Three forces reshaping bank liquidity and risk management

KEY TAKEAWAYS

• Three forces – spreads, speed and optimization – are reshaping how banks think about liquidity, and together they mark a shift from passive defense to active balance sheet management. 

• Regulators are focusing less on how much liquidity banks hold and more on whether they can access and deploy it quickly across entities, currencies and markets. 

• AI and tokenization can improve decision-making and efficiency, but they also remove time buffers, increase complexity and expose weak data and governance foundations. 

Liquidity risk is accelerating as faster-moving capital, evolving regulation and technological change force treasurers to rethink the foundations of risk management.

At Bloomberg’s Global Markets & Banking Summit in London in May, banking leaders shared how their firms are strengthening liquidity and risk frameworks and how they can balance AI adoption and tokenization with control, ensuring efficiency gains don’t come at the expense of resilience.

Enhancing liquidity: The next phase of risk management 

From jumbo IPOs and renewed issuance to geopolitical shocks and rapid technological change, the operating environment for bank treasurers has rarely been more complex. But for all the moving parts, one thing remains constant: liquidity is what brings banks down. 

Before 2008, that risk was not yet fully understood. Institutions ran thinner buffers, with few recent precedents showing how quickly funding could disappear. The 2008 crisis forced a reset, with banks building larger reserves, strengthening oversight and investing heavily in measurement to ensure they could withstand periods of stress. 

That system delivered. But it was built to solve for one problem – quantity – and the challenge has now evolved. As balance sheets become more fragmented, institutions are being forced to rethink not just how much liquidity they hold, but how they measure, manage and mobilize it. 

Against this backdrop, three forces are reshaping how banks are approaching liquidity: spreads, speed and optimization. Together, they mark a shift from passive defense to active balance sheet management.

The three forces redefining liquidity 

1. Spreads

For years after the financial crisis, liquidity portfolios were characterized by caution. With negative asset swaps and compressed returns, treasurers had little room to do much beyond parking funds in cash. Liquidity was simply a cost of resilience. 

Today, with rising rates and the return of positive asset swaps, liquidity portfolios are more active and –  crucially – more consequential. Treasurers are once again balancing safety with return, turning liquidity from a passive buffer into a performance lever. 

2. Speed

Liquidity is no longer just about how much sits on the balance sheet, but how quickly it can be mobilized. Banks have always dealt in the business of trust, but now that trust can erode within a matter of hours. It demands a move away from static metrics towards execution readiness.  

As the speed of liquidity stress becomes a systemic risk in its own right, therisk, the burden of proof on banks is rising accordingly. Banks are expected to know exactly where liquidity sits across entities, currencies and jurisdictions, and demonstrate, in detail, that they’re able to deploy that liquidity in compressed timelines.  

The onus is also on regulators to enable this shift. A lot of the supporting infrastructure, particularly central bank processes, remains complex and slow, so bridging that gap will be critical. 

3. Optimization

Traditionally, treasury functions treated liquidity, capital and funding as distinct disciplines, each managed according to its own constraints. This siloed approach is giving way to a more integrated model, with a focus on how different resources interact across the balance sheet, and where efficiencies can be unlocked. 

The goal is efficiency as well as safety: deploying capital and liquidity in a way that supports returns for shareholders while maintaining a strong defensive position.  

AI as an enabler, not a shortcut 

AI is starting to deliver practical benefits for treasury functions, particularly in reducing decision latency. From identifying day-to-day variances to flagging anomalies, enhancing stress testing and strengthening early warning indicators, AI is proving useful in making faster, more informed decisions.  

Execution is a different story. AI can’t yet replace the underlying governance required to manage liquidity risk, from legal agreements to recovery planning and stress testing frameworks. Only with consistent, well-structured data, can it underpin the process of making good decisions. As AI use expands, so does the need for clear audit trails, explainable outputs and a human in the loop to validate decisions.

Tokenization and real-time finance: a double-edged sword 

Tokenization and real-time finance promise to strip out long-standing inefficiencies in how money moves through the system.  

By reducing settlement lag and enabling seamless transfers, these technologies offer clear benefits. Features such as programmable payments and smart contracts could allow funds and collateral to move automatically, bringing treasury operations closer in sync with real-time markets and client expectations. 

But that efficiency comes with trade-offs. The delays embedded in traditional settlement systems have long provided a liquidity buffer, giving treasurers time to check and reposition resources. As settlement becomes instantaneous, that window disappears. At the same time, new digital pathways could fragment liquidity across platforms, raising the question of whether inefficiencies are being removed, or replaced with new forms of complexity. 

Ensuring liquidity is in the right place at the right time remains a key objective. But delivering on it will become more demanding, as banks balance faster systems with the need to maintain control and resilience.

Prepared, but not protected

Resilience is defined by how effectively liquidity can be moved when it matters most. With this, the role of treasury is evolving from buffer manager to real-time risk operator. 

The banking system may be more resilient than in 2008, but it’s not immune. Risk factors are clear to see, and we don’t know what the next crisis will look like – but we can be sure it will move faster.  

The job of the treasury is to make sure banking institutions are prepared to identify stresses and step in when it’s time to support clients and the economy