UniCredit and Webasto: Cash Pooling Unlocks Liquidity - Markus Meissner and Andreas Weindel

Cash pooling in the euro area and beyond is proving increasingly attractive to large corporates even in an economic downturn. In fact, according to Markus Meissner from UniCredit Group and Andreas Weindel from Webasto AG, cross border cash pooling is the key to liquidity management.

The last year has taught everyone that markets can change suddenly, but no matter how the global economic landscape changes, the appetite amongst multinationals for cash pooling persists.

Corporates need liquidity, but also want a clearer view of risk. They want banking partners that can deliver the necessary risk management.

‘Risk mitigation plays a more important role than in the past. Corporates with lower ratings face higher funding spreads, and funding will be more difficult in the future. So, cash pooling is more interesting than traditional corporate finance,’ says Markus Meissner, head of Cash Management Sales Germany for the UniCredit Group (UniCredit).

‘In these challenging times companies should look internally. They will find that cash pooling is the cheapest option. In fact, they can benefit from collecting cash from all over the world,’ agrees Andreas Weindel, head of Corporate Treasury for Webasto AG, an innovative supplier to the automotive industry.

UniCredit's main cash pooling product is zero balancing, where aggregated balances are physically transferred from predefined subaccounts to concentration accounts, without losses of original value dates. In the past this has been valuable for managing interest rate exposure but now companies realise that it can be an important source of liquidity.

‘Some companies are still using expensive overdrafts facilities, then make conservative investments to ensure banks don’t cut their overdrafts. Cash pooling is much cheaper. Some large companies have done cash pooling for years in larger subsidiaries. Now, we will see smaller subsidiaries taking part,’ says Meissner.

Working with Webasto AG

UniCredit has implemented zero balancing across several countries for enterprises like Webasto, which has taken full advantage of the service.

‘Cash pooling is a top priority for every large corporate and should be supported by a centralised treasury department. The basis of the predefined pooling structure should be a strict bank policy, in order to have full visibility and control of the bank accounts of all subsidiaries. Without such a policy there is a risk of subsidiaries withholding cash outside of the pooling structure,’ says Weindel.

A company's first choice of international cash management should be cash concentration like UniCredit's zero balancing rather than by debt capital.

Webasto also uses physical rather than non-physical or notional pooling. Physical pooling sees credits transferred to the master account if there is a credit balance, or funds sent from the master account if there is a debit.

‘Notional pooling was a procedure for companies that were cash rich, wanted to optimise their interest position and had to consider tax and legal restrictions. Now, physical pooling as a financing instrument is more helpful, as it impacts liquidity directly, which is the correct approach in the financial crises,’ notes Weindel.

Cross border cash pooling coverage has evolved to include a greater number of countries from outside the euro area.

‘Soon UniCredit will be able to pool the euro from Russia by implementing a Russian euro account into a zero balancing structure within the UniCredit Group. That could have a huge impact when companies are able to get liquidity out of Russia. But the euro area is important, too,’ explains Meissner.

UniCredit is a strong player in the euro area and has an extensive international network to include tax issues in each jurisdiction, which is a key factor for realising crossborder pooling as an efficient funding instrument in markets where you still face legal restrictions.

In countries where UniCredit doesn't have subsidiaries but wants to support customers with cash management products, they work with partner banks of the IBOS association.

‘You must have a service provider that knows what a multinational company needs, but you must also have local services and knowledge,’ says Weindel.

UniCredit can offer such local products and support backed by global banking capability.

Markus Meissner Markus Meissner, head of Cash Management Sales Germany for the UniCredit Group.
Andreas Weindel Andreas Weindel, head of Corporate Treasury for Webasto AG.