Banking Industry Needs to Overhaul Liquidity Controls, Says Rule Financial

Rule Financial’s new white paper ‘The Liquidity Gap’ claims that the banking industry is missing an opportunity by making compliance an end in itself.

It argues that where banks have invested in a complete review and overhaul of their liquidity controls and systems, adopting dynamic, proactive management of their resources, they’ve been able to achieve a genuine competitive advantage, profiting substantially from their optimised processes.

During one review, an unnamed major investment bank discovered a staggering US$14bn of unused collateral it was subsequently able to put back to work.

David Goucher, a former banker who leads Rule Financial’s liquidity management practice, said: “While the liquidity crisis may be over, the storm hasn’t passed. Prices are still above pre-crisis levels and there is a serious possibility of a further liquidity event. Many banks have appreciably improved their liquidity reporting capabilities and are able to comply with the FSA reporting requirements, but few have significantly enhanced their internal liquidity and collateral management capabilities.”

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