From RTC to GTC?
Treasury Centres in Asia Pacific Going Global
by Helen Sanders, Editor
Treasury centralisation is nothing new, and is typically considered to be a best practice for many industries, depending on their business model and culture. However, when looking at Asia, the role, and prominence, of regional treasury centres (RTCs) is changing. As the three key themes of globalisation, digitisation and regulatory liberalisation continue, the need and ability for RTCs to deliver value to their organisations is increasing. As Asia’s contribution towards global revenues continue to grow, could these RTCs become the global treasury centres of the future?
A new generation of treasury centres in Asia Pacific
Centralisation of treasury activities in Asia Pacific has become well-established, with a long heritage of sophisticated, highly professional RTCs amongst multinational corporations headquartered in North America and Europe, and the largest Asian multinationals in industries such as automotive and electronics. As globalisation and digitisation continue, however, corporations of all sizes, and headquartered in all regions, are taking the opportunity to increase visibility and control over liquidity and risk by concentrating treasury activities into treasury centres in Asia. Sandip Patil, Managing Director and Region Head, Global Liquidity and Investments, Asia Pacific, Citi explains,
“Initially, large sophisticated corporations headquartered in Western Europe and North America have for many years been setting up RTCs in Asia Pacific, but now we are seeing this trend extend to fast-expanding Asian multinationals as they recognise that a centralised treasury function is an efficient way of facilitating growth. In addition, in the past tier two corporations that have lacked the necessary scale in their international operations to justify centralising treasury are now seeing the benefits of doing so.”
HSBC expand on this,
“As Chinese companies expand their business into new markets, they are increasingly setting up treasury structures in Hong Kong, and tapping into expertise and best-practice techniques to support growth and efficiency.”
Furthermore, as Victor Penna, Head of Treasury Solutions, Standard Chartered Bank illustrates, this trend is not restricted to Chinese multinationals,
“In Korea, the largest corporations already have well-established, highly efficient treasuries, but the trend towards regional and global treasury centres in Asia is now impacting on the next tier. Malaysian corporations are also outgrowing their home market and expanding internationally. These businesses are therefore seeking similar sophistication in risk management, and cash and liquidity efficiency, as their peers in other regions.”
Factors in treasury centralisation
There are a variety of reasons behind this development, as Sandip Patil, Citi outlines,
“We see three key drivers of treasury centralisation in Asia Pacific: Firstly, globalisation, as corporations in all industries, expand beyond their home markets. Secondly, digitisation, with rapidly increasing availability of tools to facilitate centralisation and connect the business. Thirdly, competitive pressures, which will only increase further. Corporations of all sizes need to be as efficient as possible, reducing both operational and financial costs, using cash more effectively, and optimising intercompany flows.”
A fourth trend that is important to note, however, is regulatory liberalisation. In China, for example, it is becoming easier to automate and standardise financial processes, but also to manage cross-border liquidity in RMB, using techniques such as intercompany lending and cross-border cash pooling.