The importance of a centrally managed account platform

New regulations, with the introduction of new frameworks around capital, liquidity, accounting, remuneration, risk management and transparency, not to mention increased competition, are all having a big impact upon the correspondent banking landscape. It has, therefore, never been more important for banks to understand their universe of Nostro and Vostro accounts; to rationalise them in order to more efficiently and effectively manage counterparty risk and associated costs.

I have been involved in the development of a number of cash correspondent related products within the Thomas Murray Data Services portfolio. We have found during our research that around 95% of banks globally, are still heavily reliant upon a manual way of working – a manual, non-centralised way of managing and maintaining their accounts both internally and externally. Documents are stored in various locations throughout the organisation. This is causing inefficiencies as well as increasing the exposure to risk throughout the network.

A centrally managed account platform can ease a bank’s operational risk and also reduce its cost burdens. This is why we have developed our Cash & Treasury Toolkit. It holds static data and all documentation pertaining to all correspondent relationships, as well as important cash management information such as transactional volumes, fees and rebates. It also integrates our cash market profiles alongside a bank’s own information and features a powerful reporting wizard, enabling all of the information within to be sliced and diced to create custom and pre-determined reports. The Thomas Murray Data Services’ cash market profiles track market practice in payment and treasury operations in over 80 markets worldwide.

It is important to move towards a centrally managed account platform such as this in the modern banking world. Information surrounding the areas of transaction volume, fees and rebates is being used increasingly throughout the industry. The need for transparency has been increased, not just to external agencies and clients, but internally, too, so employees within an organisation can easily access accurate account information.

This is why we are seeing a number of banks looking towards developing in-house resources or approaching us about our solution to this. One of the key benefits provided by us to our clients is efficiency; be it time, resource or cost efficiency. A lot of the information that is required and can be input into a centrally managed database is often held in a very fragmented way. The efficiency gains, across the bank, of holding such information centrally are very clear.

Of course there are costs attached to establishing a centrally managed account platform like this, as there are with the opening and closing of accounts as well as the maintenance of them thereafter. This type of system, however, enables banks to curtail the number of duplicate accounts and to streamline resources effectively into account management. This has obvious cost-saving implications going forward.

These accounts will also be held in a position that they can be easily adapted around new regulations. This is a rapidly changing and challenging environment and by holding all of your accounts in one space and having them managed by a select team makes it a lot easier to change the processes and mechanics of these accounts, as well as to easily access information about latest market conditions affecting your accounts globally.

The regulatory pressure cannot be underestimated. The need for due diligence, know your customer, new capital and liquidity frameworks… banks cannot afford to be inefficient so it makes little sense to keep a global jigsaw of your accounts that is incredibly difficult to piece together.

This aside, cost reduction is an added bonus. One mid-sized bank that we have supplied our system to, found 15 redundant accounts in its network. The cost of maintaining these on an annual basis far exceeds the cost of implementing a centrally managed platform which will prevent such duplication in the future. To add some context to this, the cost maintaining a Nostro account is anywhere between $35,000 and $50,000 per year. Adding a conservative estimate to this bank’s duplications, it saved $525,000 per year by switching to a centrally managed platform.

Given the modern banking environment, can anyone afford the added cost, risk and inefficiency of maintaining a globally fragmented account management structure?

For more information on Thomas Murray Data Services’ Cash & Treasury Toolkit solution, please contact our global head of cash products, Michael Hill: mhill@ds.thomasmurray.com or +44 (0) 20 8600 2300

Tags: CashAccount ManagementCash & Treasury ToolkitBanking