Netting

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.....

Please LogIn /Register to access the full commentary and a further 150+ similar commentaries. If you receive our newsletter - use your email to LogIn / Request Password Reset

 

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

Please log in, or create a free account, to read the whole report summary.

Corporate Treasury & FX in South Africa

Report date: 
18 Feb 2025

Commentary

South Africa sums up a lot of what is good in Africa – and what is not so good. The country has a lot of problems, with a lot of violence and people living in poverty. At the same time, it possesses enormous mineral wealth, and has a tradition of being a business friendly environment - it is ahead of many African countries in this respect. Also, the years of isolation during the Apartheid sanctions mean that many local subsidiaries operate with a greater degree of independence than is usual.

What does this mean for multinational companies doing business there?

Basically, South Africa works. There is a lot of bureaucracy, and there are laws to promote the advancement of certain ethnic groups. Our peers’ activities there vary in size, but they are generally profitable. There are exchange controls, but the currency is convertible, and can be hedged onshore: offshore hedging is available in both deliverable and non deliverable forms, and does not drive a significant premium.

The main points:

  • Banking can be a challenge. A lot of international banks have scaled down their presence, or are exiting the market – HSBC is the latest example. There is a concern that a lot of effort may go into moving to an international bank, only for them to withdraw from the country – this happened to one peer with HSBC.
  • For the banks who remain, peers expressed the view that....

Please LogIn /Register to access the full commentary and a further 150+ similar commentaries. If you receive our newsletter - use your email to LogIn / Request Password Reset

Topics covered in this report: 
FX, Hedging FX, Bank Relationships, Cash Pooling - domestic, Netting, Cash Repatriation, Trapped cash, Intercompany loans, Collections - domestic
Service providers discussed in this report: 
Standard Chartered, HSBC, Citi, Standard Bank, First National Bank (S Africa), JP Morgan

Please log in, or create a free account, to read the whole report summary.

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

 

Please Login or Register to access the rest of this free commentary.
If you haven't previously Logged in but receive commentaries via email, simply use your email address to change your password & LogIn
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

Please log in, or create a free account, to read the whole report summary.

Treasury & FX in China

Report date: 
25 Sep 2019

In this report: Netting, pooling, supply chain finance, customs guarantees, cash repatriation, Hedging, Local v International banks and T&E

Topics covered in this report: 
Netting, Cash Pooling - cross border, Cash Pooling - domestic, Customs, Cash Repatriation, Dividends, Hedging FX, Funding, T&E Management, Supply Chain Finance, Bank Relationships, KYC
Service providers discussed in this report: 
Alipay, WeChat Pay, ICBC, Bank of China, China Merchant Bank, Standard Chartered, Union Pay, HSBC, Citi, JP Morgan

Please log in, or create a free account, to read the whole report summary.

Treasury & Banking in India

Report date: 
25 Apr 2022

Commentary

This call took place against the background of the war in Ukraine – but it was a useful chance to catch up on the ever improving situation in India.

India has always been complex, with many regulations and poor clarity. This is clear from the comments below, where participants often have different experiences on the same topic. But, overall, the economy is working well, people are making profits (this was not always the case), and regulations are becoming more user friendly, even if they remain challenging.

Business structure: most participants have one legal entity which faces customers, and a different one which acts as an international shared service centre, invoicing other companies in the group on a cost plus basis. This can lead to inefficiencies in cash management: everyone struggles with domestic cash pooling and intercompany loans, while the shared service centre has guaranteed profits and cash generation. One participant has all activities in the same legal entity, which makes life easier.

Intercompany loans within India create transfer pricing and tax challenges: there is a required or recommended interest rate of 8%, compared to deposit rates of 4% to 4.5%.

Cross border cash pooling and intercompany loans are generally very difficult: many approvals are required. Dividends are subjected to withholding tax of 15%, which is sufficient to deter some, but not all, participants from paying dividends. However, this is an improvement on the previous 22% dividend tax, which was often not creditable against tax in the receiving country.

Netting of intercompany invoices is not allowed. However, one participant is using an Indian entity to centralise all invoices within the country using a POBO/ROBO process, and limiting the transactions to a single, large, gross in/gross out settlement. They are also looking at a non resident INR account.

Participants mostly use deposits for investing their excess cash. One is using the TIDE deposit: the bank automatically sweeps fixed amounts of cash above a defined threshold into deposits. These receive a higher rate if they remain for more than two weeks, but can be released if needed, with a lower interest rate being paid.

Most participants use international banks, mainly Citi and BNPP. Most complained that Citi are reluctant to...please sign in to continue reading

Please sign or set up a  free registration to read the rest of this commentary and get access to all CXC commentaries together with occasional free reports. (if you receive our updates, use your email to re-set your password)

Topics covered in this report: 
Bank Accounts, Tide deposits, POBO/ROBO, Cash Repatriation, FX, Cash Pooling - domestic, Intercompany loans, Cash Pooling - cross border, Dividends, Netting, Tax
Service providers discussed in this report: 
JP Morgan, HSBC, BNP Paribas, Citi, ICICI, FXall, 360T, CoProcess

Please log in, or create a free account, to read the whole report summary.