A Pan-Regional Approach to Liquidity and Bank Connectivity

by Benoît Mulsant, Treasury Manager, PSA Peugeot Citroën

Our team is in charge of cash and treasury management for PSA Industrial and commercial companies as well as the one for Banque PSA Finance.

We work with a large number of banks across the group, currently more than 50, which makes it important to have an efficient structure to achieve transparency and control over cash. Consequently, we have a centralisation strategy to consolidate group cash on a daily basis across both commercial and financial entities. In Europe, we achieve this using a euro-denominated physical cash pool with Societe Generale, in which cash held in multiple accounts across all of our banks in Europe is zero-balanced into a header account.

A pragmatic approach

Having implemented our cash management solution in western Europe, an important area of focus during 2009 has been the integration of our Central & Eastern Europe (CEE) cash management activities with those in other parts of Europe.

We adapted our use of bank connectivity tools according to the level of sophistication required in each country.

Our key objectives were to concentrate liquidity across all of our countries in CEE, to achieve greater visibility and control, and to leverage the cash management tools we were using in other parts of Europe. We decided to work with Societe Generale on the basis of our existing relationship. We were impressed by their extensive network in CEE (fig 1). By leveraging this network and our existing relationship, we were able to implement a pragmatic cash management approach in each country, including cash concentration. We adapted our use of bank connectivity tools according to the level of sophistication required in each country, including using Sogecash Net International in countries with reasonably straightforward cash management requirements, and ETEBAC 5 (Sogecash Remises and Sogecash 101) in others.

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Focus on Slovakia

PSA has a strong commitment to markets in CEE. One of these is Slovakia, where PSA has a major manufacturing division producing more than 850 vehicles each day, Gefco in charge of transport, Citroën already had the knowledge of these tools in-house, which ensured a consistent approach to security and reporting. One of the key factors which contributed to the success of this project was Societe Generale’s technology, which satisfies our security and transparency requirements. The quality and responsiveness of their team has also been vital, both at a local level and when liaising with group treasury. The importance of having competent people on the ground cannot be underestimated in inspiring confidence, which is vital when moving millions of euros across the region.

A trusted relationship

The success of cash management relies on close, long-lasting relationship between the customer and its bank. Security, transparency and timeliness of both information and flows of funds will be achieved based on a trusted banking relationship. We have built such a close and trusted relationship with Societe Generale spanning several decades, which noticeably enhances our operations.

Looking ahead to SWIFT

Having achieved cash and connectivity cohesion, the next step for us is to rationalise our payments processing and local bank connectivity. As a multinational corporation, we currently have to send payment files in over 100 different local formats, which are handled at a local level. This creates a major resourcing overhead due to the need to maintain multiple bank connections. To address these concerns, we are planning to implement SWIFT connectivity with all of our group banks, across all of our subsidiaries. This project will start during the first half of 2010 with a focus on rationalising both connectivity and file formats through the use of XML-based formats.