by Bas Rebel, Senior Director of Corporate Treasury Solutions, PwC The Netherlands and Philippe Förster, Director, PwC Luxembourg
Notional pooling is a popular cash management instrument. But over the past few months the debate about its future has intensified. Some believe it will disappear in the next two years, others are convinced that it will survive. No doubt some convictions are founded in business opportunism. Many corporate beneficiaries are sitting on the fence wondering what will happen and how and when they should prepare for alternatives. Treasury professionals know that implementation of any alternative implies a fundamental change in cash management which will require substantial effort and lead time. In the interest of undisturbed and stress-free cash management, clarity on this issue is needed sooner rather than later.
It would not be the first time notional pooling has been declared dead prematurely. Without a good understanding of the issues that triggered the debate and turmoil this time, it is difficult to assess the right moment to jump trains if/when necessary. This article examines the underlying issues.
What are we talking about?
Notional pooling comes in many different shapes and forms, ranging from simple interest recalculation to contractual supported balance sharing. It can be implemented across legal entities as well as within a single legal entity. The currencies of the participating accounts is another dimension to the range of notional pooling products. A special kind of notional pooling is the so-called reference account structure also known as ‘Nordic’ pooling, in which the owner of the account can be different from the operator. A key characteristic of all notional pooling products is that account balances are not transferred between participating accounts.
