BSP to require real-time liquidity reports from big banks

Large banks will soon be required by the Bangko Sentral ng Pilipinas to provide the regulator with real-time updates on their liquidity levels within the banking day—a scheme which is hoped will give policy makers a clearer picture of the financial system at any given point in time.

The new rules were approved recently by the central bank’s Monetary Board, which decided to adopt the policy on intraday liquidity reports to facilitate monitoring of the supervised institutions’ intraday positions.

“The monitoring of intraday liquidity position provides a tool to gauge the ability of covered banks and quasi-banks to meet their intraday obligations on a timely basis, ultimately contributing to the smooth and efficient functioning of the payment and settlement systems,” the central bank said in a statement.

The report on intraday liquidity will be applied to universal and commercial banks, and their subsidiary thrift banks and quasi banks.

It should present intraday liquidity metrics consistent with those proposed under international standards, such as daily maximum intraday liquidity usage, intraday throughput, gross payments sent and received, and available intraday liquidity position, among other metrics.

Meanwhile, stand-alone thrift banks or quasi-banks and all rural or cooperative banks will not be required to submit the report on intraday liquidity in recognition of the lower volume of payments and settlements entered into by these financial institutions, the central bank said.

Instead, they are expected to maintain an adequate and reliable management information system that is able to measure and monitor selected intraday metrics.

Moreover, the submission of the report is expected to encourage covered banks and quasi-banks to adopt a systematic and disciplined approach in managing their intraday liquidity.

“It will also enable the BSP to conduct a detailed analysis of the resilience of the covered banks and quasi-banks to intraday liquidity shocks and monitor how intraday liquidity risk evolves over time,” the regulator said.

Covered banks and quasi-banks are required to submit the report by end-June 2021.

The guidelines complete the BSP’s four-phased package of reforms on liquidity standards. These include the issuance of guidelines on liquidity risk management as the first phase; the adoption of liquidity coverage ratio and the net stable funding ratio for universal and commercial banks and their subsidiary banks or quasi-banks as the second phase; as well as the minimum liquidity ratio for stand-alone thrift, rural and cooperative banks as the third phase.

“The sequencing of these liquidity standards was deliberate and cognizant of domestic conditions and the potential impact on the banking system,” the central bank said.