CASH MANAGEMENT FOR CORPORATES
This adds up to a very difficult environment for both banks and major payment service users, especially if they operate in more than one country – i.e. corporates.
Corporates have moved towards centralisation over a 20 year period, starting with autonomous subsidiaries each running their own bank relationships. That also meant using different electronic banking tools, payment schemes, borrowing and investment instruments.
Gradually the corporate centre has taken over effective control of these processes, even if day-to-day operation may still be decentralised. Starting with Group FX policies, through multilateral netting, to Treasury Centre/In-House Bank, and then on to centralisation of AP/AR, it has been one-way traffic.
However the credit crisis has eliminated a key source of funding which was a major reason for centralising funding at an In-House Bank – Commercial Paper.
Funds are on the books of major retail banks who may not be international banks; at the same time PSD has entrenched country-level differences in the EU/EEA.
What is the way forward? Does the prime task of Treasury – to ensure the availability of money to meet the company’s debts when they fall due – determine a reversion to a national-based approach?
