After agreeing the IHB setup in Singapore, Citi proposed to set-up the regional cash pooling in USD. For phase one, Citi established the sweeping connectivity for their subsidiaries in Hong Kong, Japan and Singapore to the newly formed IHB entity.
Once KLA was familiar with the automated cash sweeping mechanism under Global Concentration Engine, and robust Liquidity Manager functionality that provides real-time access to global cash positions and reporting, the bank proceeded to phase two by having KLA’s European entities sweep to the bank’s London’s sub-header account, then to the Singapore header.
This allows KLA to segregate the cash positions between its European and Asian entities. Through this sweeping setup, KLA achieved several key benefits.
Before the implementation of the IHB, KLA’ regional cash management functions were decentralised. By transitioning to a centralised model, KLA improved control, visibility and optimised economics. All funding, investment and FX activities are now centralised, resulting in more standardised and efficient treasury management.
The cash pool structure has allowed KLA to optimise the idle balances across regional entity accounts, significantly adding between US$1.2m and US$1.5m to interest income per year.
For Asia-based entities, there is a timing mismatch when investing in US MMFs due to time zone differences and operational cut-off times. KLA eventually addressed the challenge of same-day investment and redemption in MMFs by using a UK sub-header cash pool that takes advantage of the overlapping time zones.
KLA managed to close 15 regional MMF accounts, reducing administrative burden and reconciliation effort by local finance teams, especially during month-end. Manual accounting and payments have been minimised thanks to the automated cash pool interest calculation and automated interest settlement.
KLA has retained Citi’s digital liquidity solution, Citi Token Services (CTS) for Cash as a contingency solution during, for example, UK public holidays or when the UK daily operating limit is exceeded.
