RBS: Seize the Day – Phillip Lindow
The idea that cash is king isn't new, but that doesn't stop banks developing resourceful ways to free it up every year. Phillip Lindow of RBS tells FDE about two trends facing finance managers: cash mobility and cross-currency pools.
Liquidity and its related issues will never be far from the thoughts of many financial directors. When adopting liquidity management solutions, the average financial director might be tempted to fall back on tried and tested approaches to tackle the problem.
But Phillip Lindow is not your average money man. As the head of international liquidity and investment management at RBS Global Transaction Services he has overseen the implementation of the bank's liquidity solutions for hundreds of clients, endeavouring to recycle their internal cash in brighter, slicker ways.
He also understands the challenges that treasurers face, the minimal resources available and the search for increasingly sophisticated methods of cash concentration.
"When the credit crisis first hit, cash pooling took off like you wouldn't believe," Lindow recalls. "But I think it's always been important. The crisis just highlighted the processes and encouraged people to take control of their cash."
Post-crisis, he says, companies have directed as much cash as they can into centralised solutions. Treasurers no longer instinctively apply tried and tested cash concentration tools, but are curious about new approaches to draining regional cash traps.
The latest drivers in liquidity management are increasing access, managing risk and optimising global daily transactions.
"What we've seen is a move away from end-of-day liquidity situations, to looking more at intraday solutions," Lindow says. "Clients are asking if they will be able to mobilise their cash to where it needs to go during the day."
Some clients face gruelling daily cycles. For instance, a corporate might have access to cash in the US in the morning and need to use it immediately for late day payments in Europe. RBS strives to develop global liquidity and investment solutions that enable the client to sweep cash from all its banking partners, take advantage of safer investment vehicles and provide ready access to cash.
Bold sweeps
Liquidity, as Lindow points out, is nothing without access. At RBS, a legacy of innovation and leadership in the field of global treasury has led the bank to develop tools for fully automated, end-of-day intra and cross-regional sweeping.
The search for liquidity solutions is relentless and the cash question inspires new thinking every month. Lindow highlights how RBS has extended its cross-border cash concentration services to more markets around the world as one example of a recent RBS product development. Cross-currency pooling has already been recognised as a tool for increasing operational efficiency in multi-currency liquidity systems.
Cross-currency notional pooling uses the same methods as single currency notional pooling but throws in new factors: exchange and interest rates combine to optimise interest on multi-national balances thanks to the offset in debit and credit balances between different currencies.
One example of RBS setting up an internal bank for a treasury function is its long-standing client Grupo Antolin. The multinational auto parts supplier, which works in 18 countries, wanted to introduce a single, fully-automated solution for its operating companies that could accommodate euros, sterling and US dollars, as well as other currencies.
RBS phased in two major changes: the implementation of a cross-border pooling solution for the Eurozone, and the expansion of the euro pool through the adoption of automated global and cross-currency cash pools. Operating companies in Europe and the US manage their payments and receipts locally. Resulting balances in Europe and the US are then automatically swept to a cross-currency pool. Local transactions are more efficient and cost-effective, and cross-currency pooling reduces the need for FX activity.
One thing about liquidity management that never changes is the need for expertise. No matter how old the subject, or how new the innovation, a banking partner with experience in cash concentration knows how to find the specifics of every new case. RBS has a global team of liquidity advisors, and dedicated specialists in financial centres that can offer support to those looking for bespoke cash concentration solutions.
