Bunge’s innovative liquidity structure is a global, automated, multi-entity, multi-currency, “follow-the-sun” solution incorporating 16 currencies. In 2014, the company was among one of the first corporations to implement a cross-border sweeping arrangement in RMB (and USD) for operations in China.

The challenge:

The Bunge Treasury team, based in the US, the Netherlands and Singapore, managed global cash balances in various currencies via Bunge Finance B.V. (BFBV), the company’s primary treasury and in-house bank entity, and executed physical cross-currency conversions (swaps to US$), which caused funding and FX inefficiencies.

To address this challenge, the treasury team’s objective was to implement a game-changing pooling solution that would provide Bunge with an end-to-end cash concentration solution, which includes third-party sweeps, and two regional, multi-currency, notional pools that are automatically drained at the end of each business day in their respective region into a US$ master account held in New York. These pools would largely eliminate Bunge’s funding and FX execution inefficiencies, giving the team more control of global cash.

One key challenge that treasury faced in realising this objective concerned the mobilising of RMB balances held in China into a pool in the US on a same day basis and the reduction of the associated administrative burden.

The solution:

The solution Bunge developed leverages J.P. Morgan’s global liquidity platform to establish automated “net balance sweeps” to transfer the net notional balance (in US$ equivalent) of a regional, dual-currency, notional pool in Singapore, and of a global, multi-currency, notional pool in London into the global US$ master account in New York – a true “follow-the-sun” global cash management solution.

In the global, multi-currency, notional pool with J.P. Morgan London, currencies are primarily aggregated in the name of BFBV. The company uses J.P. Morgan’s fully automated multi-bank physical cash concentration services to consolidate balances held with third-party banking providers into and out of BFBV’s accounts with J.P. Morgan London in the same currencies. Where required, eg for tax reasons, select subsidiaries of Bunge participate in the notional pool in their own name, thereby retaining ownership of funds on their balance sheet.

The key driver for the structure was the automation and simplification of Bunge’s liquidity management set-up. With the new model, Bunge could implement the multi-currency, notional pool for its balances globally, except where local regulations did not allow this. Zero balance movements from operating accounts for all participating entities in Europe, North America and elsewhere ensured automated funding/cash concentration.

The company also came up with an innovative method of getting RMB balances out of China, taking advantage of changing regulations. It implemented an RMB loan account at J.P. Morgan in China which was linked via an automated two-way sweep to an RMB account with J.P. Morgan Singapore that was included in a notional, dual-currency pool in Singapore.

Best practice and innovation:

Bunge’s innovative liquidity structure is a global, automated, multi-entity, multi-currency, “follow-the-sun” solution incorporating 16 currencies. In 2014, the company was among the first corporations to implement a cross-border sweeping arrangement with J.P. Morgan in RMB (and US$) for operations in China. Balances are captured using a dual-currency notional pool in Singapore, with the net balance in US$ automatically included in the global pooling position.

Taking everything into account, the solution that was developed was able to meet treasury’s original objectives, delivering greater efficiency – and, as a result, reduced funding costs – improved utilisation of RMB excess balances, substantially less FX conversions (and related workload), cost reductions (also due to the implementation of J.P. Morgan’s Global ECR solution) and, finally, greater visibility and control. “The solution provides centralised visibility and control over global liquidity positions via a single platform, eliminating execution of relatively costly FX swaps,” says Marc Verkuil. “This new structure saves on average US$1.5 to US$2m per year (within a range of US$0.5 to US$3.5m).”