TREASURY SEMINAR. Antwerp, 2nd of March BY HANS DE VRIES Corporate Payment Management

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1 TREASURY SEMINAR Antwerp, 2nd of March 2017

2 THE END OF NOTIONAL POOLING Options left for the post notional pooling era 2

3 WHY NOTIONAL POOLING? Most companies need multiple accounts for various reasons: Administrative Company policy ( independency of subsidiaries) Multinationals Treasurer ideally needs only one bank account How to get there? 3

4 CASH CONCENTRATION: BASICALLY 2 OPTIONS Physical pooling: Zero balancing/ Target balancing/ Trigger balancing Notional Pooling: a rare phenomenon in the Treasury World of today available in only a few countries UK, Denmark and the Netherlands 4

5 THE BEAUTY OF NOTIONAL POOLING No physical transfer of funds while all accounts are notionally regarded by the bank as One account All accountholders are able to check the balance of the account through e- bank systems minute by minute Overdraft limits per account to control spending Bank takes care of the interest calculation and allocation Bank facilitates company s intercompany interest conditions (armth length regulations) 5

6 BASEL III AND NOTIONAL POOLING Dutch Central bank no longer allows the banks to report the net position on the underlying accounts only The banks are therefore forced to keep costly debt reserves at the central bank covering the debt position in the cashpool Leaves two options for the banks: 1 à Transfer the actual notional pooling costs to the customers 2 à Stop offering notional pooling 6

7 END OF NOTIONAL POOLING: WHAT OPTIONS? IF POSSIBLE: reduce number of accounts, operate them as stand alone IF NOT: cash concentration by physical transfers: physical pooling Manually (time consuming- sub-optimal results) Automatic via the Bank systems (optimal result per bank) (Semi-) Automatic via Treasury Management systems (sub-optimal per bank but preferably in a multibank situation) 7

8 CONSIDERATIONS ON PHYSICAL POOLING Intercompany loan administration Revolving credit agreement Interest calculation and allocation (arm length) Intraday credit limits versus target balancing (coping with zero balance situation) Controlling the daily individual spending on the accounts Mono or Multi- Bank? Can Bank provide the tools to support? 8

9 HOW FINTECH CAN SUPPORT THE ZB SITUATION Take care of the intercompany loan administration Intercompany interest calculation and allocation Process and handle the actual intercompany interest transfers Uniform approach to a Multi-Bank environment Daily overview of overall (multibank/ intraday) position Online controlling on spending on individual accounts Optimizing physical multibank pooling transactions Take care of the zero balance sweeps 9

10 FINTECH: THE LOGICAL ALTERNATIVE Physical Pooling as integrated function of the daily Treasury activities originated by the treasury system means maximum control and flexibility Be aware of the Cathedral in the Desert effect Multibank and ERP/ TMS connectivity is a conditio sine qua non The PowertoPay Corporate Payment Hub as connector to all banks via Swift/ Host2Host/ PSD2 and multiple ERP systems/ file conversion Optimal control on all outgoing and incoming flows Reducing (multi-) bank transaction and system costs significantly 10

11 END OF NOTIONAL POOLING Opportunity to optimize the international bank and account structure and expend the Treasurers control on outgoing flows Reduce operational risks and costs 11

12 THANK YOU FOR LISTENING HANS DE VRIES, POWERTOPAY 12