8.3.3.1 Intraday Drawdown
This assumption enables banks to provide correspondent banking services only. The payment system participants value intraday credit on electronic funds transfer networks because payments and receipts are not perfectly synchronized. In addition, it eliminates the necessity of holding clearing balances large enough to cover all expected outflows of funds.
When a customer bank is in stress, to maintain adequate liquidity, the customer may resort to excessive drawdown of Intraday credit lines.
In the following example, the correspondent bank has 5 customers. Under normal conditions, credit lines extended to customers and usage are as follows:
Table 7-41 Customer list sample
| Normal Conditions | ||||||
|---|---|---|---|---|---|---|
| Financial Institution Customer | Intra-day Credit Line Extended | Intraday Usage | Secured | Committed | Usage of Secured | Usage of Committed |
| Bank O | 85 | 70 | 40 | 50 | 31 | 21 |
| Bank E | 80 | 60 | 25 | 10 | 26 | 30 |
| Bank M | 45 | 30 | 30 | 40 | 21 | 6 |
| Bank G | 35 | 25 | 30 | 30 | 12 | 13 |
| Bank Z | 30 | 20 | 15 | 20 | 12 | 17 |
| TOTAL | 275 | 205 | 140 | 150 | 102 | 87 |
One or more of the customer banks may be under stress, due to which maximum drawdown of Intraday credit lines may occur. The application supports following dimensional inputs:
- Percentage of Drawdown
- Respective Customers
In the above example, two customer banks are assumed to be under stress-Bank E, Bank O. Under this example, 100% drawdown of credit lines by the customer is assumed. Hence the credit lines extended and used under stressed conditions are as follows:
Table 7-42 List of banks and the customers
| Stress Conditions | ||||||
|---|---|---|---|---|---|---|
| Financial Institution Customer | Intra-day Credit Line Extended | Intraday Usage | Secured | Committed | Usage of Secured | Usage of Committed |
| Bank O | 85 | 85 | 40 | 50 | 40 | 50 |
| Bank E | 80 | 80 | 25 | 10 | 25 | 10 |
| Bank M | 45 | 30 | 30 | 40 | 21 | 6 |
| Bank G | 35 | 25 | 30 | 30 | 12 | 13 |
| Bank Z | 30 | 20 | 15 | 20 | 12 | 17 |
| TOTAL | 275 | 240 | 140 | 150 | 110 | 96 |
Similarly, the application computes ‘Peak Usage’ for both normal conditions and stressed conditions.
When a drawdown assumption is applied at higher level of time buckets, a single assignment within any level zero buckets of the said amount is considered. An example is as follows:
- Primary bucket (level 3): 08:00 – 09:00, level zero buckets being minutes
- Offset Bucket (Level 3):16:00- 17:00
- Available balance: 1000, assumption value= 40%
An amount of 400 is the outflow in the primary bucket and an inflow in the offset bucket for banks providing credit lines to its customers. This amount is allocated as a single amount in any level zero time bucket which constitutes primary and offset buckets; like 08:03( outflow 400) and 16:06( inflow 400) ;or 08:44 (outflow 400) and 16:02 (inflow 400).