Cash & Liquidity Management

Is IBOS needed in post-SEPA Europe?

Published: Nov 2007

IBOS claims to deliver the best of local and international cash management, by combining the strengths of banks which are market leaders in their respective countries. But in a post-SEPA Europe, who will need this? Does IBOS have a future? In this talkingtreasury debate, leading bankers and their customers give their views on IBOS and the challenges ahead.


Portrait of Siegfried Drawell

Siegfried Drawell


Portrait of Angelika Ertl

Angelika Ertl

Cash Management and E-banking Sales

Portrait of Lisa Herold Ferbing

Lisa Herold Ferbing

Nordic Head of Cash Management Sales and Concepts

Portrait of Bob Lyddon

Bob Lyddon

Managing Director

Portrait of Bo Madsen

Bo Madsen

Treasury Manager

Portrait of Steen Madsen

Steen Madsen

Cash Management Advisor, Cash Management Sales, Corporate Banking

Portrait of Jasper Savelkoel

Jasper Savelkoel

General Manager, International Cash Management


Richard Parkinson

Managing Director

Richard Parkinson (TT): Please can we start by asking what IBOS is?

Angelika Ertl (HypoVereinsbank): First of all it is a partnership – a partnership of associate banks – and our intention is to offer our customers the best services, with maximum proximity between the market and the customer. The best services meaning a full bank service and, for us, it’s important that we work together with a market leader in markets where we are not represented by own branches or own subsidiaries.

Lisa Ferbing (Nordea): IBOS is the oldest bank club in Europe and that means the partnership banks have known each other for many years and have really integrated their services. All the banks have IBOS desks where we have dedicated people who know each other very well. It adds value for our customers because it’s a partnership among banks which is very easy to operate. We know each other so very well and our services are so integrated and we know about the differences in our own local services and so on.

Parkinson (TT): But I hear other banks saying, ‘I can deliver this service because I have a branch there or because I have a banking partner there. I’ve had correspondent banking partners for many years and in fact I’ve bought some of them so they are real partners of mine now.’

Steen Madsen (Nordea): The closeness of the cooperation is the core of what IBOS is. It’s an extension of our own being in the market and our own strategy in the market so it’s a perfect fit.

Ferbing (Nordea): And I think the important point is that we have a very intensified partnership that means that we have committed to specific service levels and our intention is to make it as easy as possible to open accounts abroad. So if, for example, a customer of HVB would like to open an account with Nordea and we say, ‘this is our important customer too’, this makes it so much easier for the customer to get familiar with Nordea and the whole account opening process.

Bob Lyddon (IBOS): Some of the most basic things turn out to be the most difficult to achieve quickly – like getting an account open. And that is the core product, the core service – easy account opening. Not only getting the account open, but creating the relationships between the company’s subsidiary and the people in that bank that the account has been opened with so that it runs smoothly at all points.

Parent to the introducing bank and subsidiary to the account holding bank, that’s the core service and everything else spins off from that. That is really very basic but not often achieved by general partner-banking. There’s an awful lot of discussion about bi-lateral exchanges of MT101 (SWIFT messages) but that doesn’t necessarily involve account opening. That still has to be negotiated, pricing has to be negotiated… and value dating.

You also have political problems inside some of these banks that say, ‘here’s a customer, how much am I earning out of that?’ That isn’t a question that ever comes up in IBOS. If it’s an IBOS referral, the account gets opened, end of story.

“An advantage I got from IBOS is that you can open a new account quickly with all the paperwork done before it comes to the customer.”

Parkinson (TT): Okay well let’s ask the users how they find it.

Siegfried Drawell (Kennametal): For us, we use IBOS for cash pooling. IBOS has the only system which allows me to arrange cash pooling from different banks without any loss in value dating. This is, for us, the best advantage which we have. We have other cash pools as well with different bank groups and we always lose one day. We collect the money locally during the day and the next morning we get it centralised, but with IBOS we get same day value. Of course we don’t see it the same-day. We see it in our account a day later, but it doesn’t matter: we have it for value purposes a day earlier. This makes IBOS unique for us. Other banks, international banks, with similar systems can make cash pooling within their own systems without any delay, but as soon as we go from one bank to another we have this one day delay, but not with IBOS. This makes IBOS unique.

Parkinson (TT): And you’re able to use the money that you don’t see until the end of the day effectively? You don’t know about it until the following day, but it comes in to an interest bearing account or is used in some way?

Drawell (Kennametal): Yes.

Portrait of Bo Madsen
Bo Madsen

Bo Madsen (IC Companys): For me it’s more about the local service our shops need. From my perspective, IBOS has been a little invisible. Sitting here and hearing of your cash pool knowledge I’m a little disappointed that I haven’t had the opportunity to choose the right banks around the world because I haven’t got IBOS banks all over the world. But it’s been invisible to me and that’s my criticism. I think it should be on your business cards so that people know it’s an IBOS member that you are dealing with.

Lyddon (IBOS): That’s a well-taken comment. IBOS’ brand should not be lead brand towards the customer. The customer’s relationship with the individual bank is paramount and that bank should be the lead brand to the customers. At the same time, the IBOS brand should not be invisible.

Parkinson (TT): Should you position IBOS a bit like ‘Intel Inside’?

Lyddon (IBOS): Yes, that’s how it should be. We should mark that point down as an ‘even better if…’.

Parkinson (TT): What are the other aspects of IBOS that you do or do not like?

Drawell (Kennametal): I think that individual banks are not able to offer, in all the different countries, all the right services and the same level of service through their own branches and subsidiaries, whatever they claim. We are located in all big Western European markets; like Germany, Italy, France and the UK. Spain as well, although this is a smaller market for us, and also in central European countries like Poland and Hungary. In all countries we have different kinds of services we need.

For example, in Italy, the so called ‘ricevute bancarie’ which are a kind of draft, a lot of our customers use them, and it is a typical Italian thing and from my experience the Italian banks can handle these things better than international banks. We tried this, for example, with an international bank in Milan and it didn’t work, so we went back to Intesa Sanpaolo because they did it so much better.

We saw that our international bank in Ireland was not able to give our Irish company cheques in US dollars, even though our suppliers in the US requested dollar payment by cheque. They refused wire transfers so we needed an account with an Irish bank just for this payment to the US and things like that.

On the other side, I think competition between our banks is good for business and is good for pricing and everything like that. We have strong competitors in our own business. We are forced by these competitors, and I think if we have more than one bank then the banks are also forced to give us the best service and the best price, of course. And that’s the reason why we prefer more than one bank relationship.

Parkinson (TT): Bo, how do you find opening accounts for all your subsidiaries?

Bo Madsen (IC Companys): An advantage I got from IBOS is that you can open a new account quickly with all the paperwork done before it comes to the customer. So, it just has those small coloured arrows saying ‘sign here’. That is really helpful for a lot of corporate customers, because you don’t invest that much time in it you just say, ‘I have to have an account there, because we are now opening there’.

Portrait of Siegfried Drawell
Siegfried Drawell

Drawell (Kennametal): What is key is that it’s one single point of entry and it’s near to me, so it should be faster, and it’s harmonised and standardised with service level agreements.

Parkinson (TT): Can I ask about credit lines? How does it work from a credit line point of view? You might be operating as a branch in the country so in other words it’s still in the name of the parent, so it’s a question of will you extend credit to the parent? The other scenario would be a separate legal entity in the country. How does the whole credit process work in IBOS?

Lyddon (IBOS): We have an inter-bank agreement that a small line of credit in the country where the account is being opened can be set up immediately on the credit risk of the introducing bank without any further questions. But that’s only meant to give operating credit for the operational services like direct debit or for riba (the ricevute bancarie) or something like that.

“Instant availability of a small line of credit to just get the operating business off the ground.”

Parkinson (TT): Or a foreign exchange line?

Portrait of Bob Lyddon
Bob Lyddon

Lyddon (IBOS): Yes. But it isn’t meant to be a working capital line. Instant availability of a small line of credit to just get the operating business off the ground. The companies are often good enough to stand up in their own right. So, to us, it’s just a question of time to go through the analysis. The alternative route of banks constantly issuing guarantees to one another consumes capital at an enormous rate and creates costs that are completely redundant really.

So the first main line of attack is to make sure that the discussion between the account holding bank and the local subsidiaries, facilitated by the parent treasurer and the introducing bank, should get off the ground quickly because the banks in IBOS are big commercial banks. The question is simply. ‘is the subsidiary good for it standing on their own feet, or is a letter of comfort required from the parent? Or is a guarantee required from the parent?’.

This is the normal discussion which should just happen quicker and with a greater openness and is easier than if you were just walking into, say, Intesa Sanpaolo off the street and they never heard of you.

Parkinson (TT): And is the small operating line of credit indemnified by the introducing bank?

Lyddon (IBOS): Yes it is. It isn’t that a larger amount cannot be negotiated but that, up to that small amount, the local bank has to do it because they’re committed to doing it.

Drawell (Kennametal): But, for example, when you talk about Italy. In Italy, we have a one million line of credit. Our colleagues in Italy can use the account for one million because one million is covered by HVB on a daily basis and if one million is not enough, we can just call HVB and say we want to increase it for the next day to three million because we want one extraordinary transfer. Once a month we really have an extraordinary transfer for three million. I just make a call to my partner with HVB and then it’s fine. It’s very easy.

Lyddon (IBOS): The difference is that’s within the operation of the DZero cash pool product, there is a credit line, an overdraft line, effectively built in. But if it’s, say, a mediumterm loan or building finance or leasing, each country has its own particular way of offering financing.

Portrait of Jasper Savelkoel
Jasper Savelkoel

Jasper Savelkoel (KBC): This goes to the heart of the IBOS model. We’re still independent banks acting together to gain additional business and if there are significant loans to be given or to be done in certain countries it all depends on how the company is organised. Is it organised centrally? Or are the treasury and financial functions decentralised? A lot of times we see, and with middle sized companies most of the time we see, it’s decentralised so there is a need for a strong local banking relationship between the local company and the local bank. At this level, you have negotiations about longterm loans or whatever kind of investment projects. We offer the full range of lending services that are available.

Lyddon (IBOS): I think a point about foreign bank branches in any country is that they often don’t have real substance. So they’re limited in what they can do. Also if any lending product has some tax aspect to it, like leasing, you have to have a tax base in that country to offer it. Local banks do, branches of foreign banks by definition don’t, or in only a very limited amount.

Parkinson (TT): Is there such a thing as a typical IBOS customer? What are the characteristics that make a typical IBOS customer?

Portrait of Steen Madsen
Steen Madsen

Madsen (Nordea): From my point of view as a cash management advisor in Nordea, it’s a matter of having collection accounts with the IBOS banks. So it’s customers who don’t have any subsidiaries in the country, but they need an account with this special bank in this special country to get their customers to pay into. It’s medium sized companies generally.

Lyddon (IBOS): That’s one typical profile, medium sized, requiring non-resident accounts with the IBOS banks to do collections. The other principal kind of customer is the one that has both substance and autonomy, and needs local services that can only be delivered locally, like cash, cheque, card. These can be very large groups in aggregate, but let’s stress again that their operating structure and their business line defines the banking needs.

“Within seven to ten years it will lead to centralisation of accounts.”

Ferbing (Nordea): And the reason for the decentralisation could be because you have retail customers in the specific countries where you need to use the retail way of handling their payments; it could be that you have a philosophy about your subsidiaries that they should be more independent of the parent company because they should be more in charge of their own economic resource, that could be another reason.

So I would say a typical IBOS customer is someone who really has a need for having some of the banking decentralised due to different ways or reasons or philosophies on how to do business.

Ertl (HypoVereinsbank): I think a typical IBOS customer is someone who needs local services, most of them would like to use the DZero automatic end-of-day sweep in order to get the money back to the home country where they are catered for and they appreciate a global account management approach. That means they like to have the coordination through the host bank, but they hold accounts abroad and appreciate the existence of differing local business practices and payment – holding those accounts with IBOS banks enables these differences to be reconciled efficiently to a global approach.

Parkinson (TT): How does IBOS respond to requests for proposals (RFP) when you have somebody with needs in several different countries?

“Where they have special questions or their special focus, then you can really work with those details.”

Lyddon (IBOS): Well the RFP document is usually very thick and there are certain pieces that only the main bank needs to answer. You’d expect to get some kind of profile of each subsidiary and the needs in each country, with some stats of payment values and volumes and types. So the host bank receiving the RFP completes a customer referral sheet for each IBOS bank with the data from the RFP, stating needs for just that country and the subsidiaries in it, and anything else they know that’s relevant to that country. That’s a few pages per account holding bank. In many cases, we already know what the pricing and terms will be because they’re the IBOS terms for that volume and value and so on. Hopefully there’s only three or four points per country that need to be clarified and so by having most of the terms pre-agreed we can spend the time looking at the really key points and the cash pooling or whatever.

Then there is a response deadline whereby each account holding bank has to go back and give it the thumbs up or their answer and then the host bank puts it together. You can rely on the answers from your partners.

“I think a typical IBOS customer is someone who needs local services, most of them would like to use the DZero automatic end-of-day sweep.”

Portrait of Lisa Herold Ferbing
Lisa Herold Ferbing

Ferbing (Nordea): We have worked for so long with IBOS that we can do this in one week or less even very, very big RFP’s covering many, many countries. Where they have special questions or their special focus, then you can really work with those details. It used to take weeks and weeks five or six years ago, but today this is a very quick process. We are aware of the standardised conditions which are connected to volumes.

Savelkoel (KBC): And it’s also predefined and this is very important. When account managers talk to customers they can talk about the conditions that other IBOS banks can offer and this is a completely different situation from a thirdparty bank.

Parkinson (TT): Are you saying that you will provide the same pricing from all the different units? Will I see the same pricing?

Lyddon (IBOS): Ah but there you see Richard, you fall into a fallacy that it’s better to get the same pricing, this is one of the real bits of spin in this game. Is one price for Europe better than having credit transfers or business priced country by country? In several countries it’s more or less free. In other words the answer is no, you get the local pricing for the local business, but we have consistent and attractive pricing for the cross-border business.

“They need an account with this special bank in this special country to get their customers to pay into.”

Parkinson (TT): Second question is, does my volume buy me discounts in aggregate or does each bank look at the volume it’s getting and price it according to that? In other words, do I get buying power with IBOS or do I get buying power with individual IBOS members?

Portrait of Angelika Ertl
Angelika Ertl

Ertl (HypoVereinsbank): The pricing of the local business depends on the development of the local business you have as a customer with the local bank and we are aiming at increasing this business even at the cost of maybe of the host bank. So, for example, if I refer a customer to Nordea in the beginning it’s maybe just an account, but after that it develops to something more because Nordea and the customer, they do some further business and it’s good because it adds to the relationship we have with this group.

Lyddon (IBOS): With regard to pricing, you have to look at the combination of item pricing and value dating. Some of these clearing systems route payments in such a convoluted manner that where you have your account is extremely important; how soon does the money reach your account after it leaves the sender’s bank, and then the value dating when it hits your account, when it is really available and how much the item charge is.

Parkinson (TT): We ought to turn to SEPA and if I could start with our corporate guests, what your thoughts are on SEPA and do you see it changing your banking?

Bo Madsen (IC Companys): We still need the local banks because I need cash payments and cheques cleared and the local cards or whatever, so we’re going to need the local banks but the transfers would be easier as I see it.

Drawell (Kennametal): We don’t see any change in our relationship with banks because of SEPA. We have our bank accounts, we will not increase them, we will not reduce them.

Parkinson (TT): Okay let’s turn to our banking colleagues here on the SEPA issue, how do you see the SEPA and IBOS?

Savelkoel (KBC): I think the main opinion is that within seven to ten years it will lead to centralisation of accounts. I’m pretty sure about it, but that does not mean that there aren’t still many, many reasons for customers to maintain multiple banking relationships. Also banks will still require fee business and payments are the core of fee business so I don’t think that there will be a lot of corporates that will actually have one account for the whole of the European Union in 2015.

Ertl (HypoVereinsbank): There is also the point of risk diversification. Plus competition is very important in order to get the best service, so I think they will use several banks in order to get the better prices and to get the best services. Not to be dependent on one bank. The accounts will be reduced and the number of banks will be reduced, but the customer will be more aware of the service and the quality. IBOS has got a future because we offer – and keep on offering – best services and best pricing and we can gain customers.

Ferbing (Nordea): The key values of IBOS will be there regardless of SEPA and they will still be needed. We have the knowledge of the local environment, the proximity and can break down language barriers. In fact, IBOS customers will benefit less from SEPA than others because so many of SEPA’s intended benefits are already achieved within IBOS.

Lyddon (IBOS): Well, that’s true because IBOS payments already move quicker than the Prieuro service under the EBA Priority Payment scheme, and have done for some considerable time, so we have a live Prieuro service. From our examination of the Payment Services Directive, the IBOS services are already compliant. The Directive brings the rest of the market up to the level which IBOS has already been at for some time – same-day value, no deductions from principal, visibility immediately at both end. It’s all there already for IBOS customers.

Ferbing (Nordea): Then we have all the soft issues and we know that soft issues always take a very long time to create a solution for. There’s this knowledge about the local environment. There’s this knowledge between the banks’ key people who are working together and they know each other. Every one of our banks has its own IBOS office to handle IBOS issues so they are very experienced and professional about account opening in different countries. Also, on the field of compliance, we know the requirements on customers around Anti-Money Laundering and these are becoming more and more important, and difficult for customers to deal with without support.

Lyddon (IBOS): You used the word ‘professional’ about account opening. It is a professional activity, not a clerical one, and so many banks handle it as if it’s a clerical activity. With all the different requirements and foreign languages, it is a professional activity and that’s the only way to handle it.

Ferbing (Nordea): And for us I think it’s also an important point that you have knowledge in our organisation, especially concerning tax issues. For example, we have stamp duty in different countries so if you have members in the IBOS organisation who have experience with stamp duty, we can recommend some things that customers should consider. That’s what customers appreciate. We are not allowed to give any legal advice, but we can say what is important, what you have to consider and that’s the combination; not only account opening, but you get a full package and full service and I think that’s the big advantage.

Parkinson (TT): Thank you everyone.

“Centralising UK funds in Roma, IBOS made it possible!”

Luigi Calabria Senior Vice President Group Finance Department of Finmeccanica SpA – Client of Intesa Sanpaolo SpA

Member of the Oneworld airline alliance, customer of the IBOS banking alliance.

Mr. Tamás Pergel

Financial Manager

Malév Hungarian Airlines is a medium-sized airline in Europe operating one of the youngest fleet on the continent. It is a traditional network airline offering services to 59 cities in 36 countries outside Hungary.

Characteristics of a traditional network airline are to maintain local sales activity on the local markets and to provide instant passenger transfer management on every destination. Beside the sales and customer service activities the local financial tasks are also managed by the representative offices. They are responsible for collecting the direct sales income and handling the payments of local suppliers’ invoices like fuel purchase, airport fees and marketing related costs.

The decentralised operational structure requires local banking services preferably close to the airports and strong Group Treasury control of the local payment flows and liquidity positions.

With these main objectives in mind, Malév decided to maintain banking partnership with IBOS association whose members are leading banks within their home markets and thus able to offer a full range of domestic services, on the other hand gaining from the standardised remote account opening procedures, uniform conditions and account reporting tools IBOS member banks provide to their mutual Corporate customers.

The following structure has been implemented by K&H Bank, the Hungarian associated bank of IBOS and the international cash management partner of Malév:

  • Account maintenance with IBOS banks for the local Malév operations in Belgium (KBC), Czech Republic (CSOB), Poland (Kredyt Bank), Germany (HVB), Finland, Sweden, Norway, Denmark (Nordea), UK (RBS), France (HSBC), Spain (Santander), Italy (Intesa Sanpaolo) and in the US (JPMorganChase).
  • Centralized cash management service implemented in the e-banking solution of KBC Bank Group called w1se. The daily account statements of every foreign bank account are available in w1se and it also facilitates payments handling from the local office or the Hungarian Group Treasury from a single platform.

Liquidity reporting to the Malév Group Treasury allows better control of liquidity positions and funding requirements. This leads to savings for Malév and a satisfied customer for the IBOS banks.

After the successful implementation Malév seeks future potential of the IBOS association. Cross border cash pool service of the IBOS banks might be a good solution for the company’s further working capital optimization.

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