IBOS Liquidity Management Services | IBOS :: International Banking

IBOS' Liquidity Management services enable companies to increase control over their cash, use cash to reduce borrowings, and then to minimize inactive or uninvested funds. Customers generally focus on liquidity management after they have processed all other transactions, for only then can they identify what excess cash they may have on hand.

Liquidity Management needs to be addressed on two levels, local first and then regional.

An efficient local process for collections and disbursements is the fundamental of Liquidity Management, because hopefully the results of all such activity resides on accounts at one bank per country – the local IBOS bank.

Each IBOS bank offers Liquidity Management services appropriate to its marketplace. If there is more than one account at the bank, the normal practice would be to automatically concentrate all balances onto one single account.

This would have the effect of eliminating simultaneous debit and credit balances on different accounts in the same currency and in the same country, resulting in a net cash balance or a net overdraft on the central account, usually called the “Concentration Account”.

In many cases this will be the end of the daily Liquidity Management, for example because:

The residual balances are small
The interest conditions at the Account-Holding Bank are acceptable
The money market for the currency in a different financial centre is no more attractive than the conditions in the centre where the money is sitting now
There are exchange controls

Physical papers would need to be produced to legitimize a cross-border transfer before it could be done, and it is too late

IBOS also offers services where this is not the case.

Where the daily amounts are small, the customer may wish to observe the accumulation of balances over a period – on this account and others – using the Information Reporting collected through their Host Bank.

Then, at a time suitable to the customer, the customer orders IBOS cross-border payments between the accounts to move balances around them:

Often the movements are between the local accounts and accounts held at the Host Bank, rather than directly between local accounts in different countries
This is to avoid direct intercompany loans; instead the accounts at the Host Bank may be owned by the finance vehicle through which intercompany are made
There is no desire to trigger FX conversions: all subsidiaries want to deal exclusively with their own currency if at all possible

These payments are initiated on the Host Bank electronic banking platform and are made:

Cheaply
In a fully-automated way
With same-day value
With a late cut-off time available

Where accounts are held in EUR, the customer can make use of IBOS’ automated Liquidity Management service in EUR, known as the “DZero Cash Concentration Service in EUR”.

This is a simple service from the customer’s point of view:

A “Concentration Account” in EUR is identified at one or more Account-Holding Banks – this may be the only account the customer has at that bank or the central account in a concentration arrangement at the Account-Holding Bank
A “Target Account” in EUR at a Host Bank is identified corresponding to each “Concentration Account”: there can be only one Target Account for each Concentration Account, but a Target Account can have several Concentration Accounts linked to it
The end-of-day available balance on each Concentration Account is moved to the Target Account, be it a positive balance or a negative one
The closing available balance on every Concentration Account becomes zero

The Target Account balance is increased by every movement in from a Concentration Account, and diminished by each movement out to a Concentration Account

So IBOS has the services needed for effective Liquidity Management, both locally and on a regional basis.

Liquidity Management solutions are bounded by many regulations and barriers, some in the banking system, some imposed by company law and tax regimes, and some dictated by customer organisation, preference or the precise nature of the company structure and tax position.

Customers inevitably have to seek their own legal, accounting and tax advice on such schemes: IBOS’ services respond to what is generally deemed workable by such advisors when set against the background of the many external barriers.