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Firms struggling to manage impact of intra-day funding requirements in FCA Client Money rules

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Firms across the market have been badly affected by the impact of intra-day funding requirements brought in by the recent changes to the CASS rules, according to regulatory experts at Walbrook Partners.

As firms get to grips with the significant analysis and management required to manage their liquidity and capital requirements, Walbrook Partners has teamed up with AutoRek, a provider of client money reconciliation and calculation software, to produce a paper exploring these challenges and their possible solutions.

According to the paper, the intra-day funding requirement, which requires minute by minute analysis of cash flows, must be supported by a deep understanding of how both the firm’s and the banks’ processes work.

Without unlimited cash and capital to hand, many firms have had to consider changes to processes, to the extent these are not prohibited by other regulations.

Finding the large additional sums required to comply with these regulations can prove challenging, particularly for smaller or less well capitalised firms.

By performing reconciliations intra-day, firms can identify intra-day shortfalls, release funding no longer required and spot and remediate breaches caused by counterparties, agents, service providers and the firm itself.

Karen Bond, Director at Walbrook Partners, says: “The significant impact of intra-day funding requirements in the FCA Client Money rules has taken everyone by surprise. Managing the costs of compliance as well as the added administrative burden of implementing changes to various processes has taken its toll on a large number of firms, especially smaller market participants.

“Our white paper ‘Intra-day Client Money Management’ combines our regulatory expertise with that of AutoRek’s practical capabilities to explore the potential solutions to meeting these challenges head on. If firms don’t take action sooner rather than later, our paper also outlines the serious impact of the significant costs and issues that are very likely to occur.’”

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