BNP Paribas

Commentary

All your cash in one place – but with each transaction tagged so it can be identified and allocated automatically. This is the promise of virtual bank accounts: the first offering was a unique IBAN for each customer to pay into, although all the cash really goes into the main account. This makes it easier to reconcile the receipts to invoices – the customer is already identified.

The second step is to keep one bank account, but give each subsidiary or division its own IBAN: no need for cash sweeping or pooling – all the cash is in one place. But you can then use the tags on the records to constitute and account for each entity. This structure is used by many in-house banks.

Banks have been marketing virtual accounts for more than a decade. In a recent CXC poll (results here) , 30% of respondees said they use them: of these, 84% found the product met or exceeded expectations, while 16% were disappointed.

So – what is happening? Why hasn’t the product taken the world by storm? 

Overall:

Some peers have effective solutions, which vary from complete in-house banks to receivables and payables solutions with varying degrees of sophistication.

Others have found that they are able to achieve many of the objectives of virtual accounts by using the enhanced data recognition and machine learning capabilities of more recent ERPs. These peers generally found virtual accounts added limited value.

During our call, we learned of unexpected uses of virtual accounts. These included managing payroll confidentiality, enforcing limits on employee credit cards, and segregating customer cash.

Positive cases:

• One peer achieves significant benefits, not only from cash pooling, but from eliminating the need to do intercompany settlements. Several peers have implemented...

Commentary

KYC – we all love to hate it, together with its sibling, AML. One participant on the call even joked that KYC really stands for “Kill Your Customer”.

So, after more than ten years, where do we stand? Are things improving? Are we seeing an adoption of standardised data requests and central depositories? Or are banks still coming up with new requirements, and often repeating the same requests within their networks?

If anything, things are getting worse. Increasingly, companies are setting up dedicated internal departments just to handle KYC requests. 

Data

• Data requirements still have not been standardised
  • Requirements vary by country
  • Banks do not accept that some information does not exist in all countries
  • There is inconsistency. The same bank will insist on an item in some countries, but not others
• New requirements keep surfacing. For listed companies, banks are increasingly requiring personal data on management and directors. This is an extension of the UBO (Ultimate Beneficial Owner) requirement for private companies.
• Some countries require,,,,

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

Geopolitical risk, or simply political risk, is a major challenge for treasurers. We had all become used to viewing Iran, North Korea and Myanmar as off limits, and handling issues in Venezuela and Argentina. But the Russian invasion of Ukraine and escalating trade tensions between the US, the EU and China have made the world a more dangerous place.

This call was scheduled at the request of one member, who was looking for ways to measure political risk, or at least get external indicators they can use to convince management to tread carefully. More on that below. But we quickly moved to discussing what to do, once you have identified the risk. After all, if management wants to do business in a risky country, treasury has to make it happen. 

Generally, peers participated in senior level discussions on strategy and objectives, but felt their main contribution was through managing the balance sheet:

• Cash repatriation: the main way treasurers can reduce immediate risk is by repatriating restricted and trapped cash. This often involves a cost: withholding tax in the case of dividends, or creating accounting losses on currency conversion. Tax departments and CFOs have to be persuaded this is the right thing to do. Several participants regularly circulate the amount of trapped cash by country to the business, and even the board of directors: this helps change attitudes.
• Change the business model: this is more difficult, but it can involve moving to invoicing in hard currency to reduce FX risk, or moving to selling through remarketers. One participant has moved from a single manufacturing location in China to multiple production sites in different regions. This was partly due to COVID disruptions and supply chain concerns, but it also addresses the potential exposure due to increasing tensions with China. 
• Change the funding structure: in some markets, participants have moved from funding via intercompany loans from offshore locations to onshore external borrowing. This reduces the net exposure – provided the company is willing to walk away from the local debt in a crisis. In turn, that raises a series of issues – but at least, it gives more options. It is often more expensive.
• Manage the accounting exposure: some

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