Tracking pixel
myTMI logo

Please login to access your profile

Tracking pixelCash and Liquidity Optimization USA

Cash & Liquidity Management

The End of Cash Pooling? In light of the regulatory and technology changes that have emerged in recent years, the Editor discusses whether treasurers really need cash pooling any more, particularly in regions such as Europe.

Page 1 of 4

The End of Cash Pooling?

The End of Cash Pooling?

by Helen Sanders, Editor

Cash pooling, particularly cash concentration (physical pooling) is well-established as a fundamental technique for treasurers to manage corporate liquidity, both domestically and cross-border (figure 1). However, given some of the recent regulatory and technology changes that have emerged in recent years, to what extent do treasurers really need cash pooling any more, particularly in regions such as Europe? As Chris Paton, Bank of America Merrill Lynch says,

“The basics of liquidity management have not changed: corporations still need to balance security, liquidity and yield, irrespective of the interest rate environment and degree of FX volatility at a particular time. What is changing, however, is the regulatory environment in which treasurers manage their cash, with Basel III and the liquidity coverage ratio (LCR), SEPA, liberalisation in China and changes to regulations in local markets all impacting on the opportunities to centralise liquidity.”

The impact of SEPA

As Jan Rottiers, BNP Paribas explains, with cash pooling a mature technique, demand for these solutions is relatively steady, and is supported by a large number of banks,

“In general, demand for both cash concentration, including variations such as target balancing, and notional cash pooling has remained consistent in recent years. While there has been some inconsistency in banks’ capabilities in the past, some have brought their technical capabilities up to standard so a growing number can now offer services such as intra-day zero-balancing as well as end of day sweeps.” 

In theory, however, SEPA (Single Euro Payments Area) should have resulted in a decline in demand for cash pooling across SEPA countries. After all, one of the value propositions of SEPA was the ability to replace accounts held across all SEPA countries with a single euro account. Although an increasing number of companies are centralising payments including the use of payments-on-behalf-of (POBO) structures (and in fewer cases centralising collections, including collections-on-behalf-of [COBO]) it appears that treasurers have not significantly simplified their cash management and bank account structures. Bert Terlien, Head of Cash Pooling Product, Global Transaction Services, RBS confirms,

“SEPA has not resulted in any significant loss of appetite for cash pooling amongst our customers. There are still reasons why a company may hold multiple accounts in a country, and across Europe, and although we expect treasurers to simplify their account structures to some extent, cash pooling will continue to be a requirement.” 

Next Page 1 2 3 4 

If you wish to read the rest of this article, please login to your myTMI account
or simply register now for free.

You will then also be able to read online, download and print the article.

It only takes 30 seconds and you will also benefit from the following:

- Our Monthly eNewsletter
- Regular Treasury Updates
- Unlimited Article Downloads
- Access to all premium articles
- Access to MyTMI Area

Register today for free!

Download this article for free

Show articles by this author

Discover the benefits of myTMI

Save PDFs of your favorite articles, authors and companies. Bookmark this article, or add to a list of your favorites within mytmi.

Register Today for FREE!

Share this articleShare article on LinkedIn
Share article on Facebook Share article on Twitter
Helen Sanders Article by
Helen Sanders
Editor, TMI

add author to add to my tmi

back to Cash & Liquidity Management category

back to Bank of America Merrill Lynch Treasury Leaders

Interested in learning more about Cash & Liquidity Management?

Click here for more information about our unique TMI Academy case study series

Tracking pixelHungry for the hottest cash management trends?