Global Cash Management Trends and Solutions

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Global Cash Management Trends and Solutions

• December 2007
• Itzik Coriat
• Global Transaction Services Head
• Citi Israel

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(No Transcript)
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Agenda

• Market Forces Trends
• Liquidity Investments
• Electronic Banking Information Services
• Questions

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Market Forces Trends
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Forces Driving Treasury Changes
Forces
Outcome
Trends

• Rationalisation of bank relationships and account
  structures
• Migration of treasury / financial functions into
  global treasury centres, in-house banks, shared
  service centres, and payment factories
• Focus on integrating transaction management,
  optimising cash / credit utilisation globally

Globalization

• Centralisation of head office control,
  standardised processes / procedures
• Centralised audit, regulatory, reporting and
  internal benchmarking through transactional
  visibility (SOX, IAS39, FAS133, IFRS)
• Focus on gaining visibility and control

Risk Control Focus

• Process / workflow automation to free resource
  time
• Leveraging a single ERP platform to apply best
  practices for automation of payables and
  receivables management in SSC or Payment Factory
  structure with a single bank integration point
• Format standardisation to increase STP and reduce
  errors / fraud
• Trading partner integration for better working
  capital management
• Real-time actionable information delivery for
  better decisions

Technology
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Liquidity Investments
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Target Balancing

• Solution whereby credit debit balances in a
  single currency are physically moved from a
  source account to a header account.
• Available Domestically, Cross-Border and
  Cross-Regionally.
• Funds move. The source accounts specified target
  balance is achieved by taking or moving funds
  from/to the nominated header account.
• End of day value dated balances are always swept
  with good value. Target balancing can take place
  on a periodic basis.
• Interest may be re-allocated if requested.

Pre-TBA
Post TBA
Bank London Header Account EUR 100
Bank LondonHeader Account EUR 150
USD 75
USD 25
Paris Source EUR 75
Madrid Source EUR(25)
Paris Source EUR 0
Madrid Source EUR 0
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Multi-bank Target Balancing

• Automated Target Balancing tools will enable
  efficient concentration of cash and funding of
  deficits
• Same day value via cross border/cross regional
  Target Balancing
• Intra day or next day via Multi Bank Target
  Balancing
• Statement Files/Message Based Information
  downloaded to SAP for daily accounting of funds
  movement

Domestic Bank(s)
Customer

• Communication Methods
• Web-based reports
• Files
• XML Messages

MT940 / MT950 End of Day Reporting

Intraday TBA Processor
MT920 Request for Statement (MT942)
Define TBA Rules Source A/C Target A/C
relationship
MT942 Ad hoc Intraday Report
MT101 Request for Transfer
Target Account
MT103 Funds Transfer (Concentrating to Target
Account)
MT101 Request for Transfer
MT103 Funds Transfer (Funding Source Account)
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Follow / Against The Sun Sweep
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Notional Pooling
Single Currency Notional Pooling Example.

• With notional pooling, the autonomy of the
  accounts is maintained, while debit and credit
  balances are offset for interest purposes.

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Optimisation Multi Currency Notional Pooling

• Optimises short term (overnight) cash positions,
  by notionally pooling balances with London bank ,
  across eligible currencies
• Fully automated process applies to full closing
  balances, so treasury can focus on managing
  strategic hedging and structural positions
• Flexibility to transact in any pooled currency,
  without FX conversion
• Integrate with target balancing to maximise cash
  upstreamed into pool

Net Customer Position (EUR Equiv)
Available Balance EUR 40mn equivalent, in any
pool CCY
Cross Currency Balance Sheet Set-Off
EUR 20mn eqv.
EUR 60mn eqv.
Net Multi Currency Pool Balances (EUR Equiv)
- EUR 40mn eqv.
x Group GBP
x Group EUR
x Group LCY
Individual Currency Pools or TBAs in London
London
London
London
Sub A LCY
Sub B LCY
Sub C EUR
Sub D EUR
Sub F GBP
Sub E GBP
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Multi-Currency Pooling Participation
Approved Jurisdictions
Asia Australia, Hong Kong, Japan, New Zealand,
Singapore, Indonesia, Philippines, Taiwan EME
A Austria, Belgium, Czech Republic, Denmark,
Finland, France, Germany (gmbh), Greece, Hungary,
Ireland, Israel, Italy, Netherlands, Poland,
Portugal, Slovakia Spain, Switzerland, Turkey,
UK Americas Bahamas, Bermuda, Canada
(Ontario/Quebec), USA Currencies (19) USD, EUR,
GBP, CHF, NOK, SEK, DKK, CAD, AUD, NZD, JPY,
PLN, CZK, HUF, HKD, SKK RON Positive
balances only ZAR, TRY, SGD
Additionally, on-going legal reviews Slovakia,
for which external counsel have advised they
expect a favorable outcome. FCY only pilot
phase FCY not sourced from local currency FX
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Integrating Investments with Liquidity Solutions
Tight integration of investments with global
liquidity structures optimizes both cash balances
and cash investments
Money Market Funds
Time Deposits
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Bank High Interest Yield Account (HIYA) or
Overnight Sweep
Liquidity structure (TBA or Notional Pool) to
optimise investments
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Sub 2
Sub 3
Sub 4
Sub 1

• Liquidity structures facilitate concentration
  into a single position, which can be invested in
  a choice of investments on an automated or active
  basis
• High Interest Yield Account or end-of-day sweep,
  as per market environment
• Money market mutual funds via daily automated
  sweep
• Time deposits

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Electronic Banking Information Services
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Data Aggregation Solutions
Gaining Visibility into Group Cash Positions

• Gaining visibility and control of group cash
  with actionable data is a critical first step
• To enables companies to realize these benefits
  now without need to build system interfaces with
  each banking provider
• To provides integrated information the first
  building block to controlling and optimizing cash
• To enables companies to manage risk through
  improved cash control, forecasting and event
  notification
• To enables more effective working capital
  management across various entities through
  provision of real-time actionable information
• To enables improved reporting to meet regulatory
  requirements (e.g. Sarbanes-Oxley)

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Integrated Payments Collections
Global solution integrating domestic and
cross-border payment collection capabilities
into a single, standardized and efficient product
offering

• Account based payment options, e.g. funds
  transfers, local cheques, ACH/Giro, direct debit
• Non-account based options that provide
  multi-currency payment capabilities without the
  need to open multiple accounts in each country

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Questions ?
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Thank you for your time !