Five questions bank COOs will ask with a GREXIT on the horizon

What happens inside a bank when an event like Greece leaving the Euro is on the horizon, or another similarly explosive market event is looming? I spoke with Misys Head of Payments, Matthew Williamson to get his views.

As a former head of payment technology at Citibank and Travelex here are five things he believed will be on the crisis agenda as banks look to protect themselves from market shockwaves over the coming days and weeks. He told me what used to crop up on his to do list in his former roles when similar situations arose and what COOs and operational staff at banks across Europe will be asking themselves right now:

How can I stop payments if I need to? …and as quickly as possible. In a bank you know that no matter how hard you try, within the black magic of a vast technology infrastructure, it is highly likely that in changing payment routing and touching multiple interconnected systems there is a high risk of unintended consequences. While major payment flows can be quite quickly ‘switched off’ there is always something as simple and innocuous as scheduled payment that could scupper your entire strategy. But banks need the flexibility to implement a hierarchy of controls - not just a big off switch. For example, the ability to suspend all payment flows to a specific counterparty.

What’s my liquidity position? If you don’t quickly get to grips with this via swing reports there are major challenges ahead: reputational impact, higher cost of payments and the ability to meet obligations. Banks will be asking “do we have funds in the bank”, and what is already “in-flight?” Did it leave or is it sat in a queue awaiting validation/verification? Banks need to be able to quickly determine multilateral and bilateral liquidity and have the ability to adjust it, for example through the sweeping of funds between settlement accounts.

How do we support and protect our clients? With market instability, a measured, focused approach is critical to ensure banks do not create additional unforeseen internal issues or trigger a new event that could damage the market place further. For example, realising all payments in one go and creating an outage, or breaking downstream activities that impact liquidity at another bank.

How and when do we start managing releasing funds? Can we start receiving and releasing payments? It sounds simple, but in a complex environment scheduling controls are key. This is vital to help soften re-entry into the market too. Banks will also be asking whether they are equipped to manage duplicate checking, whether they have the right level of confidence yet, and whether they are regulatory compliant based on the factors of the original event.

Where’s the nearest supply of RedBull (Sugar Free)? Looks like another sleepless night…

Banks have extensive playbooks catering for potential outcomes of course and will have a strategy in place for such market events - but this will be an incredibly challenging and stressful period for banks and bankers from an operational point of view. Does this resonate with you as a payments professional?

Misys works with over 200 banks to insulate their payments infrastructure. To find out more contact Matt and I directly, or find out more and add your comments at #PaymentsInsulator on Twitter.