Sibos 2015: Treasury management practices in Asia

Corporates in Asia often use a hybrid approach for treasury management, J.P. Morgan Head of Treasury Services Asia Pacific Dianne Challenor said, because local regulatory requirements and restricted currencies around the region make a single approach more challenging. Corporates are increasingly setting up regional treasury centers (RTC) in Singapore or Hong Kong, and more are establishing in-house banks (IHB). While companies have also set up shared service centers, more available talent and increased costs are leading companies to set up centers of excellence in Asia to support their global operations.

As one example of actual corporate practices, British American Tobacco Finance Lead Nicholas Soon said his firm migrated treasury dealing and the back office to Singapore starting in 2004. It has since set up financial services centers in Costa Rica, Romania and Malaysia, and it established consolidated treasury service centers in London and Romania.

In China, SinoTrans CFO Bilie Huang said his firm has been working on centralizing treasury since the 1990s. Centralized treasury in Beijing and an RTC in Hong Kong enable the firm to pool funds, manage risk better, monitor cash flows, and raise money within the corporation. The benefits of an in-house bank, Huang said, are risk management, pooling and using the structure as a tool for financial service innovation.

While regulatory restrictions currently preclude his firm from opening accounts with Alipay and paying clients, Huang said his firm is ready to use Alipay once regulations change. Responding to the challenge, Challenor said banks offer security and privacy as well as global support and an understanding of local requirements.

Comparing Hong Kong and Singapore as locations for treasury management, Maybank Transaction Banking Group Head John Wong said there is a stark difference in tax structures and economic policies. Hong Kong is a free market economy with more relaxed regulations, while Singapore is more government-driven and has a lower tax structure as well as a more sophisticated financial center. Challenor added that global MNCs continue to pay for expertise in Hong Kong and Singapore while moving operational functions into other countries.

Providing insights into the practicalities of setting up an IHB, Soon said BAT uses three IHBs to deal with different time zones. The firm has reduced about 60 SAP instances to 8, increased efficiencies with standardized processes and has improved cash visibility. The biggest challenges a corporate faces in setting up an IHB, Wong added, are the power struggle over who has funds and the actual structure of the IHB.

Rounding off the session with nuggets of advice, the panelists said corporates should start by defining their true needs, then get the technology and be bold in implementation. While they agreed that centralization is a journey, Wong very importantly noted that treasurers often get promoted after they set up an IHB.

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