Regional Focus

Regional treasury centre locations: Singapore vs Hong Kong

Published: Sep 2019

Companies set up regional treasury centres in APAC for a number of reasons. Selecting the right location is key – so what should treasurers bear in mind when choosing between Singapore and Hong Kong? And which other locations may be worthy of consideration?

Setting up a regional treasury centre (RTC) can bring numerous benefits, from operational efficiencies to the centralisation of funding, liquidity and risks. “When you grow into a different region, it’s common to set up a RTC in order to support business growth, cover your footprint and have treasury experts in the region,” comments Jessie Hsiao, Senior Advisor for APAC Solutions, Treasury Services, Wholesale Payments at J.P. Morgan.

But choosing the best location for that treasury centre is not always straightforward. While Singapore and Hong Kong are the favoured locations for APAC regional treasury centres, companies need to weigh up the pros and cons of each in order to find the best fit for their company. So, what do treasurers need to think about when choosing a RTC location in APAC – and how do Singapore and Hong Kong compare?

Variations on a theme

For one thing, it’s important to note that different companies structure their treasuries in different ways. “Some companies decide to have their treasury completely centralised in their Corporate Treasury (HQ),” explains Stefan Leijdekkers, head of Regional Sales, Asia Pacific, Global Transaction Services, Bank of America Merrill Lynch (BofAML). “Others decide to have RTCs reporting to corporate treasury or have in-country treasury staff in addition to RTCs.”

Likewise, treasury centres can come in different flavours. Ankur Kanwar, Head of Cash Products, Singapore and ASEAN Region, Transaction Banking at Standard Chartered Bank says that the role of a treasury centre can vary not only across organisations, but also sometimes within the same organisation, depending on factors such as company policies, operating structure, and jurisdiction.

“While the traditional role of treasury to perform essential finance-related activities has not changed, what has changed is the structure, breadth of responsibilities and requirements from management to make treasury teams more of a business partner,” he adds.

Function of a treasury centre

There are a number of reasons why companies might set up regional treasury centres, from rationalising bank accounts to managing financial risk more effectively. According to Kanwar, a treasury centre can help companies achieve a number of objectives, such as:

  • Enhancing operational efficiency through the rationalisation of bank accounts, selection of banking partners and improvements in straight through processing.
  • Concentration of risk into a single location for standardisation, better control, FX risk management and improved visibility of cash.
  • Optimising capital by reducing operating cash needs through centralised liquidity management and yield enhancement structures.
  • Establishing a centre of excellence to leverage new technology such as new payment and collection methods, thereby assisting with improved customer experience and creating new sources of revenue.
  • Providing real-time data analytics to highlight liquidity and risk issues and support forward-looking strategic planning for management.

While many of these goals are perennial, developments in regulation and technology have brought some additional considerations. “The role of a treasurer has become increasingly strategic,” says Lewis Sun, Regional Head of Product, Global Liquidity and Cash Management at HSBC Asia Pacific. He adds that as well as managing operational efficiencies and minimising risk, treasurers increasingly need a stronger voice for business development, which means “ensuring the treasury systems and processes are set up to help manage real time payments and information flow resulting from his organisation’s transformation to a digital era.”

Meanwhile, where IT is concerned, Sun also notes the importance of identifying the use of AI and RPA to minimise fraud and drive efficiency, “whilst ensuring strong cyber-security standards to protect customer and organisation data.”

Choosing the right location

When setting up a regional treasury centre, choosing a suitable location is key. Sun says that setting up a treasury centre “requires a high level of standardisation and centralisation of processes all of which require changes to the operating model of intra group companies.” As such, considerable local knowledge is needed, encompassing regulation, business practice, and local payment systems.

“Thus, the chosen jurisdiction will have specific tax, regulatory, legal, accounting practice, time zone, language, and maintenance cost requirements,” says Sun. “In addition, the right location would allow the company to attract and retain talent and reduce costs of the company through tax incentives and benefit programmes.”

Other considerations include making sure the chosen location has the infrastructure needed to support the company’s operations – and as Sun points out, “the region must be politically and economically stable enough to support the operations.”

Avoiding the pitfalls

When choosing a location, treasurers also need to be aware of the pitfalls that should be avoided. As BofAML’s Leijdekkers notes, these can include “blindly following where their peers located their RTCs,” as each company has its own business model and dynamics. He also warns against deciding on a location based primarily on tax incentives – not least because such incentives may come with a time limit: “It is usually for five years, and the renewal is subject to additional commitment,” he says.

Likewise, Leijdekkers says finding appropriate staff with the right experience can be challenging in some locations – and companies may struggle to attract talent if their RTC has limited autonomy, “which will have a direct impact on the effectiveness of the RTC.”

Meanwhile, HSBC’s Sun points out that when a company has multiple treasury centres across the world, internal challenges may arise due to variations in internal expectations. “Furthermore, treasury initiatives of one region may be prioritised over another if the leader of the other treasury centre is not powerful enough,” he adds. Companies should also bear in mind the impact of factors such as local regulations, developments in foreign policy, and KYC requirements in specific locations.

Relocating the treasury centre

While it’s important to choose a location that suits the company’s needs, it’s also worth noting that a treasury centre location is not set in stone. Indeed, Kanwar says that the relocation of treasury centres is a trend that seems to be picking up speed in the last few years.

“Treasury centres were traditionally established at a central global location, generally within close physical proximity of the decision makers within the corporate,” Kanwar explains. “However, with the expansion of global trade, availability of advanced technology tools, and increasing complexity of legal entity structures, many corporates now prefer setting up treasury centres closer to the growth regions. This could entail relocating the global treasury centre or establishing a regional treasury hub.”

Kanwar notes that establishing a regional treasury hub can bring significant benefits in terms of time zones, yield benefits, and access to the local talent pool. “For instance, Rio Tinto set up a commercial treasury unit in Singapore, moving a large portion of its treasury activities from London. One of the key reasons for the move was to support the Asia Pacific region which now accounts for 70% of its customer base, with Singapore being the epicentre of its trade flows.”

In addition, Kanwar notes that some jurisdictions are offering treasury incentive schemes encouraging corporates to set up base in those jurisdictions. That said, he adds that some jurisdictions, such as Malaysia and Thailand, have recently revised their treasury schemes to align with feedback from the OECD Base Erosion and Profit Shifting (BEPS) committee.

“Furthermore, there is tangible evidence through various surveys highlighting that treasury incentives by themselves are not the primary reason for choosing a location, and relocation decisions are made taking into consideration a variety of other factors,” he says.

Where to locate a treasury centre

Companies looking to set up – or relocate – a treasury centre in APAC are likely to focus their attention on two main candidates: Hong Kong and Singapore. Both have much to recommend them, although there are also many significant differences between the two. For example, Hong Kong’s proximity to China has to be weighed against Singapore’s proximity to ASEAN and Australia.

  • Hong Kong. Acting as a gateway to China, Hong Kong is an attractive option for companies seeking to access the China market. As Sun notes, Hong Kong offers tax incentives “as well as a favourable business environment, dynamic financial structure, and Asia’s third largest stock exchange.”The appeal of Hong Kong has been boosted in recent years by the introduction of a new rule in June 2016 which brought two key benefits: allowing corporate treasury centres (CTCs) to deduct interest expenses from intragroup financing under some conditions, and a 50% profits tax concession for certain treasury activities (bringing the rate to 8.25%).
  • Singapore. Singapore, meanwhile, offers proximity to ASEAN countries and the Australian market. “Singapore offers key incentives, such as a low tax rate for treasury centres (8%), a withholding tax exemption on certain interest payments, and a wide tax treaty network,” says HSBC’s Sun. “It is also the largest FX trading centre in Asia with a mature banking sector, and offers political stability, a strong technological infrastructure, and a deep talent pool.” Sun also notes that Singapore has a high focus on innovation and financial technology advancements.

A report published earlier this year by East & Partners identified Singapore as the most popular location for regional treasury centres, accounting for 27.1% of the companies surveyed. While Hong Kong was somewhat behind at 13.1%, the report also found Hong Kong to be the favoured location for manufacturers, retailers, and wholesalers.

Meanwhile, research published by EY, Singapore: a strategic regional treasury location, interviewed a number of treasurers and strategic stakeholders from regional and global treasuries located in Singapore. The report found that the location of the regional business headquarters and a well-developed financial ecosystem were the main considerations when closing a regional treasury location. Where the former is concerned, Singapore has a notable advantage: the report notes that Singapore is home to 4,200 regional headquarters, compared to 1,389 in Hong Kong.

Compare and contrast

While both locations have much to recommend them, there are a number of points to consider when weighing up their respective benefits, says J.P. Morgan’s Hsiao. She emphasises the importance of fully considering the company’s footprint and business needs alongside the existence of incentive programmes. She also notes that the philosophies and ways of rolling out such programmes can differ fairly between the two locations.

“Hong Kong is more about extending benefits to MNC and there are simple qualifying calculations across the board,” she says. “While there are various criteria to satisfy, the process is overall straightforward requiring an auditor’s confirmation that your financials qualify for certain tax benefits.”

In Singapore, Hsiao says incentives tend to be “negotiated” with the government on a case-by-case basis. “This can achieve a more tailored programme, with a specific set of rules or a plan that the company will need to follow in order to receive the agreed benefits,” she explains. “And when the term expires, the renewal of the benefit programme will be subject to further review.”

Beyond Singapore and Hong Kong

Singapore and Hong Kong may be the most common APAC treasury centre locations, but they are not the only options for companies in the region. Other jurisdictions, such as the following, may also be worthy of consideration:

  • China. “With the emergence of China as an the most important strategic growth market for many companies, China and especially Shanghai, is increasingly a location where RTCs (regional treasurer and team) are located,” says Leijdekkers. “Due to regulations, centralised account structures and cash pools will still be based in Hong Kong, Singapore or Europe. With continued currency deregulation, and support from Beijing to turn Shanghai into a major financial centre, we expect to see continued growth in popularity of Shanghai as an RTC location, largely at the expense of Hong Kong.”
  • Malaysia and Thailand. According to Leijdekkers, both of these markets offer lower costs and enhanced RTC tax incentives – although the pool of treasury professionals may be more limited. J.P. Morgan’s Hsiao also observes that some companies have started to look at Thailand when setting up a treasury centre in conjunction with a manufacturing hub, while others may consider Malaysia if introducing a treasury centre alongside a shared service centre.
  • India. Leijdekkers points out that India offers a good pool of treasury professionals and a favourable time zone for supporting both APAC and EMEA, as well as being an established shared service centre location.
  • Australia and New Zealand. HSBC’s Sun says that clients are also looking at Australia and New Zealand, “as the two countries are open markets with liquid currencies conductive to support resident/non-resident payments-on-behalf-of (POBO) and receivables-on-behalf-of (ROBO) structures.”
  • Europe. Beyond locations in Asia, Leijdekkers says that Ireland, the Netherlands and Switzerland are primary locations for RTCs managing both EMEA and APAC.

So, while Singapore and Hong Kong may be the favoured locations for companies setting up RTCs in Asia, they are not the only options. Ultimately, there’s no one-size-fits-all approach – and the individual company’s needs should be fully considered when choosing a location.

Singapore Hong Kong
Unique differentiators
  • Key hub for ASEAN markets
  • Stable legal and regulatory framework based on Commonwealth law
  • Positioning as innovation hub in Asia with start-up development programmes
  • Familiarity and proximity to mainland China
  • Language and culture make it easier for Chinese corporates
  • World’s largest offshore RMB hub
Global Financial Centres Index (2019)1 4 3
FX turnover2 3 (>US$500bn per day) 4 (>US$400bn per day)
Clearing currencies SGD, CNH HKD, USD, EUR, CNH
Financial incentive5 Financial and Treasury Centre (FTC) tax rate of 8% to qualifying RTCs Corporate Treasury Centre (CTC) tax rate of 8.25% to qualifying RTCs
Double tax treaties Over 80 nations3 Over 40 nations4

Source: Standard Chartered Bank

      1. Long Finance, Global Financial Centres Index 25 Rank:
      2. Bank for International Settlements, Triennial Central Bank Survey, Foreign exchange turnover in April 2016, page 14:
      3. Inland Revenue Authority of Singapore, List of DTAs, Limited Treaties and EOI Arrangements:–limited-treaties-and-EOI-arrangements/ 
  1. Hong Kong Inland Revenue Department, Comprehensive Double Taxation Agreements concluded: 
  2. Eligibility criteria, reporting requirements and qualifying income varies 

All our content is free, just register below

As we move to a new and improved digital platform all users need to create a new account. This is very simple and should only take a moment.

Already have an account? Sign In

Already a member? Sign In

This website uses cookies and asks for your personal data to enhance your browsing experience.