Treasury Today Country Profiles in association with Citi

Liquidity management goes virtual

Abstract digital wave effect

Physical cash concentration and notional pooling are the traditional liquidity tools available for treasurers seeking to offset long and short balance positions. A new virtual account system aims to provide a third way.

For corporates who may not be eligible for traditional notional pooling products, or those with less complex needs, a new virtual account solution from Bank of America Merrill Lynch (BofA Merrill) may be the liquidity solution they have been waiting for.

The bank’s recently launched Liquidity Express presents corporates with a new Virtual Account Management (VAM)-based solution which offers an alternative to the banking community’s rather more complex notional pooling and physical cash concentration offerings.

Liquidity Express enables companies to consolidate funds from multiple accounts into a single balance position and categorise and report these transfers using a virtual account arrangement.

The solution is an amalgamation of the bank’s VAM, Global Liquidity Platform (GLP) and CashPro Assistant Analytics and Forecasting capabilities, explains Ad van der Poel, Head of Core Cash Management, Global Transaction Services, EMEA, BofA Merrill. “Through Liquidity Express, we are now offering an easy to set up VAM-based single currency notional pool for treasurers with less complex needs but who are still interested in using liquidity tools.”

Reporting and forecasting

The structure of the offering is such that there is no need for a separate cash concentration arrangement, the virtual account element creating a simple structure that allows money to be moved between accounts. Unlimited new virtual accounts can be added through the portal at any time. With segregation of data, visualisation and reporting through the platform, group cash flow forecasting is also facilitated.

“It gives treasurers a real sense of managing liquidity even though all the transactions and money sits in a single physical header account,” comments van der Poel.

Where separate physical accounts need to be maintained for operational, tax or regulatory reasons, the GLP sweep capabilities can automate the physical transfer of funds and track and reconcile fund movements.

Liquidity Express works either as a stand-alone concentration tool or as part of a broader liquidity structure. It is currently available for US dollar, euro and pound sterling accounts held in UK and Ireland.