Navigating new waters: “The ripple effects of regulation on Liquidity management” part II
Daniel Szmukler has been in his current role with the Euro Banking Association since 2012. Responsible for innovation, bank relations and strategic engagements, Daniel runs the EBA’s thought leadership, events and education streams and manages the EBA’s innovation working groups, the EBA Academy, as well as the annual payments conference EBAday.
We are excited to announce the release of our paper, “Navigating New Waters: The Ripple Effects of Regulation on Liquidity Management Part II”, prepared by the EBA Liquidity Working Group. This paper delves into the profound impact of macroeconomic volatility, regulatory developments, and technological innovation on liquidity management practices in banks and corporates in the EU. At the heart of the research is an in-depth examination of regulations driving the accelerated adoption of instant payments, as well as an analysis of how these evolving regulations, shifting market dynamics, and advancing technologies are reshaping liquidity management practices for banks and corporates.
What’s Driving Change?
The paper examines a series of regulatory reforms – including the Instant Payments Regulation (IPR), the proposal for the Payment Services Directive 3 (PSD3) and the proposed Payment Services Regulation (PSR) – which are collectively reshaping how banks and corporates operate and define their strategies in an evolving payment landscape.
Why Instant Payments Matter
The Instant Payments Regulation (IPR) mandates the universal availability of instant payments wherever normal SEPA credit transfers are available, requiring PSPs to provide 24/7/365 settlement services and pricing aligned with SEPA credit transfers. The shift from batch-based to real-time settlement that these regulatory obligations entail introduces both new operational and liquidity-related challenges.
For corporates, the adoption of instant payments promises faster access to funds and enhanced working capital management. However, it also requires treasury teams to reassess key practices such as cashflow forecasting, liquidity pooling and contingency planning in order to adapt to the new dynamic payments environment.
Impact on Banks, Corporates, and PSPs
- Banks must maintain availability of their liquidity around the clock, including weekends, adjust deposit pricing strategies and invest in real-time analytics in order to stay competitive and compliant with new regulatory requirements.
- Corporates gain efficiency through faster settlements, but must revamp treasury operations and invest in capable systems and processes to effectively manage liquidity in real-time.
- Non-bank PSPs face new opportunities to innovate and expand, but this comes with increased regulatory scrutiny and the necessity to adapt compliance and security frameworks for a real-time environment.
Strategic Recommendations
Our paper provides actionable strategies for navigating this evolving landscape. Its conclusions invite market players to:
- invest in digital transformation and advanced real-time data capabilities to stay ahead of the curve
- enhance liquidity forecasting and stress-testing models to ensure preparedness in a more dynamic environment
- foster collaboration between banks, corporates and other non-bank PSPs to build greater resilience and drive collective success
Why Read the Full Paper?
The paper provides a comprehensive analysis of key regulatory changes (CRR3, IPR, PSD3/PSR) and their operational implications on liquidity management practices. It includes practical examples and case studies to help stakeholders adapt to the the new real-time liquidity requirements and develop sustainable strategies for moving forward.
Instant payments are not just a compliance requirement—they represent a fundamental shift in liquidity management practices, demanding agility and innovation from all participants in the ecosystem.
Download the report: Navigating new waters: “The ripple effects of regulation on Liquidity management” part II
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