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Treasury

Cash management: Value dating

While regulatory pressures are having huge repercussions for costs in the cash management industry, some argue that they are causing such disruption that fundamental tenets such as value dating need to be re-examined.

"There is increasing discussion within the industry about whether or not value dating is as relevant as it once was, given new compliance requirements that can add delays in payment execution," says Michael Gallagher, head of payments and cash management for North America and global head of FI payments and e-clearing at HSBC.

Payments are being stopped in queues for review so that banks can reconfirm they are appropriate. Clarification can at times take days to complete. "The question asked is, if a payment stops in an Office of Foreign Assets Control filter and is delayed beyond a day or two, what is the practical impact of a value date? There need to be industry standards regarding expectations of the deliverability of payments," says Gallagher. Given low interest rates at present this might not seem important but when rates rise it could become so in considering how values should be adjusted if payments are delayed, he adds.

Inevitably, not everyone in the industry agrees that the issue of value dating should be raised. "There is no appetite from corporate clients for changes to value-dating practices as they stand – they wouldn’t accept it," says Tom Isaac, global head of financial institutions client sales management for intermediaries at Citi.

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