The challenge
It has successfully implemented physical cash pooling structures in the US, a euro cash pool in London (covering Italy, Poland, the Czech Republic, Slovakia, Germany and Spain) and a domestic RMB cash pool in China that went live at the beginning of 2014. The company also wanted to create a notional pooling structure, involving all its major currencies, including RMB.
Brembo SpA’s aim was to link this multi-currency notional pool with its existing physical pooling structures – including a new cross-regional pooling structure linking its USD liquidity in the US with London. It also wanted to fully integrate these structures with its payment and collection activity, creating a seamless cash and liquidity management solution that could be easily managed by a small treasury team.
The solution
In 2013, Brembo SpA created a multi-currency notional pool structure that has vastly simplified management of its bank accounts, optimised bank charges and made the company less reliant on bank overdrafts. Brembo can now efficiently manage the existing master accounts of its two zerobalancing cash pooling structures (euro and USD).
“A crucial element to the success of the solution is that we maintain almost all the bank accounts in the structure with Citi and use the CitiDirect platform globally with a central client definition, making compliance and account management easier,” explains Giancarlo Cicuttini, Treasury and Credit Manager.
Moreover, FX is fully integrated into the solution using CitiFX Pulse, which provides real-time market access to FX spot, forward, nondeliverable forward and swap pricing in over 400 currency pairs, 24 hours a day. The multi-currency notional pool adds important functional benefits to Brembo’s existing FX structures, which include RMB invoicing for Brembo’s two Chinese subsidiaries. This has eliminated FX risk for the Chinese entities and allows them to be managed more effectively from London by Brembo SpA, where it can arrange forward transactions or open orders with physical settlement of currency using its RMB bank account. The incorporation of RMB in the multi-currency notional pool means that positive RMB balances can now be used against negative balances in other accounts (as it is not yet possible to have negative RMB balances).
The cross-regional physical cash pooling structure also created as part of this solution links Brembo’s USD master account in New York (serving the USD zero-balancing cash pool structure) with a London Brembo USD account within the notional pool structure.
Best practice and innovation
The solution entailed the creation of a multi-currency notional pool, incorporating all the major currencies Brembo SpA uses: EUR, USD, SEK, JPY, RMB and GBP. Separately, a cross-regional physical pool was created, linking the USD cash pooling structure with London.
The greatest challenge faced by Brembo was the need to change its internal culture as it moved from a decentralised to a centralised treasury structure.
“We also implemented the ISO XML file upload functionality to enable us to be SEPA-compliant and we will use a customised version of this file format outside Europe to manage domestic payments. We are currently working to customise the ISO XML file to manage ACH payments in the US directly through CitiDirect,” concludes Cicuttini.
