HSBC, for example, said this month that it is relocating staff “from HSBC’s offices from all corners of the globe including Hong Kong, India, Japan, Australia and London” to Singapore to serve clients regional treasury centres” there. HSBC said it is seeing “unprecedented levels of client activity across the region as clients have heightened their focus on treasury and working capital management post the global financial crisis.”
Citibank, too, is expanding its support in Singapore for regional treasury centres. J.P. Morgan also has strong support for regional treasury centres, though it has put it regional operations centre in Hong Kong “since Hong Kong is a leading global financial centre with a well-developed banking infrastructure [and] many companies choose to place their regional treasury headquarters in Hong Kong and use it as a regional hub for liquidity management.”
Treasury Centre Trends
This growth in regional treasury centres and financial institutions’ support for them highlights three trends.
First, companies’ increasing focus on treasury along with their heightened awareness of the need for better liquidity management after their experience during the economic downturn over the past two years has led more companies to take advantage of the benefits regional treasury centres can provide. BMW, for example, expanded its centre in Singapore this year and said “the intention is to benefit from greater economies of scale and to simultaneously instill improved process efficiencies.” Savills told Finance Asia that it set up its regional treasury centre in Hong Kong, focusing initially on cash management through notional pooling, “for compliance, to strengthen our internal controls and manage our cash better.”
A second is that Chinese companies are off-shoring treasury to tap expertise. While much of the growth in regional centres so far has been led by multinationals, Citibank told Singapore’s Today newspaper in April that “a large number of Chinese companies setting up treasury centres” in Singapore has led it to plan to hire hundreds of staff to handle the volume. While capabilities are expanding in China too, more Chinese companies seem to want to tap foreign expertise and also leverage the benefits of an offshore centre.
And third, Hong Kong and Singapore have emerged as the centres of choice for regional treasury centres since they offer advantages in infrastructure and the business environment. Among the key factors companies consider in determining where to set up regional treasury centres, according to Petr Polak from the Swinburne University of Technology in Australia, are bank transaction fees, prices for foreign incoming and outgoing payments, withholding and corporate tax, reporting requirements, rating and currency environment. While HSBC’s Mahesh Kini told China Forum as far back as 2007 that “Singapore has by far the largest number of treasury centres in Asia Pacific,” both Singapore and Hong Kong have strengths in those factors.
Attracting Corporates to the Region
In addition, both markets continue enhance their attractiveness to corporations. Singapore’s Finance and Treasury Centre Incentive provided through the Economic Development Board, for example, offers a concessionary tax rate as well as withholding tax exemption. Its 40 double taxation agreements offer benefits from another perspective. Hong Kong is also enhancing its capabilities. The Hong Kong Monetary Authority project to migrate its various RTGS systems to SWIFTNet, for example, is facilitating “straight-through processing of banks’ overseas payments and enhancing Hong Kong’s status as the payment and settlement hub in the Asia-Pacific region,” according to Peter Wong, convener of the Hong Kong Association of Corporate Treasurers.
As corporations increasingly focus on how to gain better control over cash and raise their efficiency, the trend towards regional centres looks set to continue.
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