Building an In-House Bank

Debunking the Myths

For many treasurers, creating an in-house bank is an intimidating prospect. But with robust planning, a clear phased approach, and some suitable technology from an experienced partner, it can be easier than you may think, says Jouni Kirjola, Head of Solutions, Nomentia. 

Corporates that have set up an in-house bank (IHB) often discover greater process flexibility and simplification, as well as improved cost efficiencies, and centralised control over their cash flows. There’s a lot to recommend taking this path, yet creating and maintaining an IHB is for many a daunting prospect, which, frankly, the typically under-resourced treasury department cannot begin to think about.

However, the notion of an IHB is open to a number of different interpretations, some of which may prove eminently achievable even for the most hard-pressed treasury team. So, while it could extend to a sophisticated global payments and COBO model, it may also simply be a means to enable treasury to get more visibility into the company’s liquidity position and manage internal FX deals. Fig. 1 outlines some of the possible elements to an IHB.

FIG 1 – Interpretations of an IHB

Benefits on offer

The fact that different approaches to an IHB are possible opens up the variability of reasons why a company may choose to operate one, notes Kirjola. A business handling a high volume of internal invoices, for example, may use an IHB to manage a transaction volume that otherwise would necessitate processing by external banks. As well as the cost consideration, in instances where its banks are not directly present in certain markets, using an IHB in this way can bring direct control and visibility over those transactions.

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