10th Apr 2018

Capital Requirements Directive IV (CRD IV) | Regulatory challenges for Treasury & Finance

James & David discuss CRD IV, a directive which states that treasurers must have a good view of liquidity trends, including negative positions and historical trends within balance sheets. This potentially arduous process requires technology to intervene with time-saving automation.

How will CRD IV affect firms with business operations in the EU?


CRD IV will affect a number of financial and credit institutions. After the financial crisis in 2008, there was an overwhelming requirement by regulators to create a sense of safety in the market so before that point we had financial and credit institutions holding cash but not necessarily reporting it to regulators like the prudential regulatory authority, which is the Bank of England.

With the crash, we had banks over-leveraged. What CRD IV within the UK necessitates is that treasurers have a good view of liquidity trends so they’ll have to have a view of their negative positions, along with the historical trends of how the balances are.

During an operating month, a bank with have inflows of cash & outflows of cash. What the regulators are really interested in is the net negative position to illustrate they’ve got sufficient capital and that they can cover that net negative position in an intra-day basis.

So, what’s required is a lot of manual reporting today so you have treasurers who have to run reports every day, it isn’t automated. They have to look at MT950s which is statement messages from institutions and then break that down into what the net negative position is.

What Automated Cash Analytics Tools allow, is to have a trend analysis attached to it, but then it also automates that function and it shows it in a visual format. So, if a treasurer were to sit down, they could click a button and look at their net negative position quite easily rather than reconciling on a day by day basis.