global cash management trends and solutions december 2007 itzik coriat global transaction services...
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Global Cash Management Trends and Solutions
December 2007Itzik CoriatGlobal Transaction Services HeadCiti Israel
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Agenda
Market Forces & Trends
Liquidity & Investments
Electronic Banking & Information Services
Questions
Market Forces & Trends
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Forces Driving Treasury Changes
Forces Trends Outcome
■ Rationalisation of bank relationships and account structures
■ Migration of treasury / financial functions into global treasury centres, in-house banks, shared service centres, and payment factories
■ Focus on integrating transaction management, optimising cash / credit utilisation globally
■ Centralisation of head office control, standardised processes / procedures
■ Centralised audit, regulatory, reporting and internal benchmarking through transactional visibility (SOX, IAS39, FAS133, IFRS)
■ Focus on gaining visibility and control
■ Process / workflow automation to free resource time
■ Leveraging a single ERP platform to apply best practices for automation of payables and receivables management in SSC or Payment Factory structure with a single bank integration point
■ Format standardisation to increase STP and reduce errors / fraud
■ Trading partner integration for better working capital management
■ Real-time actionable information delivery for better decisions
Strateg
ic Treasu
ry
Ho
listic ap
pro
aches acro
ss ente
rpris
e
Glo
balizatio
nR
isk &
Co
ntro
l F
ocu
sT
echn
olo
gy
Liquidity & Investments
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Pre-TBABank London
Header Account
EUR 100
Bank LondonHeader Account
EUR 150
USD 75 USD 25
Post TBA
Paris
Source
EUR 75
Paris
Source
EUR 0
Target Balancing
Solution whereby credit & debit balances in a single currency are physically moved from a source account to a header account.
Available Domestically, Cross-Border and Cross-Regionally.
Funds move. The source account’s specified target balance is achieved by taking or moving funds from/to the nominated header account.
End of day value dated balances are always swept with good value. Target balancing can take place on a periodic basis.
Interest may be re-allocated if requested.
Madrid
Source
EUR(25)
Madrid
Source
EUR 0
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Automated Target Balancing tools will enable efficient concentration of cash and funding of deficits
Same day value via cross border/cross regional Target Balancing
Intra day or next day via Multi Bank Target Balancing
Statement Files/Message Based Information downloaded to SAP for daily accounting of funds movement
Domestic Bank(s)
MT920 Request for Statement (MT942)
Customer
Define TBA Rules – Source A/C &
Target A/C relationship
Intraday TBAProcessor
MT940 / MT950 End of Day Reporting
MT942 Ad hoc Intraday Report
Communication Methods-Web-based reports-Files-XML Messages
MT101 Request for Transfer
MT103 – Funds Transfer (Concentrating to Target Account)Target Account
MT101 Request for Transfer
MT103 – Funds Transfer (Funding Source Account)
Multi-bank Target Balancing
Follow / Against The Sun Sweep
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Notional Pooling
With notional pooling, the autonomy of the accounts is maintained, while debit and credit balances are offset for interest purposes.
BankAccount 1
+USD 1000
BankAccount 3
+USD 1500
BankAccount 2
-USD 2100
BankAccount 4
-USD 500
BankAccount 5
+USD 400
Without Notional Pooling
With Notional Pooling
Interest = + 40 - 126 + 60 - 30 + 16 = - USD 40
Bank Rates
Credit Interest = 4%, Debit Interest = 6%
Bank Account 1
+USD 1000
BankAccount 2
-USD 2100
Bank Rates
Credit Interest = 4%, Debit Interest = 6%
BankNet Position
+USD 300
Interest earned by pooling accounts = USD 300 x 4% = USD 12
Advantage to customer = USD 12 - (- USD 40) = USD 52
BankAccount 3
+USD 1500
BankAccount 4
-USD 500
BankAccount 5
+USD 400
Single Currency Notional Pooling – Example.
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Optimisation – Multi Currency Notional Pooling
Optimises short term (overnight) cash positions, by notionally pooling balances with London bank , across eligible currencies
Fully automated process applies to full closing balances, so treasury can focus on managing strategic hedging and structural positions
Flexibility to transact in any pooled currency, without FX conversion Integrate with target balancing to maximise cash upstreamed into pool
- EUR 40mn eqv.
+ EUR 20mn eqv. + EUR 60mn eqv.
Available Balance = EUR 40mn equivalent, in any pool CCY
London
xGroup
EUR
Sub D EUR
Sub CEUR
London
x Group
LCY
Sub B LCY
Sub ALCY
London
Individual Currency Pools or TBAs in London
Net Multi Currency Pool Balances
(EUR Equiv)
Net Customer Position
(EUR Equiv)Cross Currency Balance Sheet Set-Off
xGroup GBP
Sub FGBP
Sub EGBP
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Multi-Currency Pooling: Participation
Asia: Australia, Hong Kong, Japan, New Zealand, Singapore, Indonesia*, Philippines***, Taiwan*
EMEA: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany (gmbh), Greece, Hungary, Ireland, Israel*, Italy, Netherlands, Poland, Portugal, Slovakia Spain, Switzerland, Turkey, UK
Americas: Bahamas, Bermuda, Canada (Ontario/Quebec), USA
Currencies (19): USD, EUR, GBP, CHF, NOK, SEK, DKK, CAD, AUD, NZD, JPY, PLN**, CZK**, HUF**, HKD**, SKK** RON**
Positive balances only: ZAR, TRY, SGD**
Approved Jurisdictions
Additionally, on-going legal reviews Slovakia, for which external counsel have advised they expect a favorable outcome.
* FCY only **pilot phase ***FCY not sourced from local currency FX
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Integrating Investments with Liquidity Solutions
Liquidity structures facilitate concentration into a single position, which can be invested in a choice of investments on an automated or active basis:
1. High Interest Yield Account or end-of-day sweep, as per market environment
2. Money market mutual funds via daily automated sweep
3. Time deposits
Automated Investment Solutions
Active Investment Solutions
BankHigh Interest Yield Account (HIYA) or Overnight Sweep
Sub 2 Sub 3 Sub 4
Money Market FundsMoney Market Funds
Time DepositsTime Deposits
1
2 3
Sub 1
Tight integration of investments with global liquidity structures optimizes both cash balances and cash investments
Liquidity structure (TBA or Notional Pool)
to optimise investments
Electronic Banking & Information Services
An Aggregated View
Multi-bank cash and other financial information
Information WarehouseInformation Warehouse
Web Dashboards
Standardized and ad-hoc custom reporting
Data aggregation and normalization
Key Success Factors
Citibank Bank 2 System 1Bank 3 User 1
Metrics Reports Ad Hoc Analytics
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Data Aggregation Solutions
Gaining Visibility into Group Cash Positions
Gaining visibility and control of group cash with actionable data is a critical first step
To enables companies to realize these benefits now without need to build system interfaces with each banking provider
To provides integrated information – the first building block to controlling and optimizing cash
To enables companies to manage risk through improved cash control, forecasting and event notification
To enables more effective working capital management across various entities through provision of real-time actionable information
To enables improved reporting to meet regulatory requirements (e.g. Sarbanes-Oxley)
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Integrated Payments & Collections
Account based payment options, e.g. funds transfers, local cheques, ACH/Giro, direct debit
Non-account based options that provide multi-currency payment capabilities without the need to open multiple accounts in each country
Global solution integrating domestic and cross-border payment &
collection capabilities into a single, standardized and efficient
product offering
Fully FlexibleAdministration
Fully FlexibleAdministrationScaleable, Secure Web portalScaleable, Secure Web portal
Robust, flexible, user-tested platform
Robust, flexible, user-tested platform
Custom Reporting
Custom Reporting
Liquidity Management Views
Liquidity Management Views
Risk Management ViewsRisk Management Views
Integrate with MS
Office
Integrate with MS
Office
AlertsAlerts
State-Of-The-Art Portal Solution
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Questions ?
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Thank you for your time !