The benefits of using nonresident and resident accounts in a cash pool.
Ears perked up at a NeuGroup meeting of treasurers sponsored by UniCredit when the bank described an international cash pooling product to improve an MNC’s liquidity management in Russia while ensuring compliance with the local legal and regulatory constraints. Here are highlights:
- UniCredit owns the largest foreign-owned bank in Russia and the solution gives clients the ability to manage RUB liquidity via a nonresident account as part of a cash pooling setup, providing maximum control over liquidity in Russia.
- The parent company opens the nonresident account with UniCredit Russia, which is incorporated into the pool. “The pool is the way to establish a connection between the resident or subsidiary account and nonresident or parent company account,” one banker explained.
- There are no limitations on the parent’s use of the nonresident account, which is not subject to Russian currency control legislation.
- This structure will help facilitate intercompany financing, the underlying basis for transactions within the pool, from the parent to its Russian subsidiary.
- The bank has a legal opinion confirming its cash pooling product is fully compliant with current Russian legislation.
- In an alternative funding solution, the nonresident account can be funded by the offshore parent by entering into a swap arrangement (USD/RUB) with UniCredit. The parent funds in USD and swaps with UniCredit, which sends rubles to the nonresident account. The swap ensures there is no ruble FX exposure; offshore USD cash flows avoid the risk of trapped cash; and the ruble funding level achieved is often more attractive than a local ruble loan.
“I found the UniCredit Russia presentation very interesting,” the treasurer of a large pharmaceutical company said. “It seems an efficient way to address exchange exposure and surplus cash in Russia.”
