Photo of Stan Blykers and Koji Minami, Toyota Motor Europe and Yuki Ohashi, Citi.

This solution combines a full payments and collections platform for RUB transactions, a fully automated domestic physical pool to consolidate all positions in a single hub, a true end-of-day automated sweep for the excess operational cash and an offshore interest-bearing RUB account to centralise the net position of all daily activity.

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Liquidity solution to ruble challenge for Toyota in Russia

The challenge

The major challenge in the region for Toyota Motor Europe (TME) has been the RUB flows and Toyota Motor Russia (TMR) was using several banks in Russia. Due to the peculiarities of the domestic clearing system, the lack of multi-bank solutions in the domestic market and the geographic disposition of the country, expanding in 11 time zones, it has been almost impossible for large overseas treasuries to manage their domestic flows efficiently. Over three billion of operational balances, in local currency, remained fragmented, creating significant cost, working capital and operational inefficiencies. TME acknowledged the problem and despite efforts to reach a solution over the past few years, the cross border flows remained challenging.

They set out the following objectives to:

• Extend the transactional window and gain at least one additional day of value on their FX swap transactions.
• Reduce the fragmented positions across the different legal entities.
• Eliminate idle balances.
• Improve the repatriation process to Japan through effective cross-border flow management.
• Reduce the cost on the intercompany loans.
• Improve the cash flow forecast.
• Manage more effectively counterparty and country risk.

The solution

TME, TMR and their bank worked to structure a multi-layer solution that enables the clearing of all daily operational transactions in Russia, the funding of the local accounts and the automated integration into a London liquidity overlay account, enabling TME to utilise the funds with good value and eliminate idle cash that was held in fragmented positions across multiple domestic accounts.

The solution combines a full payments and collections platform for the RUB transactions, a fully automated domestic physical pool to consolidate all positions in a single hub, a true end-of-day automated sweep for the excess operational cash and an offshore interest bearing RUB account to centralise the net position of all daily activity. An additional FX swap is performed from the offshore account without the need to add additional account layers.

Best practice and innovation

The solution achieves optimal results by fully eliminating idle and fragmented positions and transferring the excess liquidity of different legal entities and accounts into an offshore domiciled IHB account. This arrangement maximises the liquidity and delivers working capital efficiencies without the need of manual intervention, thus generating operational efficiencies too.

Toyota is one of very few companies to start managing their cross border flows in a more holistic manner. The cross border element along with the integrated domestic collections and centralised FX activity is a creative way to eliminate any manual element through the process. An additional element that makes this solution even more innovative is the scalability and the option to fund the Tokyo EUR Account on a same day basis without any loss of value.

Stan Blykers, Senior Treasury Specialist explains, “A key differentiator for us is that this solution is fully scalable and can support the international and domestic growth of the company in a much more effective manner.”

Key benefits

• Elimination of substantial pockets of liquidity held in Russia.
• Working capital optimised.
• Further enhancement of working capital cycle by the additional value of two days for the billions of the RUB/EUR FX swap.
• Incremental interest earnings from the consolidating position in a high-yielding currency.
• FX and risk management process optimised.