In house bank

Corporate Treasury: Approaches & Experiences with Multilateral Netting

Report date: 
23 Jun 2025

Commentary

The relentless search for efficiency and cost reduction: this is the lot of every treasurer. One of the first, and most obvious, targets is netting – so much so, that it is often taken for granted. This call was an opportunity to check up on what our peers are doing, and the latest developments.

The most obvious – and frequent – area for netting is intercompany transactions. The benefits are clear: the elimination of spreads on FX transactions which are no longer required, the reduction of bank charges and fees, the optimisation of funding, and the imposition of enhanced discipline in settling intercompany invoices.

This basic transaction has been extended: while traditional intercompany netting is cash settled, an increasing number of peers are turning netting into an in-house bank. In this case, all intercompany transactions are booked into an account with the parent company – from the subsidiary’s point of view, this means the invoices have been settled. The in-house bank will decide when, and if, the intercompany accounts are settled. This same account can also be used for third party transactions, under POBO/ROBO arrangements, significantly reducing the number of cash transactions in the subsidiaries.

Also, many peers net transactions with their banks: instead of settling all FX transactions with each bank, some peers use regional treasury centres to settle on each other’s behalf. It is also possible, for example, if there are gains and losses on hedging transactions, to net settle with each bank, or get the banks to settle between each other on behalf of the company. This reduces the.....

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Topics covered in this report: 
Bank Relationships, Netting, intercompany netting, Intercompany loans, In house bank, POBO/ROBO, Hedging FX
Service providers discussed in this report: 
CoProcess, GTreasury, Kyriba, it2, Finastra, Integrity

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Counterparty Risk - A Reality Check

Report date: 
11 May 2023

Commentary

Risk management. Every treasurer includes this as part of their job description, and we are rightly proud of what we do in this area. But, every now and again, we get a reality check. How good are our processes? 

Recent events have provided just such a check, with the failure of Silicon Valley Bank (SVB) in the US, and Credit Suisse. This call was a “lessons learned” session, with an excellent and very detailed discussion on the operational aspects of what people went through, together with some of the broader issues, including the, very human, tendency not to take risks seriously until they materialise.

The call took place before the failure of First Republic Bank, and its acquisition by JPMorgan.

This summary is two pages long – this was a very detailed call, with a lot of practical learning and experience sharing. 

So I will put the bottom line before the long read: the participants who had problems with the collapse of SVB did so because they had delayed integrating recent acquisitions into their normal counterparty risk management processes. With acquisitions, there are good reasons for doing this – but also risks. Others felt management was losing sight of these issues – so it was a useful wake-up call. All participants were grateful to their centralised processes, which meant they could get the information on the exposure quickly, even if this required working with other, centralised, functions. All participants are moving away from using smaller regional or local banks, wherever possible.

It can be hard to justify having a proper and rigorous counterparty risk management process, especially when it has been a few years since the last significant bank failure. This was an important wake-up call. Fortunately, it came at no cost.

Operational issues:

  • Generally, SVB created more anxiety, as the failure became apparent on a Friday, and the intervention of the US federal authorities only became certain over the weekend.
  • Everybody scrambled to understand what payments were going into SVB, so they could be put on hold. The concern was that, if you pay employees or suppliers by making a transfer into an account with a failed bank, they may not be able to access the cash. This concern was
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Topics covered in this report: 
Risk - counterparty, Bank Relationships, In house bank
Service providers discussed in this report: 
Silicon Valley Bank, Credit Suisse

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