

The need for real-time integrated information
The problem that bank's face, is that so many of the services outlined above are offered by different divisions and therefore tend not to be integrated at the client level. Typically banks receive this information once a day and often this is not a consolidated view. The information is often buried in disparate computer databases, accessed only by an overnight batch-run. This is counter-productive to the overall commercial objectives of banking. Banks must be able to provide a range of financial services that can be tailored to the client; allows an integrated picture of the clients business and exposure to the bank; provides easy, low cost online access to services, and most importantly provides up-to-the-second information.

Decisions that will maximise operations & profitability
The reason this is so important is that today's client is very sophisticated. Clients are becoming very demanding, in our competitive business environment, they need to maximise operations and profitability. For example, financial institutions, such as insurance companies and fund managers, have large sums of liquidity surplus to current daily requirements. These organisations need real-time updates on their projected cash liquidity to enable them to maximise profitability through intra-day investments.

Gaining global visibility to effectively manage rapidly changing circumstances
In addition, the need for one global view is paramount to the client. Traditionally, on-line access to a bank's services has been provided through proprietary systems and networking. This has made it difficult for clients to move to another bank, as there have been cost implications, as well as the upheaval and time involved to implement another banking system.

The expansion of web technology over the last few years is rapidly changing this. The Internet, extranet, or Intranet are providing a common low cost way of communicating between client and provider, and browser access is becoming the standard means of access. The benefit of using web technology is significant in keeping costs down as the nature of the web means it is easy to retrieve information from any organisation. The universal nature of the Web allows access from anywhere in the globe.

Offering a tailored solution
The ability to view a client with all aspects of its business is beneficial to both the bank and the client. The bank can better understand the various risks, can sweep balances between accounts whether one or multiple currencies, can net obligations across financial instruments, and can aggregate pledged collateral across financial instruments. The client can benefit similarly but in addition can find that 'pooling' of collateral and credit lines, and obligations will reduce the cost of doing business with the bank. The ability to consolidate, by currency, and geographic region will assist with immediate risk management.

Most banks offer a range of services to clients but they are not necessarily tailored to the client. Tailored services will potentially maximise returns. A consolidated view of a client's position will assist it to understand its global situation. A key factor to build into facilities that are on offer is to provide a consistent means of access for the client. Today, with web technology the task is easier.

Sharing Nostro account information between banks
As already stated, the key is that all of these facilities, are only really beneficial if all the information is real-time. Systems and information operated and controlled internally can be made real-time at the discretion of the bank. The problem banks face is the open access to their information, in real-time, held at another bank. Real-time Nostro account information across currencies is a key piece of processing missing today.

Nostro account information forms a fundamental building block for many intra- and inter-bank transactions. By its nature, Nostro account information needs to be accurate, secure and available to those whose profits depend on it. The fact that it could only be accessed by a daily batch-run motivated several international banks to define a standard means of exchanging real-time Nostro data.

Gresham Financial Services (GFS), a major player in the Banking Operations and Payments market was the catalyst in this partnership to help define a standard mechanism for exchanging Nostro information between banks. As a result, a revolutionary new product has been developed, NostroDirect. NostroDirect will provide the information necessary to improve risk management, reduce the cost of collateral and liquidity to support foreign exchange settlement processes, and it will demonstrate to regulators that action is being taken to reduce settlement risk. Nostro direct enables fast secure access to Nostro information via the Internet or any IP network.

How does NostroDirect work?
Nostro account information can be accessed via a simple web browser or an automated client application on demand. NostroDirect can support intra-day nostro reconciliation systems, real-time cash management systems, and real-time risk management systems. The automated client application streams intra-day Nostro reconciliation continuously through the day enabling discrepancies to be identified promptly, and the day's reconciliation to be completed by early evening rather than the next day. This significantly reduces the period of settlement risk.

A transaction time-stamp indicates the actual time that the account was credited. This allows the accurate measurement of settlement exposure of a client, by comparing when payments are made, versus when payments are received. This is important for risk management and allows credit lines and collateral requirements to be set based on the true intra-day position, rather than the traditional end of day measurement. Even better cash and risk management is possible when aggregating information across various currencies and business units which supports centralisation of management functions.

The software satisfies the need for client access to their information in the way they want it and when they want it. The information is provided in a standard format using XML over IP and allows the client to automatically route the information received to back office systems for further straight through processing

The software also has web-enabling capability as standard for the distribution of information over a web network ; an Intranet, VAN, or even Internet. Connection to in-house systems can be achieved through any host adapter or Enterprise Appli- cation Integration (EAI) software, as long as it supports synchronous connectivity.

The future of banking
The move to making decisions based on up-to-the-minute information will significantly improve decisions, reduce errors and risks, and therefore have a positive impact on the 'bottom line.' In addition, real-time information combined with modern technology will allow new services to be created. In today's complex and changing world, NostroDirect provides the communication and visibility required by Banks wishing to take a more proactive approach to optimising their treasury operations. NostroDirect is a classic example of how Gresham Financial Services can deliver appropriately focused products and services to banks to deliver a competitive advantage to their clients.

Alan MacFarlane
Manager, Business Development
Gresham Financial Systems

 

 

Banking

Secure Banking
Internet Banking
Clicks not Bricks
Better Infrastructure
Banking Software
Automated Dealing
Synergys going dotty
Focus on Technology
Issues
Web Based Banking
Trading room costs
Offshore fund managers
New age of hacking
Electronic trading
Money laundering
The Perfect Storm
Supplier Financing
Speculative Bubbles
Index Funds
Convenience banking
Two-tier banking
Gaining Clickshare
Cutting out paper
Tracking trends
Integrating
E-commerce
Banking on Security
Real Time
security under scrutiny
Personal touch Banking
ISMA
Sell side value
GSTPA for FX
Informatics
Anti Money Laundering
21st Century Banking

 
 
 

 

Home  |  About Us  |  Search  | FAQ  | Contact Us