Key takeaways from the Asia Treasurers’ Peer Group fall meetings sponsored by Standard Chartered.
By Joseph Neu
India ties current accounts closer to credit relationships. Members wanted clarity on a Reserve Bank of India (RBI) circular released over the summer that seeks to restrict current accounts to banks with which companies have a local credit relationship—subject to thresholds.
- Standard Chartered’s presentation explained that going forward, banks cannot open a current account for a customer who has “availed” a cash credit or overdraft facility from others in the banking system. From now on, all transactions will have to be routed through the cash credit or overdraft account.
- The good news, for some banks and corporates, is that the RBI this week extended the deadline for compliance with this part of the guidelines, from Nov. 5 to Dec. 15, 2020.
- The RBI said it had been contacted by “banks seeking clarifications on operational issues regarding maintenance of current accounts already opened by the banks. These references are being examined by the Reserve Bank and will be clarified separately by means of a FAQ.”
- The stated objective of the circular is improved transparency on client cash flows, but it also seems like an attempt to help banks in India maintain liquidity and share of wallet by tying assets to liabilities. In this crisis, visibility over liquidity is important to everyone.
All entity cash visibility and access. Indeed, MNC regional treasurers in Asia have been focused on cash visibility, including better forecasting, just like everyone else.
- The regional treasury focus, however, is much more at the entity level in each country of the region and involves looking at liquidity as seen by their parent at headquarters. More than ever, there has been a focus on upstreaming liquidity and tweaking the cash plumbing to maximize assurance that the ability to upstream will remain.
- Covid-19 and its economic impact have been a big driver, plus US MNCs have the added incentive to repatriate cash ahead of potential tax changes with a changing of the guard in Washington.
China bank scenario planning. Speaking of access and cash plumbing, another project members shared is looking at the potential for US-China tensions to result in sanctions or other formal and informal restrictions on banking operations in China.
- This is especially important when it involves US or other international banks that MNCs rely on for transaction banking in China and cross-border.
- It’s time for some to evaluate the pros and cons of shifting business to a local bank from a US or international one.
- While adverse scenarios impacting treasury operations are deemed unlikely, having a contingency plan is always better than not.