8.3.2.1 Time Shift in Payments
When a bank is under financial stress, customers and counterparties defer payments, leading to a reduction in Intraday liquidity. The delayed payments, affect other payments in the pipeline and also effect the fulfillment of time specific obligations.
In a similar way, when certain obligations of the bank are brought forward in time during the day, this leads to a stressed situation as well. The assumption supports a time shift in payments- either a forward or backward shift.
The application supports a time shift of payments from one time bucket to another. You can apply this assumption to both payments made and payments received.
Note:
All payments within the time bucket are affected and shifted according to the assumption definition.The following is an example for Time Shift in Payment assumption category:
The Time buckets are defined as follows in the example:
Table 7-36 Time Shift in Payment assumption
| Level 2 | Level 1 | Level 0 |
|---|---|---|
| 09:00:00 to 09:24:00 | 09: 00:00 to 09:12:00 | 09:00:00 to 09:06:00 |
| 09:06:01 to 09:12:00 | ||
| 09:12:01 to 09:24:00 | 09:12:01 to 09:18:00 | |
| 09:18:01 to 09:24:00 |
When a Business Assumption is defined:
- Dimensions: Legal entity- Payment system
- Based on: Payments received
- Time buckets from : 09:00:00 to 09:12:00
- Time buckets To: 09:12:01 to 09:24:00
- Percentage of delay: 60%
The payments made and received are as follows:
Table 7-37 Payment details
| Time bucket (Level 0) | Payments Received (Inflows) | Payments Made (Outflows) |
|---|---|---|
| Amount | Amount | |
| 09:00:00 to 09:06:00 | 990 | 675 |
| 09:06:01 to 09:12:00 | 550 | 234 |
| 09:12:01 to 09:18:00 | 130 | 167 |
| 09:18:01 to 09:24:00 | 100 | 389 |
When the assumption is defined at level 1, the same is translated to level 0 buckets when the assignment method is selected.
In the above example, the selected time bucket option as an assignment method is chosen. In this case, Inflows in the time period 09:00:00 to 09:12:00 moves to the time bucket 09:12:01 to 09:24:00. Since the ‘to’ bucket has two level 0 buckets, the assignment of the total amount i.e. (990 +550) must be done to both the buckets. After the assignment, the payments received and made are as follows:
Table 7-38 Payment details
| Time bucket | Payments Received (Inflows) | Payments Made (Outflows) |
|---|---|---|
| Amount | Amount | |
| 09:00:00 to 09:06:00 | 396 | 675 |
| 09:06:01 to 09:12:00 | 220 | 234 |
| 09:12:01 to 09:18:00 | 592 | 167 |
| 09:18:01 to 09:24:00 | 562 | 389 |
Here, 60% of (990 +550) is delayed and is allocated equally between the level 0 buckets in the to bucket.