HSBC in Germany has won a mandate to implement a fully-automated two-way renminbi sweeping solution between China and Germany for Würth Group, the global fastening products group. The solution enables the group, located in more than 80 countries, to sweep funds seamlessly from China to Germany and vice versa, making efficient use of their global cash balances.
The agreement paves the way for the first implementation of its kind for the Chinese currency in Germany.
‘Sweeping’ is a critical part of a company’s ability to manage its cash efficiently. It refers to the automated, physical movement of cash across borders from one country to another.
“Renminbi sweeping enables us to manage the liquidity of our Chinese group companies centrally from Germany and to integrate it into our global cash management”, says Patrik Imholz, Head of Treasury Management, Würth Finance International B.V.
“Surplus liquidity can be used to finance other group units, so insufficient liquidity can be balanced out by cross-border transfers, while interest and foreign currency expenses can decline as a result. Currency risks can also be managed centrally from Germany.” Imholz added.
With this solution, group-owned accounts are settled beyond the Chinese national border: at the end of a working day, the accounts of Würth’s various national companies in China are settled via the master account of the group’s Chinese cash pool. The master account in turn is settled with a German target account via a special cash concentration account. Two-way cross-border sweeping has been possible for the Chinese currency throughout China since July 2014.
“The more payments are settled in renminbi, the more valuable automated renminbi cash concentration becomes for German companies”, says Gabriele Schnell, HSBC’s head of payments and cash management in Germany.
“HSBC has already implemented liquidity settlement manually in several mandates”, adds Schnell. “Automation means greater efficiency and security for our customers, helping them to use the cash in their business globally in the most valuable way possible.”
Irrespective of a company’s location, turnover and length of business activity in Europe, renminbi sweeping is subject to approval. Ceilings for capital inflows and outflows, which may not be exceeded, also have to be agreed between the bank and the companies.
After Hong Kong, Singapore and Great Britain, Germany is the fourth country in which HSBC has implemented the fully-automated, renminbi, two-way, cross-border cash concentration.