Corporates look to cash pooling as rates rise
Rising interest rates have driven demand for more efficient liquidity structures.
As interest rates rise, so do the negative impacts of inefficient bank account and liquidity structures. Cash pooling automatically consolidates cash, decreasing the credit-debit spread that would otherwise be paid on individual accounts. This is driving demand for physical pooling solutions.
We have observed increased demand for notional pooling structures in an increased number of locations
Notional pooling (especially multi-currency) enables corporates to manage currency mismatches while minimizing borrowing costs. However, it is subject to various regulatory and legal conditions and not available in every market.
According to Mariya Tretyak, head of liquidity solutions for corporates at BNP Paribas, the best option for a company will largely depend on its specific liquidity needs, goals and organization – although notional pooling is often coupled to physical pooling where the master accounts of physical cash pools are looped in a notional pool structure.
“While implementing and optimizing physical cash pools remains the main priority for corporates, in recent years we have observed increased demand for notional pooling structures in an increased number of locations,” she says.