Enhancing Cash Pooling for Effective Liquidity Management in Corporate Banking (Analyst Insight)

Overview 1
Catalyst 1
Summary 1
Table of Contents 2
Table of figures 3
Analysis 4
Cash and liquidity management has become the key focus for corporate banks in the downturn 4
Cash management has shifted from a relationship loss leader to a core revenue growth engine 5
Cash management, and within this liquidity management, is the top requirement from corporate treasuries 6
Corporates' cash management need has shifted to the receivables side in downturn 7
Ensuring cash liquidity, rather than return on surplus cash, is the top liquidity management requirement 8
Banks need to offer more sophisticated cash pooling to remain competitive 9
Cash concentration, a physical form of cash pooling, is already well-developed within domestic markets 9
Notional pooling, a more tax-friendly form of virtual pooling, has been the main area of innovation 10
The financial crisis has accelerated demand for cross-border cash pooling, turning interest into action 10
Increasing corporate treasury centralization makes cross-border cash pooling a necessity 11
Local regulations present barriers to cross-border pooling, but treasuries are looking to overcome these 11
Pooling benefits to banks are strongest in customer retention and acquisition rather than top-line growth 12
The next phase of cash management innovation will be focused on multi-bank cash pooling services 13
Cross-border cash pooling has been driven by top-tier banks, but will become essential for the second tier 13
Effective cash pooling requires flexible fee capability, product breadth and strong client connectivity 14
Cross-border, multi-bank service needs to support an array of pooling products with high automation 14
Banks need to incorporate flexible fee-charging structures to cover costs and support acquisitions 15
Recommendations 16
Vendors should bring offerings to market as soon as possible given the rush to enter this space 16
Bank-to-client back-office integration offers a potential opportunity for vendors 16
APPENDIX 17
Definitions 17
Further reading 17
Ask the analyst 17
Datamonitor consulting 17
Disclaimer 17
List of Figures
Figure 1: Banking services demanded by corporate treasuries for primary and secondary banks 6
Figure 2: Main liquidity management product/service types 8
Figure 3: Corporate banks are focused on enhancing their capabilities to handle global clients 12
Figure 4: Main types of pooling approaches required in global cross-border cash pooling 15