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Best Practice Handbook

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European Cash Management 2014



Section 1: The ECM landscape
Section 2: Payments and clearing: the latest
Section 3: Core cash management
Section 4: Organising treasury
Section 5: Liquidity structures
Section 6: Funding the business
Section 7: Short-term investments
Section 8: Bank relationships
Section 9: Technology partners
Section 10: Tax and legal advisory

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This European Cash Management Handbook is designed to provide an update for corporate treasurers on the various ways they can improve the efficiency and effectiveness of their cash management. Most of this guide takes a back-to-basics approach, looking closely at the elements that form the foundation of cash management so that treasurers can optimise their operations by assessing what they are doing – and what they are not doing – in relation to best practice.

In Europe, the worst of the debt crisis now thankfully appears to be behind us. However, the recovery is not exactly in full swing yet either. As such, 2014 has been another challenging year for the region’s corporate treasurers, many of whom are already under considerable pressure as they try to maintain yield on short-term investments in an ultra-low rate environment.

In June, the European Central Bank (ECB) announced a raft of measures designed to provide stimulus to the Eurozone economy and encourage banks to lend more to businesses, the most radical of which was a cut in the deposit rate from zero to -0.1%. Negative rates are unknown territory for a major central bank. But whatever the outcome for the Eurozone economy, the implications for the banks and businesses operating in it could be enormous.

Elsewhere bank failures and credit weaknesses are continuing to cast a shadow over restricted investment lists. And on top of that there are the challenges posed by the ongoing overhaul of financial regulation.

For example, changes in the regulation of money market funds (MMFs) in Europe rest on a decision due to be made in the term of the new European Parliament in Autumn 2014. What is still unclear is what inspiration regulators in Europe may take from regulators in the US who, in July 2014, unveiled their own reforms for the MMF industry, now widely considered to be the most dramatic shake-up to MMF products since the 1970s.

The Single Euro Payments Area (SEPA) is also worth noting in this introduction to European Cash Management 2014. Following the extension of the original migration date by six months, on 1st August 2014 a political project that began way back at the turn of the millennium was finally put to bed. Now that corporates have got over the strain of complying, the time has come to think about how the changes brought by SEPA can be leveraged, including harmonising payments and collections, rationalising bank accounts and centralising, as far as possible, treasury operations across the region.