Hybrid Cash Pooling solution has been specifically built to meet the need of challenging markets while boosting the business and economic values of the companies. It is a system that uses two or more distinct cash balancing engines to maintain credit and debit positions of various accounts in the book of the service provider bank.
Hybrid Approach to Unlocking Liquidity in Challenging Markets
1. Hybrid Approach t o
Unlock ing Liquidit y in Challenging Mark et s
Must afa K ILIÇ
R egional T reasury & Goup Insurance Manager
Group T reasury
Indesit Com pany Int ernat ional Business S.A. | Sw it zerland
EuroFinance Int ernat ional Cash & T reasury Managem ent 19 t h Annual Conference
6-8 Oct ober 2010, Geneva Palex po, Geneva, Sw it zerland
2. Agenda
Challenges facing t reasuries
R eshaping t he t reasury
Liquidit y solut ions cont inuum
T rapped in cash
Becom ing hybrid
T he hybrid cash pooling solut ion
Q&A
Long w ords in short
3. T he new look of cash and t reasury m anagement
is being chast ened by risk and shaped by
globalizat ion.
4. In com plex environm ent s, cross-border
m ovem ent s and abilit y t o hold offshore and
FCY account s are highly regulat ed.
5. Local regulat ions oft en rest rict int er -com pany
m ovem ent s or require cent ral bank approval
and report ing.
6. T reasurers are cont inuously seek ing a bet t er
plat form w here t o st rat egically m anage t he
ent ire cash m anagem ent process t o increase t he
int rinsic value of t he business.
7. It is not feasible t o have one approach for all
count ries w hen it com es t o cash and t reasury
m anagem ent due t o different jurisdict ions in
each count ry.
8. R eshaping t he t reasury
Harm onizat ion Liberalizat ion
Cont rol Focus Cent ralizat ion
Technology Out sourcing
9. Liquidit y solut ions cont inuum
Dom est ic Cash Concent rat ion
Dom est ic Cross Border
Not ional Not ional
Pooling Pooling
Cross Border Cash Concent rat ion
10. Som e ent it ies m ay not be perm it t ed t o
part icipat e int o cash concent rat ion or not ional
cash pooling agreem ent .
11. Cash concent rat ion and not ional cash pooling
give rise t o com plex legal, regulat ory,
account ing and t ax considerat ions.
14. Hybrid approach t o cash pooling
Dom est ic Cash Pooling
Cash Concent rat ion Not ional Cash Pooling
Cross-Border Cash Pooling
15. “ Hybrid cash pooling” is a syst em t hat uses t w o
or m ore dist inct cash balancing engines t o
m aint ain credit and debit posit ions of various
account s in t he book of t he service provider
bank .
19. Becom ing hybrid
ZBA NCP HCP Overdraft
Part icipant Header Header Part icipant
Account s Account Account Account s
€50 CR €10 CR
€10 DR €10 DR
€20 DR €40 DR
€20 CR €40 DR
20. Becom ing hybrid
ZBA NCP HCP Overdraft
Part icipant Header Header Part icipant
Account s Account Account Account s
€40 CR €10 CR
€10 DR €10 DR
€10 DR €40 DR
€20 CR €40 DR
21. Hybrid cash pooling
ZBA NCP HCP Overdraft
Part icipant Header Header Part icipant
Account s Account Account Account s
€40 CR €10 CR
€10 DR €10 DR
€10 DR €40 DR
€20 CR €40 DR
22. Hybrid cash pooling
ZBA NCP HCP Overdraft
€20 CR
Part icipant Header Header Part icipant
Account s Account Account Account s
€40 CR €10 DR
€10 DR €10 DR
€10 DR €40 DR
€20 CR €60 DR
23. Hybrid cash pooling
ZBA NCP HCP Overdraft
€70 CR
Part icipant Header Header Part icipant
Account s Account Account Account s
€40 CR €10 DR
€10 DR €60 DR
€10 DR €40 DR
€20 CR €110 DR
24. Hybrid cash pooling
ZBA NCP HCP Overdraft
€70 CR
Part icipant Header Header Part icipant
Account s Account Account Account s
€40 CR €10 DR
€60 DR €10 DR
€10 DR €40 DR
€30 DR €60 DR
25. Hybrid cash pooling
ZBA NCP HCP Overdraft
€70 CR
Part icipant Header Header Part icipant
Account s Account Account Account s
€10 DR €10 DR
€10 DR €10 DR
€10 DR €40 DR
€30 DR €60 DR
27. What does it t ak e t o st ep up?
It t ak es t h ree t o fi v e m on t h s t o bu i l d a h ybri d en gi n e
6-8 w eek s 3-4 w eek s 5-7 w eek s 1-2 w eek s
St ruct ure P rovider P lat form Service
•P lan •Part icipant s •Docum ent at ion •Test s
•Design •Evaluat ions •Im plem ent at ion •Trainings
•Requirem ent s •Select ions •Ex ecut ion •Deploym ent
28. Offers a broad spect rum of benefit s
Creat es efficient w ay t o consolidat e liquidit y w it h
bet t er geographic coverage.
Elim inat es local borrow ing needs w hile reducing
corporat e guarant ees for local credit lines.
Brings econom ies of scale in financing condit ions
w it h increm ent al incom e st at em ent im provem ent s.
Enhances cont rol of cash balance and increases it s
visibilit y.
T reasury can overdraw in currency of choice.
Maint ain local bank account s t o serve local needs.
29. Offers a broad spect rum of benefit s
Elim inat es int er-com pany loans w hile creat ing new
funding vehicle.
R educes or elim inat es FX and sw ap t ransact ions t o
offset t he debit posit ions of t he account s.
R educes num ber of operat ional t ransact ions and it s
cost .
No physical m ovem ent s of funds across ent it ies or
account s at header account level.
No change in ow nership of cash.
No addit ional hardw are/soft w are on user side.
30. T hings needed t o be considered
Hybrid cash pooling prohibit ed or m ay be subject
t o recharact erized in som e count ries.
Som e ent it ies m ay not be allow ed t o part icipat e
int o hybrid cash pooling agreem ent .
Occasionally requires physical m ovem ent of funds
across account s.
May require t he parent com pany guarant ee.
Invest m ent st rat egy for ex cess liquidit y.
T ax and legal opinion.
31.
32. Long w ords in short
Cash in ex cess of w ork ing capit al at local level
no longer rem ain “ t rapped” or subject t o local
invest m ent vehicles.
Short t erm funding in t he currency of choice
w it hout t he t radit ional reliance of int er-
com pany loan st ruct ures.
Hybrid solut ions have been specifically built
t o m eet t he needs of challenging m ark et s
w hile boost ing t heir business and econom ic
values for robust fut ure.