SWIFT solutions for Liquidity risk management Catherine Banneux, Senior Market Manager, SWIFT Bart Claeys, Product Manager, SWIFT

Liquidity risk management: The drivers Global financial crisis More stringent liquidity risk regulations Global: BIS Principles for Sound Liquidity Risk Management and Supervision (2008) Principles for sound stress testing practices and supervision (2009) International framework Higher global minimum capital standards (9/2010) Europe CEBS Guidelines on Liquidity Buffers & Survival Periods (2009) Guidelines on Stress Testing (CP32 – 2009) US Interagency policy statement on funding and liquidity risk management (03/2010) FSA - Strengthening liquidity standards (Policy Statement19/6 – 10/2009) Related regulations: regulatory pressure towards central clearing for derivatives (e.g. Dodd – Frank act in the US – 2010) Liquidity risk management - October 2010

Regulatory systems and control requirements Bottom up risk strategy implementation Regulatory reporting (i.e. daily in/outflows by counterparty) Stress tests: identify unexpected movements, set-up early warning indicators, calculate forward exposure Risk management Management capability Position management, both current and predictive Flow control (identify, prioritize, re-route, block) Predictive analytics measure daily in/outflows, anticipate intra-day timing Global versus local Increased focus on intra day position management for both cash and collateral Liquidity risk management - 9 September 2010

SWIFT 2010 Survey 80% of Financial Institutions are investing in improving liquidity risk management Source: SWIFT survey, June 2010. 255 treasury, liquidity and liquidity risk managers at financial institutions. Full survey report available from swift.com Liquidity risk management - October 2010

Analytics & forecasting SWIFT 2010 Survey Liquidity Risk Management 4 Major operational issues Data integration Intra-day visibility Need for: - Standardisation (80%) - Integration services (57%) 60% have less than 50% transactions reported intra-day Need to improve Analytics & forecasting Global position 87% want more traffic data and business insights 68% have difficulty building timely firm-wide position Overdraft charges Intra-day credit lines costs Oversized liquidity buffers Costly emergency funding Risk non-compliance TO REDUCE Liquidity risk management - October 2010

SWIFT Services that can support your liquidity risk management Intra-day visibility Data integration Intra-day reports Early advices Underlying process automation Consulting services SWIFT solutions Analytics & forecasting Global position Watch FINInform Liquidity risk management - October 2010

The Dynamic Interdependent ECO System Liquidity Management Brokers Banks Corporates Fund Managers other clients Users of liquidity information. Need info online « As it Happens » Global Financial Institutions ACH Securities MI CSD CCP Retail MI RTGS Providers of liquidity information. Some monitoring tools, some without... Providers of liquidity information. Some monitoring tools, some without... Liquidity risk management - October 2010 Interoperability of standards & systems should achieve better liquidity management

SWIFT supports integrated & real-time liquidity management Liquidity Function Major Flows - Examples Payment flow control : cancel, modify priority Modify standing order Get/return reservation Liquidity credit transfer Limit management Collateral substitution Management Notice to receive Trade notification/ Trade leg statement Predictive Notifications Monitoring reports Pending transactions report Pending/ forecasted balance report Margin report/ Collateral &Exposure statement Monitor all in/out payments Confirmation of debit/credit Intra-day cash transaction report (*) Intra-day securities holdings report (*) Current (*) Including underlying cash & securities collateral Liquidity risk management – October 2010

Overview of the high value payment market infrastructures using SWIFT Central & Eastern Europe Albania Azerbaijan Bosnia & Herzegovina Bulgaria Croatia Hungary Romania Western Europe Denmark EBA Clearing TARGET2 Norway Sweden Switzerland UK North America Canada US (TCH) Middle East Bahrain Israel Jordan Kuwait Oman UAE (DIFC) Asia Pacific Australia Fiji Hong Kong New Zealand Philippines Singapore Sri Lanka Thailand Central & Latin America Bahamas Barbados Chile Dominican Rep. Guatemala Trinidad & Tobago Venezuela Africa Angola Algeria Botswana Central African States (BEAC) Egypt Ghana Kenya Lesotho Mauritius Morocco Namibia Senegal Sierra Leone South Africa Swaziland Tanzania Tunisia Uganda Zambia Zimbabwe West African States (BCEAO) Live systems as of September 2010 Liquidity risk management – October 2010 Systems with advanced monitoring

Improvement of RTGS liquidity management functions: A key challenge for the industry For the MI operating the RTGS MI liquidity movements Forced payments Queue management Gridlock processing Increase liquidity against collaterals Change the limit For the RTGS Direct participant Monitor their queues and accounts Suspend or cancel their own payments Change payment priority Change alerts Transfer funds between their accounts Liquidity risk management – October 2010

SWIFT Intra-day Cash-Reporting Service: Standardised Data - Improved liquidity visibility SWIFT (ISO) Business Standards to support intra-day/real time information MT Debit /credit confirmation (MT 900/910) Interim transaction report (MT 942) Interim balance report (MT 941) MX Debit/credit Notification (camt054) Account report (camt 052) Available November 2011 NotificationToReceive (camt.057) NotificationToReceiveStatusReport (camt.059) NotificationToReceiveCancellationAdvice (camt.058) Intra-day Reporting Structured, granular information on underlying transactions, transaction date/time Based on threshold Within specific time ,event-driven or periodic Position Management Additional account and currencies balances/projected balance Business practice development (rule book) New Third party application certification Liquidity risk management – October 2010

SWIFT Collateral Management Service: Standardised Data - Improved liquidity visibility Current position Existing Intra-day Reporting Messages MT535: Holdings of underlying securities collateral MT 942 /camt052: Holdings of underlying cash collateral New Intra-Day/Real-time Messages Cross Asset Class Margin Calls Margin Disputes Collateral Reports Available December 2010 (pilot) March 2011 (live) Predictive position ISO 20022 Liquidity risk management – October 2010

SWIFT’s solution for CCP to clearing member messaging: Supporting a consolidated view on positions Accord matching Exchange or MTF Exchange or MTF CCP1 CCP2 Clearing Member Clearing Members New ISO 20022 messages to cover Trade management Position & settlement management Margin management Default funds contribution for equities and fixed income Live: May 2011 CSDs Key (SWIFT flows) CCP to settlement (ISO15022) CCP to Clearing Member (ISO20022) Accord to CCP (ISO15022) Liquidity risk management – October 2010 Interoperability flows (under review)

SWIFT Copy Service - FINInform Standardised, Scalable Data – Global liquidity View Monitor payments & intra- day reports on liquidity positions sent to branches Guaranteed real-time copy delivery, confidentiality of sensitive information through partial copy Simple No action or development by sender or receiver Flexible Full or partial copy, filtering on message content MT103, 202 MT 900,910, 942,535 Any bank Branch FIN Inform user MT096 MT103, 202 MT 900, 910,942,535 Headquarter Copy destination Liquidity risk management – October 2010

SWIFT Integration consulting services Assessment Implementation Assessing cash and liquidity business / operational processes Intra-day position management Predictive position management Payment flow control Assessing underlying related processes Guidance for potential process improvements in line with new liquidity risk regulation Business layer – Formal modeling of cash & liquidity processes and data flows (by type of instrument) Middle layer - Technical model representation Messaging layer – Data mapping with SWIFT messages and integration with your applications Connectivity layer - Configuration, deployment and testing support Liquidity risk management – October 2010

Watch Value Analyser Online insights into amount & currency Ordering possible now! First data publication (December 2010) Allowing you to: Monitor the total value per currency of your cash flows Identify your SWIFT market share from a value or currency perspective Measure your counterparty exposure Perform customer risk analysis Liquidity risk management – October 2010

Historical view of my business Watch Value Analyser – Business insights Yearly evolution of Payments business in Europe per currency Monitor Your Business “What is the regional breakdown of the Payments value that you exchanged over the past years? … Which currencies?” Perform a similar analysis for each business line, country, entity… More to come: daily peaks, average daily peak with timing Liquidity risk management - 9 September 2010

Monitoring of the evolution Watch Value Analyser – Market insights Market share evolution of EUR Payments business from France Track Evolution “How is our market share in EUR payments from France evolving? … Is the market evolving in a similar way?” Perform a similar analysis for other business flows, currencies… Preliminary alerting options Liquidity risk management - 9 September 2010

Counterparty exposure analysis Watch Value Analyser – Customer risk analysis Counterparty reciprocity analysis per currency Customer Risk Analysis “Who are your main counterparties? … What is the direction of exposure towards them? Liquidity risk management - 9 September 2010

Monitor counterparty exposure over time Watch Value Analyser – Customer Risk Analysis Monthly evolution of exposure with counterparties 2010/Oct 2010/Nov 2010/Dec 2011/Jan 2011/Feb 2011/Mar 2011/Apr 2011/May 2011/Jun 2011/Jul 2011/Aug 2011/Sep 2011/Oct Trend Analysis “With which entities do you have the biggest exposure? … Do you see any trends?” Total EUR amount More to come: analysis of daily in/outflow per counterparty Liquidity risk management - 9 September 2010

Q&A ? Liquidity risk management – October 2010

More info? SWIFT experts On overall liquidity (risk) initiative Catherine Banneux Intra-day reports & copy service Catherine Banneux RTGS liquidity management Stéphane Ernst Collateral Management Banu Apers CCP to clearing member messaging Joe Halberstadt Watch initiative Bart Claeys Visit our stand Main conference session - Liquidity risk management: The challenges at hand- 4pm, room 2 Other related SWIFT@sibos sessions “The power of business analytics” – Tue 26 Oct, 17 pm “SWIFT for Payment Market Infrastructures: Efficient support to successfullyrenew payment clearing and settlement systems – Wed 27 Oct, 14 pm “Transforming Collateral Management: How bi-lateral and tri-party messages can mitigate counterparty and credit risk” – Thur 28 Oct, 11 am PowerPoint Toolkit – 23 October 2008 – Confidentiality: restricted

Thank you Liquidity risk management – October 2010

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