Regional Focus

Regional treasury centres in Asia

Published: May 2020

A regional treasury centre is a structure which multinational companies use to centralise treasury activities and increase visibility over their activities in a particular region. Many jurisdictions in Asia have incentives in place in order to attract RTCs – so what should companies consider when deciding where to locate their treasury centres?

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For companies around the world, implementing a regional treasury centre can bring many benefits, from supporting business growth to making sure the company has treasury experts in a specific region.

“The key principle behind companies’ decision to set up a regional treasury centre is to centralise treasury functions across regions,” says Aziz Parvez, head of Asia Pacific Corporate Treasury Sales, Global Transaction Services at Bank of America (BofA). He adds: “When working across diverse markets, it is important for treasurers to have visibility across their operations, it creates efficiency and enables treasurers to make informed decisions regarding the business.”

As such, Parvez says that MNCs tend to consider the following key factors when setting up an RTC:

  • The company’s business model/scale, as well as the set-up of legal entities in the region.
  • The decision to move from a decentralised to a centralised set-up.
  • The enhancement of governance and control in operating subsidiaries.
  • The decision to centralise liquidity and funding for subsidiaries.

When it comes to setting up an RTC in Asia specifically, there are some additional points to consider. Francois-Dominique Doll, Executive Director, Global Treasury Advisory Services, Deloitte Southeast Asia, points out that Asia is the fastest growing economic region and largest continental economy by GDP nominal in the world. As such, he says, there are a number of reasons why MNCs from other regions see value in setting up an RTC in Asia.

One is the need to put in place a centralised treasury function and take advantage of the resulting efficiencies. “There are 48 countries in Asia with a variety of different cultures, languages, currencies and government systems,” says Doll. “Because of this diversity, having a regional treasury centre in Asia will create a financial structure to concentrate cash, manage risk exposure centrally and hedge different currencies with a standardised process.” He also notes that a regional treasury centre can play a role in managing working capital more effectively, as well as optimising liquidity by providing clear regional visibility.

In addition, Doll says that having a centralised treasury function in the region can increase the company’s competitiveness, given the economic fragmentation of markets as well as differences in supply and demand profiles across the region. “Any required action could be executed on a timely basis without worrying about time zones,” he adds.

And as a further benefit, Doll points out that consolidating the treasury function at a regional level can considerably reduce the number of bank accounts and transaction fees. “To establish a payment factory or on-behalf-of (OBO) structure would be a leap forward for the regional treasury centre, because not only does it reduce transaction costs, it also reduces the overall processing time,” he explains.

Locations of choice

Given the disparate nature of Asia’s markets, different locations will have different features and incentives in place that may recommend them to companies as a potential treasury centre location. Singapore and Hong Kong tend to be seen as the most popular choices, but companies may also wish to consider a number of other options depending on their requirements and their geographical footprints.

Deepali Pendse, head of South East Asia Corporate Treasury Sales, Global Transaction Services at Bank of America, says that MNCs have so far favoured Hong Kong, Singapore and Shanghai, adding that in recent months there has been mounting interest in moving RTCs to Singapore, “given the shift in supply chains to Southeast Asia.”

However, she also notes that in the last five years, a few other locations have emerged, such as Thailand and Malaysia – not least because geopolitics is increasingly being taken into consideration as a factor. In addition, Pendse says Shanghai is being considered as a serious contender “due to the status of China as an important market, and also because a number of MNCs have significantly large operations in China.”

The advantages of these locations are explored in more detail below.

  • Singapore. The location of choice for many, Singapore’s attractions include its Finance and Treasury Centre (FTC) incentive, which aims to encourage companies to grow their treasury management capabilities and use Singapore as a base for conducting treasury management activities for the region, according to the Singapore Economic Development Board (EDB).


    Under the scheme, approved FTC companies are eligible for a reduced corporate tax rate of 8% on income from qualifying services. Approved FTC companies are also eligible for withholding tax exemptions on interest rate payments. In order to be eligible for the incentive, companies “must establish substantive activities in Singapore and perform strategic functions,” with key activities including managing interest rate, foreign exchange, liquidity and credit risks, as well as control over the management of the cash and liquidity position.


    “Robust governance and transparency of the system allow MNCs to better navigate requirements and operate in a regulated and stable environment,” comments Aziz, adding that Singapore also has access to mature financial markets, advanced technology infrastructure, and a deep treasury and operation talent pool.

  • Hong Kong. As Doll notes, Hong Kong “serves as a good gateway to both China and the international market.” Indeed, with its proximity to mainland China, and its status as a Special Administration Region (SAR), Hong Kong has much to recommend it as a regional treasury centre location.


    Like Singapore, Hong Kong also offers particular tax incentives for companies seeking to set up treasury centres. In June 2016, the Hong Kong Monetary Authority (HKMA) set up a Corporate Treasury Centre (CTC) scheme. The headline benefits include a 50% deduction on the taxation of profits for particular treasury activities, resulting in a tax rate of 8.25%. In addition, CTCs may be able to deduct interest expenses related to intragroup financing under some conditions.

  • Shanghai. China – and particularly Shanghai – is also a location of choice for a number of corporations. “With the aim of the Chinese government to transform Shanghai into a global financial hub, regulations have been eased to make it easier for companies to manage their treasury activities in Shanghai, especially in the Free Trade Zone (FTZ),” says Doll. “It is recommended for companies, especially MNCs that have huge investments or have a big part of their sales generated in China, to set up a regional treasury centre in Shanghai.”
  • Thailand. According to Aziz, Thailand’s new incentives for locally incorporated companies makes the country worthy of consideration. In particular, he notes that initiatives such as the Bank of Thailand’s International Headquarter (IHQ)Initiative and Treasury Centre (TC) Initiative have made the reporting of cross-border funds flow and FX much easier for corporates with RTCs in Thailand. “However, the treasury landscape in Thailand is still evolving, and there exist gaps such as access to international financial markets, transparency on governance structures and the ease of doing business,” he notes.
  • Malaysia. Malaysia is another location that companies may look at when seeking a regional treasury centre location. Aziz cites the country’s Treasury Management Centre (TMC) initiative, which provides tax incentives on qualifying treasury activities/service income, as well as providing stamp duty exemptions for loan and service agreements. “A company has to be incorporated in Malaysia and meet a set of criteria to be eligible for the scheme,” he comments. “It should also be able to provide qualifying treasury activities, including cash, financing, debt management, investment and financial risk management services.” But as Aziz also points out, there are still gaps which may erode the competitiveness of the TMC incentives, “such as a less mature financial environment, smaller talent pool and political instability.”

While there is no hard and fast rule about which location any particular type of company will opt for, companies in certain industries and from certain regions may gravitate towards a particular treasury centre location, as Irene Zeng, Head of Sales, Global Banking Corporates, North Asia, Global Liquidity and Cash Management, Asia-Pacific at HSBC, explains.

For one thing, Zeng says that Hong Kong is a popular choice for retail businesses, the real estate industry and predominantly Chinese corporates, due to factors including the HKMA tax incentive programme. She also cites the market’s large consumer base, open and established offshore RMB market and easy access to talent “with cultural and language fluency to facilitate the ease of doing business in China.”

Consequently, Zeng says that since the introduction of the CTC scheme, “we see a good number of Chinese corporates moving their RTC/international treasury centre to Hong Kong.” Nevertheless, she says that companies with sizeable operations in China continue to favour China (mainly Shanghai).

Singapore, meanwhile, may be an attractive choice for many western multinational corporates with substantial operations in Southeast Asia. “It offers the FTC with preferential tax concessions; flexible rules in relation to thin capitalisation, and easy access to an educated workforce, mature financial markets, liberal FX regulations, a stable political environment and a friendly living environment for expatriates,” says Zeng. “We also observe some US and European MNCs moving their RTCs to Shanghai, backed by the fact that their China operations represent a majority or very significant share in their Asia business – hence the necessity to concentrate the resource.”

Two treasury centres?

Some companies may opt for more than one treasury centre in the region. For example, Zeng says that some organisations choose to run centres in both Hong Kong and Singapore: “one focused on activities in relation to the mainland China market and/or CNH, and the other focused on ASEAN countries and currencies.” She says that in such cases, both centres can be run under a common infrastructure, with support from relationship banks, in a “very efficient and automated way.”

Choosing the right location

While there may be no ‘wrong’ choice when considering locations such as Singapore, Hong Kong and Shanghai, it’s important to make sure the company opts for the location that best suits its specific needs.

“Any business decision will need to be taken in the context of the corporate itself, such as the nature of the business, key markets of operation, the quality of the workforce required, etc,” says Zeng. “For instance, the petrochemical industry is very active in China, given that most of the end users are based there – hence it makes sense for many MNCs to restructure their operations and move the RTC to Shanghai in order to get closer to their operation sites and consumers.”

“An RTC is the brain and nerve centre of a company’s business operation,” explains BofA’s Pendse. “Located in the right location, key decision makers within the company are able to gain visibility and control over their operations, ensuring critical decisions are made on a timely basis.” She says this is “absolutely important” given the fast-paced and complex environment that many MNCs are operating in, adding that the organisation’s goals and operations requirements are among the most important factors when selecting an RTC location. “Usually, the incentives provided by local markets are secondary,” she adds.

Avoiding the pitfalls

As such, Pendse says a possible pitfall when choosing a location is to opt for one location which has very little in common with the footprint of the organisation’s business landscape. “The suitable location has to provide the right ingredients like an adaptive culture, ie least resistance to change/innovation, the right talent pool to be able to improve the scalability of treasury functions and access to financial markets which is a backbone of the RTC,” she says. “MNCs have to keep in mind that the journey towards centralisation and standardisation by establishing RTCs is not just for organic growth, but also to tap into inorganic growth needs and opportunities that can leverage the structure of the established RTC.”

Deloitte’s Doll likewise notes that companies should avoid certain pitfalls. For example, a company might find that treasury talent is not available in a particular market, meaning that the organisation would be unable to recruit treasury resources and that the hired resources would lack the qualifications needed to manage day-to-day operations. “The company could potentially incur more cost from daily operations due to errors or delay in execution,” he notes.

Other considerations are that the shift from a decentralised to a centralised model requires “a clearly defined roadmap and design of a ‘to-be’ process flow,” he says. “Treasurers, with the support of senior management, need to communicate effectively and sell the ‘benefits’ to the various local finance units to ensure success”.

Asking the right questions

BofA’s Pendse says MNCs need to consider a number of different factors when selecting the right treasury centre location, such as:

  • Ease of capital movement – access to deep and well-oiled financial markets, ie long-term capital (equity and debt).
  • Law and governance – transparency of doing business and setting up businesses, as well as international reputation.
  • IT infrastructure – connectivity to the technology infrastructure providers and innovation hubs.
  • Talent pool – the existence and availability of a highly skilled, well-educated international and mobile workforce.
  • Tax regulations – local tax structure and the impact it would have on business and capital inflows.
  • Government incentives – ease of applying the incentives related to finance and treasury-related activities.

She adds that an “important litmus test” is the existence of other successfully-run RTCs in the location under consideration, as this will provide confidence about the country’s ability and readiness for attracting new businesses. She also notes that a solid country credit rating “further provides an indication of the ability and willingness of a location’s government to fulfil their financial commitments in full and on time.”

As well as citing the importance of long-term incentives which may help MNCs achieve cost savings when setting up the treasury centre, Deloitte’s Doll also notes the importance of political stability, which “could ensure smooth treasury operation without incurring much cost from the business continuity plan.”

Last but not least, he also emphasises that stringent and clear regulations are important when it comes to setting up the regional treasury centre, which will usually take on the role of payment factory, in-house bank, netting centre or reinvoicing centre. “Treasurers would like to ensure the chosen location has regulations that would allow for all these key functions to take place,” he concludes.

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