Intraday liquidity management: an overlooked opportunity for bank profitability

After the 2008 financial crisis, banks and regulators placed a heightened focus on intraday liquidity management. However, despite its clear advantages, many viewed it as a preventative exercise — important for avoiding risks but not seen as a direct contributor to earnings or shareholder value. In an environment where interest rates were low, and the Fed offered significant incentives to hold excess cash, it was understandable why banks saw liquidity management as a “check-the-box” task rather than a value-driving activity.

But as the financial landscape evolved, so did our understanding of liquidity management’s role. Today, proactive intraday liquidity management stands at the core of successful liquidity strategies. It goes beyond compliance, directly impacting customer experience, operational efficiency, and shareholder returns. Banks that embrace real-time data, intelligent forecasting, and effective flow management are the ones poised to deliver superior products, meet customer demands, and maximize earnings.

The case for real-time data and cash flow insight 

Many banks still hold excessive short-term liquidity due to a lack of high-quality, real-time data. However, the ability to measure, monitor, and manage cash flows in real time can have a dramatic effect on a bank’s performance. In today’s world of instant payments and T+0 settlements, treasurers need detailed, consistent data at their fingertips to react to evolving cash positions.

Effective intraday liquidity management means ensuring time-sensitive payments are prioritized. It also means meeting contractual obligations and minimizing liquidity needs, all while delivering a seamless customer experience. By leveraging real-time intelligence, banks can better align their liquidity strategies with the broader business model, adding value to both clients and shareholders.

Beyond buffers: understanding liquidity drivers

When cash was cheap and incentivized, many treasurers did not see the need to truly understand intraday liquidity flows. But with real-time data, banks can now dive deep into the business drivers behind liquidity needs. By understanding how cash is being used and who is using it, treasurers can build more efficient balance sheets that reflect the true nature of their bank’s operations.

This level of insight enables banks to develop smarter, more flexible products that address client needs while also managing liquidity risk appropriately. It’s not just about holding liquidity. It’s about understanding how to price cash products correctly and ensuring that those who need liquidity are appropriately charged for it. This can have a tangible impact on earnings and, ultimately, on shareholder value.

Working together: treasury, risk, operations, and product

Effective liquidity management requires collaboration across departments. Treasurers, risk managers, operations teams, and product developers need to work in close partnership, supported by real-time data. When banks can accurately forecast cash flows and manage liquidity in real time, they can build products that are priced correctly, meet client needs, and manage risk effectively.

And while intraday liquidity management has often been viewed as a regulatory concern, it’s essential to recognize the value it brings to clients and shareholders. Regulators are right to emphasize oversight, but real-time, data-driven liquidity management offers much more than compliance. It creates opportunities for earnings growth and product innovation while improving risk management.

Building shareholder value through intraday liquidity

Banks that manage liquidity reactively, or treat it solely as a regulatory requirement, are missing a significant opportunity. Effective intraday liquidity management, built on real-time data, intelligent forecasting, and cross-departmental collaboration, is a key driver of shareholder value. 

In the current financial landscape, where instant payments and real-time settlements are the norm, proactive liquidity management is no longer optional. It’s time for banks to embrace this shift, not just to meet regulatory demands, but to deliver better products, improve customer experiences, and ultimately drive shareholder value. 

Author: Joel Feazell, Head of Liquidity Management Platform