Global Cash Management Trends and Solutions

December 2007Itzik CoriatGlobal Transaction Services HeadCiti Israel

                                                   

3

Agenda

Market Forces & Trends

Liquidity & Investments

Electronic Banking & Information Services

Questions

Market Forces & Trends

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Forces Driving Treasury Changes

Forces Trends Outcome

■ Rationalisation of bank relationships and account structures

■ Migration of treasury / financial functions into global treasury centres, in-house banks, shared service centres, and payment factories

■ Focus on integrating transaction management, optimising cash / credit utilisation globally

■ Centralisation of head office control, standardised processes / procedures

■ Centralised audit, regulatory, reporting and internal benchmarking through transactional visibility (SOX, IAS39, FAS133, IFRS)

■ Focus on gaining visibility and control

■ Process / workflow automation to free resource time

■ Leveraging a single ERP platform to apply best practices for automation of payables and receivables management in SSC or Payment Factory structure with a single bank integration point

■ Format standardisation to increase STP and reduce errors / fraud

■ Trading partner integration for better working capital management

■ Real-time actionable information delivery for better decisions

Strateg

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Glo

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Liquidity & Investments

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Pre-TBABank London

Header Account

EUR 100

Bank LondonHeader Account

EUR 150

USD 75 USD 25

Post TBA

Paris

Source

EUR 75

Paris

Source

EUR 0

Target Balancing

Solution whereby credit & debit balances in a single currency are physically moved from a source account to a header account.

Available Domestically, Cross-Border and Cross-Regionally.

Funds move. The source account’s specified target balance is achieved by taking or moving funds from/to the nominated header account.

End of day value dated balances are always swept with good value. Target balancing can take place on a periodic basis.

Interest may be re-allocated if requested.

Madrid

Source

EUR(25)

Madrid

Source

EUR 0

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Automated Target Balancing tools will enable efficient concentration of cash and funding of deficits

Same day value via cross border/cross regional Target Balancing

Intra day or next day via Multi Bank Target Balancing

Statement Files/Message Based Information downloaded to SAP for daily accounting of funds movement

Domestic Bank(s)

MT920 Request for Statement (MT942)

Customer

Define TBA Rules – Source A/C &

Target A/C relationship

Intraday TBAProcessor

MT940 / MT950 End of Day Reporting

MT942 Ad hoc Intraday Report

Communication Methods-Web-based reports-Files-XML Messages

MT101 Request for Transfer

MT103 – Funds Transfer (Concentrating to Target Account)Target Account

MT101 Request for Transfer

MT103 – Funds Transfer (Funding Source Account)

Multi-bank Target Balancing

Follow / Against The Sun Sweep

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Notional Pooling

With notional pooling, the autonomy of the accounts is maintained, while debit and credit balances are offset for interest purposes.

BankAccount 1

+USD 1000

BankAccount 3

+USD 1500

BankAccount 2

-USD 2100

BankAccount 4

-USD 500

BankAccount 5

+USD 400

Without Notional Pooling

With Notional Pooling

Interest = + 40 - 126 + 60 - 30 + 16 = - USD 40

Bank Rates

Credit Interest = 4%, Debit Interest = 6%

Bank Account 1

+USD 1000

BankAccount 2

-USD 2100

Bank Rates

Credit Interest = 4%, Debit Interest = 6%

BankNet Position

+USD 300

Interest earned by pooling accounts = USD 300 x 4% = USD 12

Advantage to customer = USD 12 - (- USD 40) = USD 52

BankAccount 3

+USD 1500

BankAccount 4

-USD 500

BankAccount 5

+USD 400

Single Currency Notional Pooling – Example.

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Optimisation – Multi Currency Notional Pooling

Optimises short term (overnight) cash positions, by notionally pooling balances with London bank , across eligible currencies

Fully automated process applies to full closing balances, so treasury can focus on managing strategic hedging and structural positions

Flexibility to transact in any pooled currency, without FX conversion Integrate with target balancing to maximise cash upstreamed into pool

- EUR 40mn eqv.

+ EUR 20mn eqv. + EUR 60mn eqv.

Available Balance = EUR 40mn equivalent, in any pool CCY

London

xGroup

EUR

Sub D EUR

Sub CEUR

London

x Group

LCY

Sub B LCY

Sub ALCY

London

Individual Currency Pools or TBAs in London

Net Multi Currency Pool Balances

(EUR Equiv)

Net Customer Position

(EUR Equiv)Cross Currency Balance Sheet Set-Off

xGroup GBP

Sub FGBP

Sub EGBP

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Multi-Currency Pooling: Participation

Asia: Australia, Hong Kong, Japan, New Zealand, Singapore, Indonesia*, Philippines***, Taiwan*

EMEA: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany (gmbh), Greece, Hungary, Ireland, Israel*, Italy, Netherlands, Poland, Portugal, Slovakia Spain, Switzerland, Turkey, UK

Americas: Bahamas, Bermuda, Canada (Ontario/Quebec), USA

Currencies (19): USD, EUR, GBP, CHF, NOK, SEK, DKK, CAD, AUD, NZD, JPY, PLN**, CZK**, HUF**, HKD**, SKK** RON**

Positive balances only: ZAR, TRY, SGD**

Approved Jurisdictions

Additionally, on-going legal reviews Slovakia, for which external counsel have advised they expect a favorable outcome.

* FCY only **pilot phase ***FCY not sourced from local currency FX

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Integrating Investments with Liquidity Solutions

Liquidity structures facilitate concentration into a single position, which can be invested in a choice of investments on an automated or active basis:

1. High Interest Yield Account or end-of-day sweep, as per market environment

2. Money market mutual funds via daily automated sweep

3. Time deposits

Automated Investment Solutions

Active Investment Solutions

BankHigh Interest Yield Account (HIYA) or Overnight Sweep

Sub 2 Sub 3 Sub 4

Money Market FundsMoney Market Funds

Time DepositsTime Deposits

1

2 3

Sub 1

Tight integration of investments with global liquidity structures optimizes both cash balances and cash investments

Liquidity structure (TBA or Notional Pool)

to optimise investments

Electronic Banking & Information Services

An Aggregated View

Multi-bank cash and other financial information

Information WarehouseInformation Warehouse

Web Dashboards

Standardized and ad-hoc custom reporting

Data aggregation and normalization

Key Success Factors

Citibank Bank 2 System 1Bank 3 User 1

Metrics Reports Ad Hoc Analytics

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Data Aggregation Solutions

Gaining Visibility into Group Cash Positions

Gaining visibility and control of group cash with actionable data is a critical first step

To enables companies to realize these benefits now without need to build system interfaces with each banking provider

To provides integrated information – the first building block to controlling and optimizing cash

To enables companies to manage risk through improved cash control, forecasting and event notification

To enables more effective working capital management across various entities through provision of real-time actionable information

To enables improved reporting to meet regulatory requirements (e.g. Sarbanes-Oxley)

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Integrated Payments & Collections

Account based payment options, e.g. funds transfers, local cheques, ACH/Giro, direct debit

Non-account based options that provide multi-currency payment capabilities without the need to open multiple accounts in each country

Global solution integrating domestic and cross-border payment &

collection capabilities into a single, standardized and efficient

product offering

Fully FlexibleAdministration

Fully FlexibleAdministrationScaleable, Secure Web portalScaleable, Secure Web portal

Robust, flexible, user-tested platform

Robust, flexible, user-tested platform

Custom Reporting

Custom Reporting

Liquidity Management Views

Liquidity Management Views

Risk Management ViewsRisk Management Views

Integrate with MS

Office

Integrate with MS

Office

AlertsAlerts

State-Of-The-Art Portal Solution

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Questions ?

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Thank you for your time !