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The 2012 guide to Liquidity Management: Electronics giant centralizes liquidity into regional hub

One of the world’s largest global electronics companies wanted to consolidate its Asia Pacific liquidity position for multiple currencies from multiple entities and countries into its regional treasury centre in Singapore on a daily basis. The company’s goals were to ensure regional visibility of daily liquidity, fund regional daily payment needs and build on its existing structure with minimum disruption to daily business. The use of multiple currencies and multiple accounts for multiple entities – with many different banks – made a solution challenging. Bank of America Merrill Lynch worked with the electronics company to leverage its existing liquidity management structures and layer a multi-currency notional pool on top of the existing structures. This solution combined a hybrid of domestic sweeps, a single currency notional pool, cross-border sweeps and a multi-currency notional pool.

The solution successfully consolidates the company’s Asia Pacific liquidity into its in-house bank. Moreover, it maximizes the yield on surplus daily cash in different currencies in different countries and in different entities and offers real-time visibility on balances.

Bank of America Merrill Lynch’s solution addressed the challenges of managing the cash flow mismatches that result from multiple entities in multiple currencies. An entity makes an ad-hoc local currency payment within the multi-currency notional pool: the Singapore-based treasurer only executes FX conversions periodically to hedge the position. The solution combines two multi-currency notional pools with cross-border sweeps. Liquidity is maintained in each account to meet global working capital requirements in both locations and transparency and reporting for all bank accounts is delivered on a real-time basis.

As a result of the solution, the electronics company has consolidated multiple currencies to achieve a net notional position.

Asia-Pacific liquidity consolidated to in-house bank
Click here for an enlarged version of the illustration 
Source: Bank of America Merrill Lynch
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