Bank of China

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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Commentary

The way treasurers manage banking relations provides a key insight into how they approach their job. This session was no exception – and we had the additional benefit of input from senior banker in Asia and Advisory Board member John Laurens, who shared his view from the other side of the fence.

• Nearly everyone had the same goal: try to get the most efficient banking structure.
• This nearly always involves a general preference for dealing with core international relationship banks over having many local relationships
• However, one participant commented that local banks in Asia often have excellent technology and services – but it is difficult to get HQ to agree to go with them
• In any case, there are many situations where local banks are still required, to support tax payments or local payment systems. China, India, Korea and Japan were the countries where this was most frequent.
• In awarding business to banks, most companies tend to give a preference to the institutions who participate in credit facilities. Exceptions were made when justified by a specific service, but this could become an issue when credit needs increased.
• Several participants have either recently restructured their banking relationships, or are currently doing so. Comments:
  • It is very important to get the local team on board. They will usually accept the outcome and help if they own the decision, and can see clear benefits.
  • The RFP process is useful, but it is important to carefully check the responses. One participant found that banks often tried to sell capabilities they did not yet have – it is important to focus on what they can deliver today. They also found it was beneficial to use...please sign in to continue reading