LCR reporting in T+15: What are the implications for market participants?

AxiomSL | Liquidity Coverage Ratio

October 9, 2014 – By: Ed Royan, Chief Operating Officer, EMEA

The financial industry breathed a collective sigh of relief in 2013 when it succeeded in convincing the European Banking Authority (EBA) to extend the proposed remittance date for liquidity coverage ratio (LCR) reporting from 15 days to 30 days. However, pulses have begun to quicken again in recent weeks as it has become clear the EBA intends to go ahead with T+15 reporting next year.

LCR reporting is a complex process that involves collecting data from disparate sources, running complicated calculations and completing detailed templates. AxiomSL - Liquidity Coverage RatioThroughout 2014, most banks have just about managed to do all of this work on a T+30 basis. News that the EBA will move forward with its plans to reduce the reporting period to T+15 in 2015 will require a major rethink and system upgrades at many banks.

In light of the change in LCR reporting frequency, market participants should reconsider the performance of their compliance software. A reporting deadline of T+15 gives banks just 11 working days to complete all data aggregation, validation and calculation work. As a result, they cannot afford to rely on software that takes up to a day to run LCR calculations – they need high-performance technology that generates the required outputs quickly, allowing them to complete their LCR reporting in a timely manner.

Banks should also consider whether their compliance software audits the changes they make to their data and keeps a record of those who signs off on reports. As with other regulatory requirements, banks generate individual LCR reports numerous times and make adjustment to them until they are sure the results are accurate. As the frequency of LCR reporting increases, it will no longer be possible to manually track these adjustments and the individuals who approve finished reports. Instead banks need to ensure their software supports these processes natively.

The EBA’s plans to reduce LCR reporting from T+30 to T+15 have crept up on many banks. However, by auditing their existing technology now and checking it includes the necessary performance specifications and audit trail and sign-off functionality, they can begin to prepare for the change.

This blog features on the CFP-Events website, and has been created in support of the 3rd Annual Liquidity Risk Management 2014 conference, at which AxiomSL representatives will be speaking.

To discuss this article further, please contact: emea@axiomsl.com

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