Photo of Fabio Sarao, Deutsche Bank, Josiane Farronato and Martin Schlageter from Roche.

Martin Schlageter, Head of Treasury Operations, remarks, “in the area of cash management/transaction banking, in these past years we have seen an increased demand by corporates for standardised banking products. While banks were often rather reluctant to provide them, XML ISO 20022 and the Single Euro Payments Area (SEPA) have paved the way in the right direction. Roche is now making use of these more standardised banking products and, with the support of Deutsche Bank, will be reaping the potential benefits of its corporate in-house bank (IHB) solution by reducing external complexity, saving costs and gaining much greater flexibility in regard to our banking needs.”

The feasibility of a full ‘on-behalf of’ model had to be verified upfront with local tax authorities and regulators, as well as with Deutsche Bank. A solution (IHB e-banking solution (EBS)) for non-ERP-based payments (eg salaries) had to be built by Roche, and Deutsche Bank’s new virtual account solution had to be developed and implemented for euro-usage (SEPA). The solution also required Roche’s local in-country organisations to agree to banking without its own bank accounts and becoming a pilot for this solution.

Due to the closure of their external bank in Estonia – with only three months’ notice – Roche was forced to supply banking services for its local entity in a very short time frame. The company decided not to work with another local bank in Estonia, but to operate solely in the name of Roche’s IHB on behalf of the Estonian entity (using a euro-account with Deutsche Bank in Germany). This solution covers all outgoing payments (via Roche’s payment factory), including salaries and tax payments, as well as all incoming customer payments, by applying Deutsche Bank’s virtual bank accounts that allows Roche to dedicate one specific bank account number to each customer and enable automated reconciliation of incoming payments. To shift all banking transactions to Roche’s IHB and eliminate local bank accounts offers multiple benefits to the group. The solution is envisaged to be rolled out to assorted countries and more than ten affiliates around the globe during the course of the next 12 months.

Benefits include:

• Reduced reliance on local bank credit lines.
• Elimination of external, local bank charges.
• Internal cost savings (100% usage of the IHB account structure allows the company to reduce its internal efforts to maintain external bank accounts – overall efforts to open/maintain an external bank account are estimated at 0.06–0.2 headcount).Productivity gains/process efficiencies:
  • Complete (100%) visibility of all flows: by eliminating the external bank account structure Roche ensures that all flows are routed through the established ERP/treasury channels and all flows are captured.
  • Increased automation rate for incoming payments: by routing external bank transactions though the IHB the company can better control/adapt/standardise bank information that is then electronically forwarded to the subsidiaries via the IHB EBS.
• Improved risk management – counterparty risk is reduced as Roche has less counterparties to monitor, manage and control due to less bank accounts.
• Enhanced internal and external compliance – as local, non-standardised banking transactions are reduced/eliminated.

As Schlageter explains, “the solution has already been rolled out to two more countries. Following discussions with several banks, other corporates and local regulators, we have found that so far no other full ‘on-behalf-of’ solutions have been implemented in these countries.”

Schlageter concludes, “with this solution, we reached the next level and entered into a new cash management dimension. Even more, a new area for a future minded ‘virtual’ transaction banking environment has been launched.”