Cash Pooling - cross border

Bank Relationships & Cash Management in China

Report date: 
7 May 2025
Topics covered in this report: 
Cash Pooling - cross border, Cash Pooling - domestic, Bank Relationships, Bankers Acceptance Drafts, Money Market Funds, Investments
Service providers discussed in this report: 
Bank of America, Bank of China, Agricultural Bank of China, Bank of Ningbo, Citi, JP Morgan, Standard Chartered, HSBC, DBS, China Merchant Bank, ICBC, Union Pay, WeChat Pay, Alipay

China Cash Pooling - Approaches & Experiences : Corporate Treasury

Report date: 
8 Jul 2024

This discussion explored the complexities of cash pooling in China, a topic that frequently arises in treasury conversations. While the goal was to clarify the regulatory landscape and operational requirements, the findings reinforced the reality that rules remain open to interpretation and can vary significantly depending on the bank and regulatory body involved.

Peers examined the key distinctions between domestic and cross-border pooling, the regulatory approvals required, and the different approaches banks offer. The discussion also touched on challenges related to tax considerations, currency exposure, and the evolving stance of authorities on approvals and compliance.

Rather than a single, definitive framework, the session highlighted the diversity of experiences and strategies companies use to navigate cash pooling in China. For treasurers managing liquidity across borders, this report provides critical insights into practical considerations, regulatory nuances, and emerging trends. The full version offers further details on bank-specific practices, tax implications, and risk management approaches.

 

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Topics covered in this report: 
Cash Pooling - cross border, Cash Pooling - domestic, transfer pricing, Bank Relationships, Entrustment loans
Service providers discussed in this report: 
HSBC, JP Morgan, PBOC, SAFE, ICBC, Bank of China, China Construction Bank, Citi, BNP Paribas, Shanghai Pudong Development Bank

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Managing Bank Relationships in Japan

Report date: 
18 Mar 2024

Commentary

With complex countries, we usually think of emerging markets. Japan is one of the most advanced, largest and affluent economies in the world – but it is also a very complex place for foreign companies to operate in.

Usually, the complexity for treasurers comes from regulation. In Japan, this is not the case: the yen is freely traded in one of the deepest markets; cash can be pooled and swept both within the country and across borders; one participant does POBO there; Japanese banks willingly report transactions and balances by MT 940; it has deep and open capital markets; and four of the world’s twenty largest banks by assets are Japanese. Instead, the complexity comes from a very strong culture, which is often not well understood by non Japanese, and which leads to a different way of doing business.

This call, which was well attended and quite animated, went into the challenges foreign treasurers face in this environment. Peers raised the following:

  • High bank fees: Japanese banks are reluctant to negotiate these down
  • Japanese banks are not used to RFPs for cash management – this is not how the domestic market operates. Many large Japanese companies have strong historical relationships with their banks, which often involve minority shareholdings.
  • While MT 940s are not an issue, one participant faced significant issues getting their Japanese bank to implement even a simple host to host communication
  • Communications challenges: it can be difficult to find Japanese employees who speak good English – very few bankers in domestic operations speak it.
  • The need to carefully manage business meetings: these are usually more formal than in many other cultures: deference to senior personnel is required
  • Difficulty managing onshore operations from a remote location: the local online banking tools are nearly all Japanese language only
  • The language issue is further complicated by the katakana character set
  • Resistance of local teams to change, especially if it involves working with foreign banks
  • Complexity in managing relationships and wallet share with Japanese banks, who are often key global providers of credit and FX
  • The use of company chops instead of signatures, and the related control issues
  • The requirement to use local bank accounts for certain types of tax payments
  • Security and confidentiality in Japanese online payment systems is not best in class – one participant had an issue with a single person (not in HR) making all payroll payments
  • Repatriating cash via dividends and intercompany loans is not a problem, but it brings the usual complications: the need for retained earnings (one participant’s business receives advance payments), withholding tax and currency hedging cost. 

How to handle these problems?

  • One peer did an RFP a few years ago, and awarded

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Topics covered in this report: 
Bank Relationships, Intercompany loans, Dividends, POBO/ROBO, RFPs, Cash Pooling - cross border, Cash Pooling - domestic
Service providers discussed in this report: 
Bank of America, JP Morgan, MUFG, Mizuho, SMBC, Citi, HSBC, Standard Chartered, Deutsche Bank

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Mexico - Corporate Treasury Update

Report date: 
12 Jan 2024

Commentary

In many ways, Mexico is a paradox. It has a vital, and complicated, relationship with its northern neighbour: apart from anything else, migration across its land border into the USA is a significant, and highly contentious, topic in US domestic politics.

But the reality is that Mexico has a thriving economy, and has modernised its financial and banking infrastructure to the point where the consensus on the call was that it is a country where it is relatively easy to work, and where most modern treasury management techniques can be used. There are no exchange controls, cash can be freely transferred across the national borders, and cross border cash pooling is regularly practiced. FX hedging can be done freely both onshore and offshore, and the country is well banked, with both good local banks and most international banks being well represented.

Despite this overall positive environment, we still had a lively call. There are a series of challenges, and some points were not always totally clear. None is particularly serious, but they still take up management time and attention:

  • Citibank operate through a relationship with Banamex. While this works well, several participants reported service level issues, and there were challenges with data not being transmitted through the IT systems. This resulted in manual interventions which should not have been required.
  • Consistent with their global strategy, Citi/Banamex are withdrawing from the retail banking sector. For some participants, this caused a problem, as banks in Mexico share the Latin American practice of giving employees a better deal on their retail banking services if the company pays payroll through them.
  • Otherwise, some participants reported issues setting up and managing local
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Topics covered in this report: 
Bank Accounts, Bank Relationships, Cash Pooling - cross border, intercompany netting, payroll, POBO/ROBO
Service providers discussed in this report: 
Banamex, JP Morgan, HSBC, Bank Mendes Gans, Bank of America, BBVA, Citi

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Turkey Corporate Treasury Update

Report date: 
20 Nov 2023

Commentary

Turkey is a challenging environment – but it works. Inflation is around 85%, the currency is depreciating rapidly and very expensive to hedge, and funding is regulated and very hard to obtain. Two years ago, restrictions were placed on the remittance of dividends, though today, those restrictions have been lifted and there are no formal exchange controls. 

Despite all this, participants on our call generally reported growing businesses, with positive results.

The main challenges:

  • Overdrafts are not available, or they are prohibitively expensive. This is not new: the country has always imposed cost penalties on short term borrowing. The central bank now requires a reserve deposit for all loans: one participant said this was 60%, while another reported 200%. Either way, this has effectively made local loans all but impossible.
  • One way of satisfying reserve requirements is to purchase Turkish government T-bills. No foreign bank is prepared to do this, so funding via international core relationship foreign banks is no longer possible. Local banks are generally also reluctant to lend: the few exceptions are government owned banks.
  • Bank deposits in foreign currency hardly receive any interest; local currency ones attract interest at around 30%, against an inflation rate of about 85%.
  • Given this, and given the high rate of inflation, there is a lot of pressure on working capital: customers are seeking longer payment terms, while suppliers are looking to be paid early. One participant has sought, without success, to put in place supply chain financing solutions.
  • Most participants manage to run their businesses with no debt. Cross border intercompany
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Topics covered in this report: 
Bank Relationships, Hedging FX, Funding, Cash Pooling - cross border, Cross border sweeping, Dividends
Service providers discussed in this report: 
BNP Paribas, Deutsche Bank, Citi, HSBC, TEB, ING, Yapi Kredi

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China Corporate Treasury Update

Report date: 
13 Nov 2023

Commentary

With recent events, there has been less media focus on China. The news related to China has been about trade tensions with the US, the extent of China’s relationship with Russia, and the issues related to the real estate sector. Even COVID has tended to fade into the background, with the economic impact of the extended lockdowns and the disappointing pace of the recovery.

The purpose of this call was to find out how our members are finding the business and regulatory environment in China, and the extent to which their operations and treasury management are being impacted.

The overwhelming response was that it is very much business as usual – both in the good and bad respects. Participants on the call come from a variety of industries: while some, especially those facing the consumer, are seeing a significant slowdown, some continue to see growth. Everyone saw current difficulties as being transient, and nobody was looking to reduce their presence. The call quickly got into the operational challenges China presents – it was the familiar scenario of regulations which are always changing, are often not totally clear, and surprises.

  • Chinese banks. One participant reported that one local bank, ICBC, had proved to be very proactive in helping their company automate several processes, using new technology. This is a big step forward, as Chinese banks have traditionally preferred to avoid this kind of engagement with foreign companies. 
  • At the same time, there was a feeling that, as their traditional real estate lending activities have come under pressure, several Chinese banks are now more willing to lend to foreign companies.
  • At the same time, most participants prefer to limit their relationships to the core foreign banks: this is becoming easier, as foreign banks are now able to provide services, such as the basic account, which used to be reserved to local banks. Several participants are reducing their banking relationships, usually focusing on core – international – banks.
  • Also, participants reported that FX payments are being approved more quickly, and regulations seem to be easing – there was a lot of discussion about the requirement to bring the balance
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Topics covered in this report: 
Cash Pooling - cross border, Cash Repatriation, Bank Relationships, Funding, FX, Dividends, Cash Pooling - domestic
Service providers discussed in this report: 
ICBC, HSBC, Citi, JP Morgan, Standard Chartered

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FX & Treasury in South Korea

Report date: 
25 Nov 2022

Commentary

South Korea is a market which it is notoriously difficult for foreigners to penetrate: this applies as much to banks as it does to industrial companies. The culture is fiercely patriotic, and the vitality of South Korean industry means that most products are available from local companies, who are often world leaders.

The result is a situation where, despite the size of the economy – in 2021, it had the world’s 10th largest GDP, ahead of Brazil and Russia – it tends not to be a major market for most non South Korean MNCs. This was reflected in the call, where the country is complicated, and not a major focus for most participants. The situation is further complicated by language – English language skills can be rare amongst local staff and banks – and by a significant reluctance on the part of staff and customers to work with foreign banks. When you add in a series of specific, and very strong, local customs and processes, such as customers who often insist on making payments in person, you have a challenging situation.

Despite all of this, our participants manage to work successfully. Cross border cash pooling is possible, using the Consolidated Management of Funds (CMF) structure, which has to be approved by the Bank of Korea. The approval process is burdensome and requires a lot of work – and it all has to be done in Korean. But it works. 

Equally, dividends can be paid – but again, there is bureaucracy. Currency trades must be settled onshore, so many people find it easier to use the offshore NDF market, which is fairly liquid. Intercompany netting has to be gross in gross out – and the won can be remitted offshore. Cross border intercompany loans

 

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Topics covered in this report: 
Cash Pooling - cross border, Hedging FX, Bank Relationships, Collections - domestic, CMF, Netting, Dividends, Virtual accounts
Service providers discussed in this report: 
HSBC, JP Morgan, Standard Chartered, Bank of America, Citi

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