Significant cash flow monitoring for Depositary Banks

As in every industry or economic sector subject to digitalization, less streamlined and standardized real-life tasks are also the hardest to automate. These become a pain point particularly when, at the same time, regulatory frameworks bind operators to put increasingly more attention exactly on such processes.

This is the case with the latest UCITS and AIFM Directives on the matter of cash flow monitoring – and depositaries know that. At Depowise, we have identified four bottlenecks that currently slow down approval, reconciliation, and oversight operations.

The solutions lie in software. Through our Significant Cash Flow Monitoring feature, depositary banks can find simpler ways to keep up their performance while ensuring accuracy in daily oversight duties.

Four bottlenecks in the current cash flow monitoring process

On the matter, Directives are clear. The depositary must ensure that cash flows are appropriately and constantly monitored. This applies both in the instances of transactions in the realm of the UCITS regulation and, even more so, when these concern alternative funds – for the prevalent matters of the investments carried out.

There are four process-related points currently affecting the efficiency of depositaries with this respect:
  1. Cash flow monitoring is still largely done manually, and operation by operation;
  2. Siloed operations, where the transaction itself is not properly and in all instances reconciled with more specific details about its nature. This may lead to redundant work on the same transaction in later stages;
  3. Manual and fragmented details collection, partly connected to the second point, in terms of the way further information about a certain cash transaction is usually investigated, annotated, stored and used afterwards;
  4. Lack of standardization, in terms of additional information complementing the cash transaction, generally attributable to the nature of the operation itself.

All these elements contribute to slowing down the daily oversight process of depositary banks. However, no one says that these tasks cannot be streamlined in a software environment that allows operators to set automated rules and keep relevant information all in one place.

Speed up routine operations and keep all details at a glance

The impact of digitalization on the management of a business process can be seen as incremental, on a spectrum. What does this mean? That even if you cannot achieve complete automation on a certain business line, that does not mean that ICTs won’t help you in other ways.

Monitoring significant cash flows is a perfect example of this argument in the investment industry. As established by the regulatory framework, depositaries must properly keep in check all cash transactions. But parts of this process can be streamlined to a great extent where rules automatically check, in the background, whether certain operations do require or not further supervision.

Much in the style of our Limit Checks module, Depowise actively helps depositaries fulfil their oversight duties by tackling exactly the bottlenecks highlighted. This takes place in two ways:

1. Setting rules on whitelisted transactions

Some cash transactions are routine, or take place with a given periodicity. Usually, these also pertain to trusted counterparties with which funds entertain business relations. By setting specific rules to whitelist operations based on transaction details (amount, counterparty, etc.), Depowise automatically checks them in the background, and notifies users only when their attention is required.

In the case of a limit breach for example, or a failed transaction due to counterparty risk, users can then look into the transaction at hand when interventions are necessary. Otherwise, if presets have already assessed that everything is correct and by the rules outlined, why doing more manual work?

2. Complementing recorded cash transactions with detailed information

In cash flow monitoring, the input of additional and more detailed information about a specific transaction still needs to happen manually. Rather than to technological deficiencies, this is due to the nature of such transactions (especially in the case of alternative investment funds) and the knowledge we have of them. It’s a movement-specific knowledge, unique to each non-routine operation and acquired first-hand by the operator charged with this task.

Depowise allows users to complement cash transactions with all relevant information and documents necessary for monitoring and oversight duties. Furthermore, this is presented at a glance, in the same interface, simplifying users’ task when looking into the reasons and description of a specific investment. Such business value may come handy also at a later stage, when information about a specific cash transaction serves as input for other activities.

To the specific end of cash flow monitoring, Depowise presents two solutions to four different problems depositaries typically encounter.

First, rules and checks in the background notify users about inconsistencies or limit breaches only when their attention is required. Secondly, the interface allows them also to complement more harmoniously a recorded transaction with its relevant details: 1) across different business lines, 2) un-siloed and all in one place, 3) to ease oversight duties and ex-post assessments of past movements.

Interested in hearing more on how Depowise could benefit your company?

Let’s talk Depowise in greater detail. Contact our Founder and Solution Architect, Sven Peekmann, at We will arrange a demo and show you how the solution could benefit your bank or Fund Management Company.

Co-authored by Federico Plantera


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