Last year, the fall of three banks in the USA in a matter of weeks held the whole world in turbulence and uncertainty. Since 2001, 563 banks have collapsed, an average of about 25 banks per year, according to data from the Federal Deposit Insurance Corp. Banks are the guardrails for keeping our lives and the economic well-being of nations on track. The failures of these banks left many, including bankers and government officials, wondering how they should strengthen their risk monitoring and responsiveness to keep the financial systems running smoothly.

Speed has become the essence of banking as digital banking is growing at an unprecedented pace post-Covid. Technology is enabling real-time payments and updates throughout the ecosystem. These technologies can also extend to continuous (real-time) monitoring capabilities with minor integrations, which can be paired with analytics to provide a holistic view of a bank’s financial position.

Real-time reporting (RTR) has become an essential tool for banks to enable a bird’s eye view of the ongoing risks, whether operational, credit, capital, or liquidity. This allows tighter and more stringent controls to ensure proper and timely action, especially during economic uncertainties. Banks recognize that real-time monitoring and management are key to the banking system’s resilience. Real-time reporting clearly explains day-to-day cash and liquidity positions, helping identify and rectify or plan for potential risks. RTR solutions should have four key features:

• real-time reporting on various bank KPIs and areas
• the ability to forecast and predict
• early warnings on limit breaches
• stress testing, simulation, and scenario testing

Real-time reporting should cover a wide range of KPIs and areas, including liquidity, ALM, and regulatory compliance. Forecasting and predicting future positions is critical for banks to plan ahead and avoid potential risks. Early warnings on limit breaches are essential for banks to take timely action to prevent potential regulatory or reputational issues. Stress testing, simulation, and scenario testing are critical tools for banks to assess their resilience to potential risks and identify vulnerabilities in their operations. Let’s briefly examine the three major areas where banks must strengthen their operations and decision-making to enable resilience through real-time reporting systems.

Liquidity Risk Management

Liquidity monitoring and reporting is gaining priority as a business obligation more than a regulatory check box. Liquidity risk management has been brought to the forefront with the SVB collapse. Real-time liquidity management is becoming a key use case for real-time reporting. RTR enables banks to monitor their liquidity positions in real-time and take appropriate actions, such as borrowing from the central bank or adjusting their lending rates, to maintain adequate liquidity levels. Forecasting and predicting future liquidity positions also enables banks to plan and avoid any potential liquidity risks.

Asset & Liabilities Management (ALM)

Effective Asset & Liabilities Management (ALM) is another critical banking aspect requiring real-time monitoring. With RTR, banks can monitor their asset and liability positions in real-time and take appropriate actions, such as adjusting their loan portfolios or issuing new debt, to manage their ALM effectively.

Regulatory Requirements and Governance

Tighter and more stringent controls and reporting are also essential for banks to comply with regulatory requirements and maintain trust among their stakeholders. With RTR, banks can monitor their operations and identify any irregularities in real-time, enabling them to take corrective action promptly. Stress and scenario testing can also be strengthened with inputs from real-time reporting and forecasts available with the bank.

Regulators may plan for more stringent reporting requirements in the coming time due to the recent events. It is also in the banks’ interest to consider real-time reporting as a tool to view the events happening and act quickly to ensure stability. The flexibility of these tools also ensures future-proofing towards regulatory changes and technology readiness if the authorities demand such systems in place. They can also leverage technologies like analytics, AI/ML, etc., to aid management and decision-making.

The Way Forward

The stability of a bank is highly dependent on cash flows and the security of their investments and real-time analytics is the key to identify and mitigate such risks.

Banks and regulators must embrace new technologies that enable them to monitor their operations in real-time, leverage analytics, and make timely decisions to prevent adverse events. By implementing real-time reporting solutions, banks can make their operations more effective, efficient, safe, and seamless