Ground Control: Intraday liquidity meets Calastone’s Net Payments Hub
05 Jun 2015
This week, Schroders announced their adoption of our Net Payments Hub providing them with earlier known payment position and timely payment on settlement, in association with Barclays.
As has been well articulated in a recent Cap Gemini paper, “Many banks dealing with large value payments cater to most of the liquidity requirements in the long run; however, intraday is an area which has not been focussed upon by many banks till date.” Basel III rules also require that capital held by banks must be of a higher quality, meaning that access to capital is much more expensive than it used to be.
Historically, payments relied heavily on manual processing involving hefty multilateral relationships and multiple positions in order to reconcile, resulting in a direct impact on liquidity flow and risk exposure.
Calastone’s Net Payments Hub has been created specifically for the mutual fund industry. We have taken a unique approach to solve these two key issues;
i. matching of individual transactions per fund per distributor
ii. timely payment on settlement date
This solution matches instructions and aggregates into a net position between counterparties, which both parties confirm in advance, allowing for early morning settlement on a single payment. The output being that firms achieve early knowledge of total funding requirements and improve their liquidity.
Barclays similarly recognised these industry challenges and joined Calastone in the creation of the Barclays Payments solution. Here, the fund manager or distributor creates a payment account that is used for the net payments for all counterparties. Importantly, this account is complementary to and independent of existing banking arrangements, ensuring simple implementation.
Feedback to date from our network of TA’s, fund managers and distributors alike has been extremely positive. I look forward to welcoming many others to join Schroders in adopting this solution which fulfils such an important industry need.