Changing Liquidity Regulations Don’t Mean Loss Of Competitive Advantages Or Lower Profits

Saturday, October 14, 2017, 6:00 PM | Leave Comment

It is commonly thought that a market that is facing a stricter regulatory environment is going to offer less opportunities to profit.

The underlying idea is; more rules make competition less effective and operations more cumbersome.

In some cases this may in fact be true. But when it comes to liquidity management, there is no reason that a changing regulatory environment that favors more rules should effect your company’s ability to profit.

Liquidity is the backbone of any commercial operation, and effective liquidity management means making the most of the changes that seem to be happening all the time. Basil III has introduced a host of new regulations, and if you want your company to prosper, it will have to find the most efficient means of accessing liquidity.

The kinds of collateral that your company uses are very important, but how your company manages its liquidity is equally worthwhile to consider. In many cases, companies don’t think outside of the box when liquidity management comes up, and if you haven’t worked on a novel liquidity management plan, your team may be overlooking advantages that have developed over the last few years.

  • New Challenges

    The days when liquidity management was a mostly in-house, or counterparty based affair are long gone.

    Depending on what market your company is operating in, it may be subject to a number of overlapping regulations that are now mandatory.

    The last thing your company needs is to have valuable collateral tied up needlessly, so knowing how to take advantage of the new framework both inside and outside of Europe is vital you maintaining a competitive advantage.

    Managing liquidity under the conditions that are emerging can be done in-house, but there are also options for companies that want to employ the services of professionals that specialize in bespoke liquidity management solutions.

    The idea behind outsourcing liquidity management is simple, and if your team hasn’t explored the idea of either partially or fully outsourcing your liquidity management needs, it may be worth looking into.

    When liquidity management is done in-house, your company is responsible for maintaining the quality of the employees, and that isn’t as straightforward as it used to be.

    The risks to operational performance are higher than ever, and the next few years could easily see more changes to the regulatory framework, especially in Europe. This makes oversights more likely, and also creates the need for ongoing education within your organization.

    While this may be acceptable to some businesses, for others it may prove to be more expensive than outsourcing the work to specialists.

  • Custom Solutions

    Using a specialist firm to manage your company’s liquidity isn’t a one size fits all solution that will be ready to go overnight.

    Every business will have different needs, and when you decide to open up discussions with a company that can manage your collateral and liquidity needs, it will take time to craft a solution that maximizes efficiencies, and ensures adequate levels of regulatory compliance.

    The potential benefits to this process are manifold, and during the design phase any and all options will be explored. This will make sure that your company is getting liquidity on the best terms possible, and there aren’t any potentially hazardous oversights.

    For larger companies an in-house liquidity management team may be a good option, but until your company explores its options, it is impossible to know if it is getting the most from the liquidity providers it deals with.

    There are a number of liquidity specialists operating in the European financial space today, and reaching out to them may offer your company benefits you never knew existed.

    It is highly unlikely that regulations will stop evolving as they stand today, so planning for the future of your company’s collateral and liquidity needs is a smart move, no matter what form it takes.

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