Regulation & Standards

Global Cash Management – where next?

Published: Oct 2009
Talking Treasury Forum participants

Six leading bankers reach some interesting conclusions on global cash management in the post-crisis banking world.


Portrait of Tarek F. Anwar, Global Head of Sales Transaction Banking, Standard Chartered

Tarek F. Anwar

Global Head of Sales Transaction Banking
Standard Chartered logo
Portrait of Nicholas Blake, Managing Director Treasury Services, J.P. Morgan

Nicholas Blake

Managing Director Treasury Services
J.P. Morgan logo
Portrait of Pierre Fersztand, Global Head of Cash Management, BNP Paribas

Pierre Fersztand

Global Head of Cash Management
BNP Paribas logo
Portrait of Michael B. Guralnick, MD Global Head, Client Sales Management Treasury and Trade Solutions GTS, Citi

Michael B. Guralnick

MD Global Head, Client Sales Management Treasury and Trade Solutions GTS
Citi logo
Portrait of Marilyn Spearing, Global Head of Trade Finance and Cash Management Corporates Global Transaction Banking, Deutsche Bank

Marilyn Spearing

Global Head of Trade Finance and Cash Management Corporates Global Transaction Banking
Deutsche Bank logo
Portrait of Robin Terry, Managing Director and Head of Sales Europe, Global Banking, Payments and Cash Management Global Transaction Banking, HSBC

Robin Terry

Managing Director and Head of Sales Europe, Global Banking, Payments and Cash Management Global Transaction Banking


Portrait of Richard Parkinson, Managing Director, Treasury Today

Richard Parkinson

Managing Director
Treasury Today logo

Richard Parkinson (TT): I want to start with the issue of credit. You are all selling cash management services, but cash management doesn’t stand alone and corporates expect some sort of credit support as part of that relationship. But bank balance sheets are under a lot of pressure as the financial markets deleverage and various forms of debt (actually these are assets to a bank) come back onto your balance sheets. So how are you meeting your customers’ credit requirements and what impact is this deleveraging having on the cash management business?

Robin Terry (HSBC): Well the two items are intrinsically linked. We’ve seen what was a very normal relationship in terms of credit, turn into a special relationship. In our view, corporates are cherishing that relationship with their bank much more because of the lack of liquidity and credit there has been in the market.

The reduction in the number of banks that have available credit has reshaped bank lending groups. It’s also reshaped those players. You’re having to look at different transactional players that perhaps you didn’t see in the past in your credit groupings and then ask what that particular bank can do, especially in terms of the wallet share that’s available. Banks will say, “What can we lock into in terms of transactional banking to get the returns that we need on that scarce credit now and in the future?”

Marilyn Spearing (Deutsche Bank): It’s interesting that that’s the mood – that credit is tight – and yet all of the bank stats show that there hasn’t really been a reduction in bank lending to the large corporate. The corporates’ concern as to whether they had access to credit was because the other markets were very much drying up.

I think that it’s a good balance that we’re reaching right now and we are seeing good, solid, honest discussions with clients on where this relationship is going. But the other impact is more providers. The wallet is getting fractured.

Michael Guralnick (Citi): I think what we are seeing is a maturing of the overall relationship. The interconnectedness of annuity business to the provision of credit has always existed. The corporates have always told us that it’s very important, and actually they emphasise that even more so today in our dialogues. While that linkage existed we too are emphasising that from our side of the coin, returns matter as well, and for use of our capital we need to see improved returns, which leads to the cash management discussion.

For us at Citi’s Global Transaction Services it’s really about supporting those clients who can truly leverage and benefit from our globality, namely the scale that Citi has in terms of the international network and consistent global platforms. It’s about open client conversations where we discuss what we both expect of from our relationship, what is mutually beneficial.

Tarek F. Anwar (Standard Chartered): I think the other way to look at this is to look at it from the clients’ perspective. Corporates are going to look at their internal working capital and they’re going to look at providers that actually can leverage that working capital in an integrated fashion. So your ability to take on additional risk, say buyer financing, helps the corporate with increasing their sales and stabilising the relationship with their buyers.

You’re also helping them with their suppliers, both using your balance sheet and your risk as well as picking up the cash management. So actually you’re rebalancing that risk return equation, not through just pricing but through provision of services which are complete.

That makes a lot of sense too from a corporate perspective, and then taking that across a multitude of different countries and not just doing it in one space. I think that’s valuable for the corporates.

Nicholas Blake (J.P. Morgan): There is a significant amount of corporate refinancing due during the next 18 months. What we’re hearing is the pricing of risk wasn’t done well in the past which led to too much cheap credit in the system. There’s an acceptance from our clients as well as ourselves that we need to be smarter about the way we look at risk and how it is priced.

Clients are also exploring other funding sources. For instance, although the debt capital markets are coming back, we’re expecting more equity to finance corporates going forward. We’ve also seen a lot of our corporate clients looking at supplier and receivables financing techniques to supplement their existing capital markets programmes or in some cases replace them where they couldn’t get the rates or funding they were looking for.

Parkinson (TT): Those capital markets are not open to corporates as before, are they? Some of the securitisation opportunities, or the originate and distribute models, are broken. But there is still the underlying demand for credit.

Anwar (Standard Chartered): In addition to what I mentioned earlier on increased focus on internal working capital, actually I think that there is a shift, not all the banks and not all the corporates have yet realised.

If you look at a lot of discussions we’ve had with our clients in the US and in Europe, they are looking at Asia Pacific, Middle East and Africa as their future areas of growth over the next ten to 15 years and therefore having the traditional revolver sitting in the US or in Europe, doesn’t really work for them.

So they’re looking at getting the funding for the growth on a local basis. You may not find the depth in these markets so it’s going to be quite interesting over the next three to five years because that shift is already happening.

Portrait of Marilyn Spearing, Global Head of Trade Finance and Cash Management Corporates Global Transaction Banking, Deutsche Bank
Marilyn Spearing, Deutsche Bank

Spearing (Deutsche Bank): Also, a big thing for us and something we see with our clients, is the whole concept around capital substitution. The ‘orginate to distribute’ model is still valid, particularly for trade finance. With the right assets there is the opportunity for us to sell down and create more capacity for our clients. On the trade side this has really worked out for us and for our clients that’s really put more liquidity into the system for them while they were able to optimise their own working capital as well.

Pierre Fersztand (BNP Paribas): Today corporate clients are looking for liquidity from several business sectors: from capital markets, from traditional bank credit, from trade or from factoring. To manage their liquidity effectively, they focus on the banks which are reliable with strong capabilities and global reach.

In addition, they focus on the local market which is not a very domestic one but which is a regional one for Asia, for Europe and for America. It is more difficult today for a corporate to be financed by only one bank for the entire world, and to only use one instrument product. Corporates have definitely revised their investments policy.

Spearing (Deutsche Bank): One last point I’d make is that this environment has been a catalyst for us on the trade side to look at collaboration for everyone around this table. A lot of us have shared clients and we are all thinking about how to best support the client’s needs, so we do this through club deals through trade syndication opportunities. I’ve seen a lot more of that and I think that’s positive thinking for the client at the end of the day.

Parkinson (TT): I’m hearing “Don’t underestimate the value of your transaction business in negotiating credit facilities”, but what else would you advise corporates to do?

Spearing (Deutsche Bank): Diversify your sources. Do not rely on the old, traditional route, it’s a different time. Who can go to market and who can’t? And, if you can’t, how are you going to get that access to working capital?

Terry (HSBC): And look at the timeline as well. What financing requirements do you have coming up in the next few years and how might you leverage transactional banking mandates in support of your request to your banking group? Timing is important.

Anwar (Standard Chartered): I’d throw into the mix, the whole counter-party risk issue because that’s changed. I would put the corporate’s relationships with Banks, Buyers and Suppliers in that category. So just taking a fresh look at what the corporates are doing, given that they may have to lock in certain pieces for a given amount of time.

The other thing I would add to the counterparty area is that if you are looking at growth areas over the next three to five to 15 years, you may want to start to make sure that you have access in those markets to the right players and that’s critical because they might be very different than what you have in your home market today.

Parkinson (TT): Does diversification also apply to one’s transactional banking group these days? Is it realistic for a corporate to think about global cash management with a single banking group any more or is that history?

Spearing (Deutsche Bank): I am hearing only about the wake-up call on diversification and those that have been consolidating heavily are having to put in contingency measures to address business continuity and counterparty concerns. If they are overly concentrated with one or two, it’s a real scare.

Portrait of Michael B. Guralnick, MD Global Head, Client Sales Management Treasury and Trade Solutions GTS, Citi
Michael B. Guralnick, Citi

Guralnick (Citi): I think that there is a continuation of a theme that we have seen for many years. The large multinationals have looked at a core banking group and they have for many years looked to split the world between that core bank group.

There are very few, if any, clients who award cash management global basis to one provider. As we said earlier, because of the linkage between credit and the need to reward credit banks, companies have divided the world amongst the key providers of capital who are also world-class cash management providers.

Clients may use some regional providers for collections, but they want to quickly upstream the cash that is possible into a global or regional pool to get visibility and access to their liquidity. They don’t want idle cash lying about, which necessitates going outside to use other sources of external credit.

So while I do think there is an evolution towards global cash management ‘system’ it is not necessarily with one bank; and this is driven by concentration, business continuity and counterparty risk concerns.

Fersztand (BNP Paribas): From a risk, as well as from a credit perspective, Corporates are trying to find global players in one region and are, sometimes, scared of using local banks in some countries. But at the same time the idea of having only one bank in one continent has never really been realistic.

I have an example of a large corporate company that wanted to have only one bank for cash management in Europe but at the end of the year they decided to have two or three additional banks, which seems to be a more realistic number.

In Europe Corporates have found that payments and collections vary from one country to the other, for example the differences between Italy and Belgium. As such, they either seemed to choose two or three banks to cover a big region like Asia and Europe and to have one or two lead banks for their cash pooling and electronic banking solutions.

Parkinson (TT): So what is global cash management and how is it different from co-ordinated regional and sub-regional cash management?

Spearing (Deutsche Bank): The way I’ve always rationalised this is around semantics. The treasurer has to decide what’s his philosophy on a global cash level and that’s really the start point. How much control does he want from the centre? How much visibility does he want and is he willing to then decentralise that? The philosophy that’s maintained at the global treasurer level to say, “Here’s how I want to do this because it is going to work for my company” and if he genuinely believes they are a multinational, they are going to still want global visibility and liquidity management at some level for core currencies.

Parkinson (TT): Is this different from what we had a few years ago when we might have split the world region by region but if one region was cash-rich and another was cash-poor you would try and do something about that?

Anwar (Standard Chartered): In the ideal world what they wanted was one pot of cash, in one currency, at the right time, globally. The reality is that companies are realising that their needs on the ground may have grown dramatically in certain markets which they used to sweep cash out of.

And they have realised the impact of pulling liquidity out of growth markets, causing difficulties with the forecasts, local balance sheets, taxes, etc. So they’re beginning to say “Are there specific regional requirements that I have in my plans going forward that I would need to keep the liquidity in place?” You have to be aware of the practicalities of what the business wants and needs are going forward.

Terry (HSBC): We’ve seen a lot of corporates moving towards one ERP system globally. But they’re all moving at different stages and as some of them have invested very heavily in the ERP system, they are also having to change their treasury management system to the same provider. This all means they can then look at things that they’ve never considered before – perhaps in-house banks or Shared Services Centres.

So, it’s changing. I don’t think you can really say there is one model that exists out there – there is a series of different models that are used in different corporate environments to meet the individual requirements of that company.

Portrait of Pierre Fersztand, Global Head of Cash Management, BNP Paribas
Pierre Fersztand, BNP Paribas

Fersztand (BNP Paribas): I agree with this because Cash Management “is differences”, it includes a wide range of needs such as liquidity management, global visibility, payments and collections. Which are fundamentally basically different things. Priorities have changed and to have more and more global visibility is certainly one of them.

But what has also changed is the idea that complexity would almost disappear. Now everyone recognises that in most countries a lot of means of payments are still not STP and are quite complex. They need to have banks with local capabilities, not only for notes and coins, but for most of their payments.

At the same time the processes can be more harmonised because there are some banks that are very good in local markets, so you can rely on them and you have technology that can allow you to have a smooth process with different banks in the world. So things have gone in the right direction which is more global banks with deep local markets at the same time, visibility and technology. But the complexity of the real world is more intricate than we could have hoped.

Anwar (Standard Chartered): One of the things Pierre is saying is visibility. I think we also need to consider visibility of what? Because if you’re in treasury you’re looking at liquidity. But, if you look at other stakeholders inside the corporate and ask “Who needs what information and what role does the bank play?”, you then have to go back to the clearing system and ask whether it supports the requirement? Does the bank have the information before it goes to the clearing system? In many emerging markets there’s an evolution that’s happening in some of the clearing systems that may or may not allow that information to be passed to the bank, and then the question is whether the bank is able to pass that on quickly enough for the client.

Guralnick (Citi): Well that’s interesting because I had a client yesterday saying “I have a global cash management system” and that really is around governance, control and the approach they take. They have a common global standard for their ERP system and they believe they have got the information they need.

I do think that it’s sort of back to the future. People were thinking about one bank globally for all cash management, but now they’re re-examining the model. They are looking at a connected system having one provider in Asia, one in the Middle East, or two maximum per region – it depends on the region and the complexity and the bank’s footprint and capabilities.

However, for treasury payments many clients would still like a single overlay bank to upstream liquidity as fast as possible. For the nuts and bolts of local collections, payments and payroll, they may use a number of banks depending on capabilities.

They would then like to tie that cash management activity to some of the new innovations in analytics in the marketplace. There is a lot of banking data out there but clients do not have the staff to sift through mounds of paper looking for information. Not everybody has a treasury workstation. We provide the analytical tools such as Treasury Vision to convert data to value-added information to manage their businesses.

Parkinson (TT): Now turning to Europe and SEPA what is going to be delivered and when?

Fersztand (BNP Paribas): The SEPA Credit Transfer exists and the growth of SEPA Credit Transfer versus the other credit transfers is very slow. The advice that I could give to corporates is to migrate to SEPA Credit Transfer according to their own agenda. In the end, the SEPA credit transfer will become widespread but for those who have not made a strong change it will be quite a smooth transition because it will only be another format and banks will provide format conversion anyway.

SEPA Direct Debit is a big change, it’s a change of responsibilities in the way of dealing with the mandate for the consumers. SEPA Direct Debit concerns relative less numerous number of corporates and all consumers so it will be a strong change. This change will be made in the next years but it will be done with good information for consumers and country by country.

For instance, in France it has been decided that 2010 will be the year of consumer information and the live date will be at the end of 2010 and no longer at the end of 2009. In Italy it will be done end of 2010 or beginning of 2011. In Belgium, they will begin very early towards the end of 2009 or beginning of 2010. So corporates have to fit with the agenda of each main country because in the end it will be a transfer of the means of payment and it will be a very good evolution.

Spearing (Deutsche Bank): The discussions are all around the banks looking for an end date for domestic schemes. If there is an end date approaching the corporates have to be doing an impact assessment and they can be factoring that in right now. So this is one of those radar items. There is a long-term benefit and although the business case looks sketchy right now, it is inevitable. We will be marching towards a common format across all the countries, so corporates have to factor that in. My guess is something like 2013 for those end dates.

The banking industry is incurring the cost of dual track (clearing systems) and that isn’t going to be sustainable. The banks don’t usually like regulation but we are looking at regulation to structure the end date of the dual track and that makes sense.

Parkinson (TT): But the poor old corporate is saying “what benefits does it give me?” You’ll be closing systems that work very well.

Spearing (Deutsche Bank): We’ve got solid business cases from clients we’re working with and it’s all around the things that treasurers want to do, which is efficiency. It’s about cost reduction rationalisation of systems which they can filter in so they should start now to agree the new formats, start to move towards ISO20022.

Portrait of Robin Terry, Managing Director and Head of Sales Europe, Global Banking, Payments and Cash Management Global Transaction Banking, HSBC
Robin Terry, HSBC

Terry (HSBC): For the last three to five years corporates have been putting in traditional European cash management structures, therefore the hesitation is understandable. “I’ve just finished all of that and now you want me to re-engineer some of this again as a result of new pan-European payment instruments being available. Maybe I need to have a set of accounts in one centre to make my payments from and maybe another set of accounts for collection in local centres.” The structure of this is very important and will differ corporate by corporate.

But SEPA is coming. It is not going to stop, so corporates have to start looking now at where this is going and they need to start planning what’s going on with their IT infrastructure and their subsidiaries across Europe to start gradually filtering this in.

I think the banks can help in some way with that because gradually we can redirect ‘the pipe’ so you have minimal changes but you can still start using the new instruments; SEPA Credit Transfer and SEPA Direct Debit when it comes in later this year and next.

Once we’ve got some end dates in the frame for legacy clearing systems to close, and I think once the public sector in Europe start getting some movement in using SEPA rather than domestic clearings, then that’s when the volume will start to move and then we’re on a very fast slope.

Blake (J.P. Morgan): Common processing across Europe is going to benefit the corporate when it becomes standard. There is value to both banks and corporates but it’s very clear so far that the benefits haven’t fully been recognised or achieved. More understanding about the future of the existing clearing systems and in particular their retirement, will help sharpen the focus for banks and corporates alike.

Those clients that are re-engineering now should absolutely think about it as part of that process because they have the opportunity and the ability to do it. For those who don’t necessarily have a reason for re-engineering yet, they should be looking at the future growth plans of their organisation, how they will need to adapt to support them and look to ensure this is included in the review.

Guralnick (Citi): They just don’t have clarity on that end date and if you look at direct debits for Spain it will still require you to use the local Spanish clearing system because of central bank reporting requirements. Until governments decide this is important to their consumers and corporates and overall business activity it is probably not going to progress as quickly as we would have initially thought. Many companies who implemented BIC and IBANs are now saying ‘I’ve got a lot of things on my plate right now and I’m going to wait and see.’ That’s what one client said yesterday. ‘We’re teed up but we’re not going to hit the ball yet.’

Blake (J.P. Morgan): We’ve seen an increased interest for SEPA Direct Debit. The value it can bring to the utility and other B2C sectors will be substantial.

Fersztand (BNP Paribas): There would certainly be a lot of value in SEPA Direct Debit because collections are more difficult for corporates and more important than payments. The other thing is that in the collections field we will see legacy, non-SEPA payments for many years to come.

So it’s very important for corporates to move progressively towards more automated and more cross-border solutions in Europe. The first one is SEPA, the other one is to choose two or three European banks to cover all the domestic markets in Europe. So it is a combination of what we have said before, and of SEPA giving value to the corporate.

Parkinson (TT): I’d like to move on to talk about connectivity and, in particular, SWIFT corporate connectivity. ISO20022 is being described as the solution to SWIFT connectivity issues in much the same way that advocates of EDI talked a few years ago. What, if anything, is different this time around?

Spearing (Deutsche Bank): Because it’s sponsored by SWIFT it has a greater chance of getting acceptability because it’s managed under the SWIFT guidelines, that means the banks are buying into it. We benefit if there is a community agreement and I think it has got as good a hope as any.

Terry (HSBC): HSBC is very focused on SWIFT for Corporates. We’ve seen lots of interest from customers who have looked at their legacy systems and proprietary bank connections and the high costs associated with running and maintaining them.

I visit some clients where I go into a room and they’ve still got all those legacy workstations lined up around it, with little signs above them saying the names of the banks! That has to change. Even in a shared service centre where they’ve ‘lifted and shifted’ operations, you can still get this type of room with multiple legacy connections.

An increasingly important part of this is being able to utilise SWIFT for liquidity management, whereby corporates can take funds directly out of their accounts rather than through traditional bi-lateral arrangements between banks to forward MT101s.

If you add in the option to use a SWIFT bureau, where costs are considerably lower than traditional methods of joining SWIFT, add a lot of value added services off the back of the bureau, then the arguments become quite compelling. With FIN and FileAct and some of the new services that are coming up, now really is the time for considering SWIFT.

Anwar (Standard Chartered): It’s actually yet another form of evolution – it’s an evolution from when banks insisted on their own proprietary systems as an advantage to protect other players from coming in. That evolution will continue and, as you say, the costs will come down and the value will go up.

Fersztand (BNP Paribas): There is a real value for corporates because SWIFTNet offers to corporates one multi-bank solution for all their entities. Which means that you can have five efficient banks in a region and just one process. BNP Paribas has been very supportive to corporates connecting through SWIFT because it was very close to our model. It has been a bit slow at the beginning because SWIFT had to move from the bank world to the corporates world which is a big change. Today the connectivity costs are going down.

What I also see with corporates even if they move to SWIFT-land, even if they use host-to-host solutions between the bank and their ERP systems, they are very happy to have the bank channel apart from this to send one treasury message and to have one kind of reporting that is very easy to use. A lot of people in the company however don’t have access to the ERP so there is a future for our proprietary internet-based systems, which is complementary to the host-to-host SWIFT connection.

Terry (HSBC): Another question is “Does it really deliver full interchangability between banks?” Maybe I’m out on a limb on this one but it’s all about messaging and formatting standards. It’s about XML and its abilities to deliver much more robust messaging. It’s also about the security around that messaging. Banks will need to adapt to accept this new format and away from more traditional file types.

Clients who are working with multiple banks don’t necessarily want to have proprietary systems, although part of what the proprietary system brings are analytical tools. It’s about information – robust information that I can make decisions on. Proprietary systems – will they just wither over time and die? Probably not. There will be a segment of the market place that these work for in the foreseeable future.

There are degrees of sophistication amongst the client base. SWIFT connectivity is a viable, valuable tool to provide clients with the capability to reach multiple banks and HSBC very much see it as an emerging trend going forward.

Spearing (Deutsche Bank): Yes – and it is literally the messaging. We are tidying up the messaging but it’s still allowing the banks to differentiate on what they do which is network…

Parkinson (TT): Yes but the corporate can now reach out across the globe using the technology.

Portrait of Tarek F. Anwar, Global Head of Sales Transaction Banking, Standard Chartered
Tarek F. Anwar, Standard Chartered

Anwar (Standard Chartered): Well I’m not sure I totally agree with that. I still think their primary relationship with the banks that give them that global reach will work. The issue is going to be where they have gaps with that relationship and the need to fill them in.

They may now have an easier option to reach out to and work with somebody else. From their point of view it is going to be the relationship, it is going to be the credit, it is going to be the counterparty risk, it’s even knowledge of the culture of the company. How much does the bank know and understand? That’s probably more important than just tools.

Guralnick (Citi): On the point of global reach, at the end of the day it’s about people, and a client doesn’t do business with SWIFT. They do their commercial business; they’re importing, they’re exporting, they’re moving goods across borders in many cases.

What they need are people on the ground who can help them with the myriad of financial requirements they have from customs guarantees, to dealing with tax or regulatory reporting issues, and so on.

This business activity is separate from the information messaging piece and the connectivity of one’s network. The ability to have a network of people on the ground will still be valued by clients.

Spearing (Deutsche Bank): But it is a value decision for the corporate. If they want to achieve their reach by going direct to each one of those counterpoints, SWIFT should facilitate that, right? So, as long as they want to open up and have the accounts and have that relationship in 70 odd countries as opposed to going to one, two, three or four banks as we spoke about.

Fersztand (BNP Paribas): In each country the clients need to have a core bank, a bank with reachability, a bank that a client wants to work with and to bank with, and not only for cash management. But at the same time, in most countries a lot of clients need to have a deep offer, whether you are in Morocco or elsewhere, you need a wide range of capabilities. Then the client has the choice: either they pay with an internet tool in this country where the global bank has reachability, but not a very strong offer – or they take a local bank which has a very bad internet tool, and becomes very difficult to manage.

It is really an extra choice for the client: finding equilibrium between global and local bank services.

Terry (HSBC): I think it’s about providing that extra flexibility we talked about earlier. We see some clients that are actually switching away from that regional model of “I’m going to choose one bank for Europe and one bank for Asia” and they’re actually going to take say, one bank for five or six countries in a region and they’re not going to choose other countries where that bank may be weaker. They would then choose another bank which is stronger and mix and match it between the two. Having a common channel like SWIFT allows them to do that in a much easier way than they would have done in the past.

Blake (J.P. Morgan): For the things we have talked about SWIFT can act as the facilitator, but the banks will always differentiate on the service they can provide, whether that be from a relationship, quality or capability standpoint.

Parkinson (TT): We have been talking about using SWIFT for basic messaging, which is making transfers and getting statements, but there is also talk of electronic bank account management. What is this all about?

Spearing (Deutsche Bank): Well, at first glance it’s about providing account information and billing type of information across the SWIFT network. This was on the corporate wish list. That’s where it started. Then it morphed into ‘wouldn’t it be great to be able to do bank account opening and, if you’re going to do bank account openings electronically, you need some sort of SWIFT messaging to communicate securely with the bank.’

Now you’re down to digital identity because with all of the bank proprietary technology, it’s personal, not just at a corporate level. We know the person authorised to make certain transactions.

Well, SWIFT isn’t personal. SWIFT operates at corporate identity level so it’s SWIFT’s security. So therefore if we’re going to extend this into the corporate world then they will look – as in France, and with all of our proprietary channels – right down to individuals, as to who’s authorised to do what. We all have first authoriser, second authoriser – it’s a different level of security and a different type of infrastructure.

Parkinson (TT): Whereas the way the banks work on SWIFT is if the bank sends the message then it’s assumed it’s OK. So at what point is the checking of identity and approval going to be done then?

Spearing (Deutsche Bank): Well, the proposal is to look at a personal digital identity for corporates that would allow each of the banks to get the best of what they’ve already invested in but make it interoperable. That’s what SWIFT is working on right now.

Parkinson (TT): So the message would come through with a personal identity attached and then the bank at the other end would check that personal identity is X from ABC Co approved to do this? The bank will be doing the checking?

Spearing (Deutsche Bank): That’s the problem because you have to keep the liability for that digital confirmation at bank level. You can’t develop it in SWIFT. It would be too broad and too much liability within the SWIFT organisation.

Parkinson (TT): At the moment any corporate using SWIFT is effectively having to do their own internal policing. Because at the point in which they send the message down, you assume at the other end it’s properly authorised because you can’t tell who pressed the buttons.

Spearing (Deutsche Bank): That’s right.

Anwar (Standard Chartered): The issue is, if we try to handle the mandates electronically, and all the account opening documentation, is all the authorities that come along with that. Is it acceptable from a legal standpoint and a regulatory standpoint? I think that’s going to be the bigger challenge.

Fersztand (BNP Paribas): Digital identity and EBAM (Electronic Bank Account Management) are two different projects – both of them very important. The habit in France is to use digital identity to confirm payments, to confirm files and to deal with the relationship between the bank and the client and to pay taxes for the corporate.

So the fact that SWIFT can bring us a group of products is very important for us. We’re also part of Identrust, but we think that SWIFT is the better vehicle for world-wide standardisation.

For EBAM, the subject is different because it’s new. Today bank account management is not STP at all, it’s only papers. The Corporates send us papers to manage their bank accounts and we send them back papers to confirm their instructions.

With these practices, sometimes, they do not even know how many accounts they have in the world and who has the account authorisation for each type of transaction. So, I think that EBAM is definately a great improvement that we have for the coming years.

And to become STP, processes and messages need to be standardised in all the banks. We are very optimistic and very much convinced by EBAM.

Portrait of Nicholas Blake, Managing Director Treasury Services, J.P. Morgan
Nicholas Blake, J.P. Morgan

Blake (J.P. Morgan): EBAM is a good thing which has been welcomed by the corporate. I think though, most of us round this table are already providing some form of electronic account information exchange. SWIFT can become that enabler again to make this a multi-bank opportunity.

Guralnick (Citi): We talked about change management earlier, which in treasury was mainly focused around re-engineering many of the treasury processes to automate and streamline them. In the middle of re-engineering their treasury management processes, many companies still deal with the most archaic basic process, account opening in a manual (paper-based) fashion.

This is the most basic banking activity, where clients and banks still exchange paper-based documents, use wet signatures to sign authorisation cards for control etc., little to no re-engineering has taken place with respect to account management. As a result, the maintenance of bank accounts today is still archaic. However, we are now introducing new modern techniques to improve work-flow management, specifically around the use of digital identity signatures to support electronic bank account management (EBAM).

One client said, “If you’re going to help me re-engineer my treasury processes, then start by helping me re-engineer my work-flow, around account documentation management and account maintenance which is really the most basic activity I do with a bank and takes a tremendous amount of time and cost.”

EBAM is a collaborative space between clients and the banks. It has to be, because this isn’t a proprietary activity at all. EBAM is all about efficiency and cost management for us and our clients across the industry. I do think SWIFT does have a role to play in this but what that role is, is still being defined.

Spearing (Deutsche Bank): There’s plenty of opportunity to move in a co-ordinated way but it does need to be co-ordinated because right now each one of us has sometimes customised based on our ten largest clients’ needs for example. Everyone’s in violent agreement; but my worry is what is the most important bit? Account opening to some clients, well SWIFT tell me, “that’s not a big thing – that’s really high-end multinational” or bank account statements? “It’s not that critical of an issue”.

Right now I think there’s a view that SWIFT has to do more and we’re not certain how to prioritise some of that. With a number of conferences coming up in the autumn, that will give us some views on all of this.

Parkinson (TT): What are your concluding recommendations to readers of this piece?

Blake (J.P. Morgan): SWIFT looks like becoming a key component that many corporates are looking for. We’ve talked about SWIFT as an enabler for payment standards, information exchange, digital identity. I think the banks all trust SWIFT because we have a stake in the business.

It’s been core to the financial institution industry for some years now, and from a corporate perspective, for those that haven’t perhaps looked at SWIFT and what the banks are doing in that space – it’s worth starting to think about it. At the end of the day, it’s all about choice, it makes sense for some but maybe not for others.

Terry (HSBC): I think it’s a very exciting time for the corporate coming up in the next couple of years. We’ve got increasing flexibility; we’ve got increasing new options coming up; we’ve got new markets like SEPA Direct Debit coming up.

This is the time when they can actually really make a difference by using these tools and working with their banks and advisors to make changes and really make a difference in their business. I think it’s a great time for them to be looking at some of these new instruments and services.

Guralnick (Citi): We talked about credit at the very start. I’m not sure the markets will go back to the sort of easy liquidity state we saw over the last five years. The one piece of advice is really around working capital. I think there’s a lot more to do to extract liquidity out of the receivables process, to look at suppliers and ensure you’ve got good connectivity through your supply chain and ensuring stability. Previously who would have imagined that working capital management was a top priority for the CFO or the CEO, but it absolutely is now.

When you can’t go to the markets to either raise capital or borrow, then looking at the inefficiencies in your working capital cycle to extract liquidity takes a very prominent role on the C-suite agenda. I urge all our clients to continue down that path because there is a lot more value they can extract. All of us offer working capital tools and platforms that can help them help themselves.

Spearing (Deutsche Bank): I think that if I had one final statement, I would give the action plan to the corporate. There is so much change occurring, now is the time to factor in that vision that we talked about for global cash management and say right, how would I really prioritise the changes that are occurring? How will I use them and when? Do you really have that action plan? This is a very good time to be doing it given technology changes, given economic changes and given the need for all of them to get smarter and faster and more efficient.

Anwar (Standard Chartered): I’d just like to add that this is the time to actually have the conversation with your bank about how to look at your structure. There is no better time than now to re-examine it, and see if there are internal or external hurdles from making change. It’s also much better for the corporate really to stop using the banks language and rather continue to use their own language. I’ve seen a lot of corporates adopt words from the banks and a lot gets lost in translation.

I actually prefer to hear it in their own words because then you can understand what they are trying to accomplish. The banks can then really help them by focussing on the priorities. OK, is that practical? Does this make sense? What’s the reality? Can we change it together? So they have to be able to sift through that.

Fersztand (BNP Paribas): I think that corporates ought to fit to their own agenda is the first piece of advice because there are so many things changing in the technology and the banking world. The company’s own agenda has to be their priority. Not to change priorities according to one piece of advice or one technology.

The most important thing is that the treasurer is able to build his own agenda. The bank can help the treasurer explain why this agenda is important for the company and convince other colleagues to follow the same objectives.

Now more than ever it is important to try to centralise and to keep costs down. There are several ways to do this and all of them are good but everyone has to agree to have the same aim within the company.

Blake (J.P. Morgan): One final point is that in addition to the cost of the changing payment landscape with SEPA, there’s going to be a significant amount of regulatory change going forward to deal with, such as the Payments Services Directive.

It (transaction banking) is an expensive business to be in. I think the banks in this room plus maybe a couple of others are likely to be the consolidators in the industry going forward. To continue investing in this business you have to have a long-term strategy that makes sense and is aligned with what your clients are going to need.

From a corporate perspective you should be thinking very carefully about your bank group. Not simply from a simple counterparty perspective, but who are going to be the long-term players in this industry? Who do you select to work with now that has the appetite to deliver what you need?

Thanks again to our participants

Standard Chartered logo
J.P. Morgan logo
BNP Paribas logo
Citi logo
Deutsche Bank logo

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