A group of payments bankers brought together by Cable & Wireless at Sibos in Geneva last year have appointed the telecommunications group to provide the connectivity for a new service which aims to allow all banks to share nostro account information in real-time.
ANZ Bank, Barclays, JPMorgan Chase and Mizuho Corporate Bank have helped Cable & Wireless to devise the so-called Cable & Wireless Real Time Nostro service as a subscription-based, online service to provide banks with a real time, consolidated view of their international transactions and balance details, so they can manage liquidity, payments and securities settlements in real time, across all payments systems, currencies and time zones. The four clearing banks have undertaken to market the service to the rest of the banking industry.
“This ground-breaking initiative assists the global financial community to reduce risks and exposures in the 24 hour management of payments and collateral, via a single view of nostro positions in each currency and across agent bank services,” explains Richard Pattinson, Senior Director, Settlement Strategy and Systemic Risk, Group Treasury, Barclays Bank, and Chairman of the SWIFT Real Time Nostro Account Information Steering Group (RTNAISG). “The provision of account transaction information in an industry standard format to enable intra-day liquidity management and resolution of account queries and payments reconciliation within the day whilst each domestic currency market remains open, is a major step forward for banks now operating in a continuous global market.”
Ultimately, the service is designed to bring together all the major banks that provide nostro clearing services on a single browser access system. The idea is to provide them with greater visibility of cash movements globally across all types of accounts held with their nostro account agents, including those for foreign exchange, commercial payments and securities settlements. The service is scheduled to start in October 2003.
“Barclays wants to be at the forefront of efforts to limit the risks in international transactions: the Cable & Wireless Real Time Nostro service will allow us to manage liquidity more closely across the many accounts we maintain with other banks around the world,” says Barry Holland, Director, Treasury Operations, Barclays Capital.
Apart from the anticipated reduction in risk and gains in liquidity management and operational efficiency, Cable & Wireless Real Time Nostro will automate the reconciliation process, and so reduce the cost in time and money of the mistakes associated with the manual reconciliation of multiple statements delivered on paper at the end of the working day. Instead, users will have access to a single compilation of all their accounts, constantly updated in real time. Significant savings are also expected to accrue from management of cash flows across currencies and time zones intra-day rather than after the markets have closed, or even days later, as well as by integrating the service with existing back office systems.
The Cable & Wireless Real Time Nostro service will allow banks to send and receive information using a secure infrastructure and it is intended to attract further banks into providing account data. Data provision is based on industry standard XML and is compatible with developments in both internet based applications and SWIFTNet, enabling banks to move away from batch based overnight processing of transactions to a more interactive way of managing cash flows. For example, a transaction error that currently would be corrected up to two days after settlement is due could be repaired and posted to a customer account before close of business on the day of settlement. Aggregation of account data will allow banks to identify risks such as unforeseen overdrafts and potential defaults within the settlement day.
“Our clients see maintenance of different settlement accounts with different banks as a major cost,” says Thomas Halpin, Vice President, and Head of Global Clearing Product Management for JPMorgan Treasury Services. “Allowing our customers real time access to data in accounts we keep, as well as accounts at other banks, provides opportunities to use cash more efficiently while minimising risks.” Kazuo Kamio, Head of Settlement & Clearing Services Division, Mizuho Corporate Bank, added: “The Yen is a major currency in international financial transactions – the provision of realtime information to our customers show we are committed to international efforts to improve transparency of settlement and risk management in Japan.” John Murphy, Head of International Payments, ANZ Bank, says the new service will enable the bank to develop new products and service for clients. “The ability to deliver customer data real time within a framework of globally agreed data standards gives us a platform to develop new and innovative business solutions for our clients, both banks and corporates,” he says.
Cable & Wireless Real Time Nostro was developed in close conjunction with the banking community through a working group initiated by Cable & Wireless to discuss the adoption of new market practices for the delivery of real time information to the global financial community. Among this group are ANZ, Barclays, JPMorgan Chase and Mizuho Corporate Bank which collectively account for a substantial share of the world’s financial transactions. The inaugural meeting of the working group took place at SIBOS 2002 in Geneva. Cable & Wireless Real Time Nostro uses software developed by Gresham Computing.
“This agreement marks an important milestone in establishing Cable & Wireless Real Time Nostro as the de facto standard for sharing nostro account information,” claims Doug Loewe, president, Global Enterprise Markets, Cable & Wireless. “It is through the combination of our business-class network, hosting facilities and professional services capability and our relationships with our partners that we have been able to help our financial sector customers address some very real business issues. In this case, the priority was to reduce risk in foreign currency and securities settlements and abide by international regulations.”