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Liquidity Management Strategies Moving towards Integration, Visibility and Agility 流动性管理策略:向集成、可预测性和高效转变 Alvin Poh Head of Liquidity Solutions, Asia Pacific Treasury Services J.P. Morgan
Challenges Faced by Treasurers Today 当今司库面临的几大挑战
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Agility and Scalability
Liquidity Management
Operating Efficiency
Foreign Exchange
Regulatory / Political Landscape
Good grasp of impact to treasury operations due to political developments and regulatory changes
Able to adapt quickly to changes in business models & regulatory landscape, and liquidity model that is scalable as business expands
Have full visibility of cash balance, enhanced forecast capability and an optimal liquidity model
Achieve operating efficiencies with fewer bank accounts and increased automation with reduced headcount
Dynamically manage FX exposure as unreliable rate sources may expose you to unnecessarily FX risk or mispricing in the local currencies
Transformation of Treasury Role
Transition of role from treasury support to business partner to develop business strategies and achieve sales growth
Risk Management Increased focus in risk management as business grows and expand into new countries
Key Market Themes and Implications 几大市场主题及影响
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Rising Rates of the USD
ECB and BoJ to continue to expand balance sheets
Negative interest rates being applied for Euro and Japan
Market Trends Regulatory Development Interest Rate Movement
China – gradual relaxation over cross border flows & internationalization of RMB
Malaysia – new FEA rule states that exporters need to settle domestic payments in MYR, immediately convert 75% of export proceeds into MYR
India – the government demonetized high-value notes to fight “unaccounted” income and counterfeit notes and move to a more cashless economy
(1.0)0.01.02.03.04.05.0
US
ECB
UK
China
Japan
Benchmark Interest Rates
$34 trillion
40% of respondents
Forecasted value of cross-border payments in 2018, up 54% from 20131 leading to increased international payments business to manage globally
Report they have significantly reduced the number of correspondents with whom they carry out cash transactions with over the last five years2
1 Aite Group Cross-Border Payments: Challenges and Trends, 2015 2 Bishopsgate Financials Payments Survey 2016
In 2016 we learnt to expect the unexpected, a surge of regulations, low or decreasing interest rates in key markets, except in the US where the rates are trending up.
Australia
Source: JPM Global Data watch, Factset
Develop an Optimal Level of Cash Buffer & Mobility 确定现金缓冲和流动性的最优水平
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Market fragility witnessed last year is expected to continue with heightened levels of uncertainty. Measures to ensure liquidity is optimized with the “right” buffer is crucial in times of prolonged volatility.
Operating Cash
Reserve Cash
Strategic Cash
Restricted Cash
Analyze trends and ensure data quality to produce accurate cash flow forecasting
Determine optimal level of cash for the business across subsidiaries / regions
Build in cash buffer that can be easily deployed within the firm.
Optimize returns while protecting principal
Treasury action plans
Conduct cash flow analysis to understand the operating liquidity requirements to meet working capital fluctuations
Determine local and regional account requirements and optimal liquidity structure to increase visibility
Adjust existing structures to the target model, including the built-in level of optimal cash buffer
Consolidate accounts and bank relationships where possible and ensure cash can be injected and repatriated as nimbly as possible given the regulatory boundaries
Minimize offshore earnings build-up. Maximize utilization of restricted cash locally
Utilize liquidity solutions to build in mobility and allow for local / regional authority to optimize funds.
Regional Pool A/C
Local A/C Local A/C
Local A/C
Regional Pool A/C
Local A/C Local A/C
Local A/C
Regional Pool A/C
Local A/C Local A/C
Local A/C
Global Pool A/C
Optimal Level of Operating Liquidity
Benchmark Liquidity Structure
Key Liquidity Management Toolbox 流动性管理主要工具
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Challenge Liquidity Management Products Key Benefits
Multiple local banking relationships
Centrally control cash without interrupting local operations & banking relationship
Reduce local bank counterparty exposure
Minimize manual operations
Uneven cash balance across accounts of the
same currency
Manage cash against target balances, automate centralized balance management
Automate sweeps based on pre-defined parameters
Single consolidated cash position
Reduce overdraft costs
Unused idle balances on local currency accounts
Automatically swap balances from non-functional currencies to functional currency
Centralize control and automate booking of FX
Reduce exposure to low, negative yielding or volatile currency
De-centralized cash management across multiple currencies
Achieve benefits of cash concentration without FX swap
Increase natural FX hedge
Enhance deployment of group cash
Gain visibility and control, while entities retain operation autonomy
Single Currency Sweep
Cross Currency Sweep
Multi Bank Sweep
Notional Pool
Leverage Treasury Solutions to Stay Agile and Improve FX Efficiencies 利用头寸解决方案保持应变能力,提高外汇交易效率
5 * Please reach out to your J.P. Morgan representative for applicable currencies and geographies.
‘Just-in-Time’ Funding
LCY*
USD Functional currency
Payment currency
Automated funding of transaction only when needed
Cross-currency Sweeping
LCY*
USD Functional currency
Collection and payment currency
Automated sweep based on target or zero balances
ACCESS FX
THB
USD
TWD HKD
GBP VND
KWR
RMB EUR
Low volume x-currency payments
Minimize restricted country trapped cash Maximize functional currency liquidity Eliminate FCY bank accounts
Flexible, modular solutions to holistically address your treasury challenges and stay agile in today’s market conditions
Traditionally solutions such as cash concentration, pooling and multi bank sweeps were implemented to help increase visibility and control of liquidity across the region
As cross currency needs have grown and regulatory considerations have increased along with demand for automation across our clients new innovative solutions have been added to complement the existing options
Automate Cash Deployment via Just-in-Time Funding 通过资金实时拨付实现现金配置自动化
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Common Challenges
Manual process to forecast funding requirements of accounts in different countries and currencies, and fund transfer
Need to be mindful of the cross currency FX cut off time
Process flow 1) Submit payment files to J.P. Morgan for processing
2) At designated time J.P. Morgan automatically checks for funding needs based on payment file received and will fund based on pre-determined parameters
3) J.P. Morgan automatically books and settles FX trades, and funds the payment account on value date
4) The payments are processed on value date
5) Automated same-day reporting available
Fully automated funding
Client
Client payments processed
1
2
3
Beneficiary-2
Beneficiary-1 4
J. P. Morgan Just-in-Time Funding – Automated sweep with embedded currency conversion
5
Efficiently Convert and Centralize Balances via Cross Currency Sweep 通过自动外汇交易实现高效货币兑换和余额集中管理
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Common Challenges
J. P. Morgan Cross-Currency Sweeps – Automated sweep with embedded currency conversion
Accuracy of forecasting incoming volumes resulting in unplanned excess balances Increased manual effort for treasury to manage excess cash balances Prolonged negative interest rate environment that could incur additional costs
Benefits Simplify account structure and consolidate duplicate bank accounts
Scalable and flexible to meet changes in your business model
Fully automated solution with online reporting
Visibility and control over FX rates and spreads
Configurable solution giving maximum control
Choose from range of currencies including but not limited to G101
Pre-agreed timing of sweeps
Zero or Target balance settings
Minimum and maximum limits available for the sweep
Online / Host to Host and SWIFT reporting options
Illustrative
Excess balances maintained in preferred currency
EUR Account USD Account 3
Online reporting is available
2
Incoming transactions
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Automatically move and convert balances from an account in one currency to an
account in another currency
4
1 The exact number of payment currencies may vary by branch location
Gain FX Rate Transparency and Improve FX pricing 提高汇率透明度、优化外汇定价
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FX Rate Visibility FX Pricing Optimization Process Improvement
Make payment decisions effectively
Input minimal payment details
View indicative rates*
Pricing engine delivers refreshed rate every 30 seconds
Leverage streaming rates that are live for two minutes for up front contracting needs
The indicative rate* displayed reflects the client pricing and is consistent with the spread applied to existing FX payments
Gain pricing benefits Aggregated FX Pricing
− Group together multiple payments of the same currency pair for execution at the same time
− FX rate determined by the aggregate notional value of the transactions
Netted FX transactions − Net same currency pairs executed
at the same time to minimize unnecessary FX purchase***
Simplify reconciliation
See your final FX rate at the time of payment release**
Know the exact debit and credit value of your transactions
For payments executed at the same time receive a consistent FX rate for same currency pair transactions
Knowledge of applied FX rate** at time of transaction execution results in expedited reconciliation
* Availability of online rates is subject to local regulatory approval in each country. The rate at which the FX transaction will be executed may differ from the indicative rate displayed. You should not regard any indicative rate provided to be an offer to enter into an FX transaction at that rate.
** The applicable foreign exchange rate determined by J.P. Morgan includes a profit to J.P. Morgan (or its affiliates) and an additional spread, and may include other fees. *** FX spread will be applied based off the netted amount. In limited circumstances, this may result in the application of a higher spread to the netted amount.
Applied Intelligence
Purchase Power Simplification
Get Rate
Enhanced Visibility & Data Analytics Capability via J.P. Morgan ACCESS® InsightSM
通过摩根大通ACCESS® InsightSM 提高清晰度和数据分析能力
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J.P. Morgan ACCESS® InsightSM makes the process more efficient, flexible and accurate.
Key features Create a customized worksheet that can be automatically populated with your bank account data, or use data extract definitions to populate your
existing spreadsheet
Refresh balance, transaction and payment/receipt data – including multibank – whenever you choose, for greater accuracy and control
View balance, transaction and payment/receipt detail directly from your spreadsheet making further research fast and easy
Save historical data to analyze your cash flow trends
Benefits Minimize access to multiple bank portal online and retrieve bank
balance Improve operation efficiency with automated update of bank
balances
Case Study: Follow the Sun Liquidity Structure & Cash Concentration at In-House Bank (IHB) 案例研究: 全天候流动性架构与内部银行(IHB)资金归集
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Key client’s challenges J.P. Morgan solution:
3 separate treasury centres globally, with de-centralized cash management, resulting in low visibility of global cash position
Large number of bank accounts across 30 different banks and no proper counterparty risk control
Manual processes for funding, sweeping, foreign exchange and investment transfers
Client wanted to simplify banking structure, reduce accounts & concentrate cash at In-house bank
Separate cash concentration structure in the respective region that enables maximum cash concentration and full visibility globally, but with minimal disruption to local entities’ operations
J.P. Morgan implemented a streamlined account structure: ̶ In-country collections & payments to benefit from local clearing ̶ Multibank sweep for countries that need to maintain 3rd party banks ̶ Multicurrency notional pool in Singapore & London, and physical cash
concentration in New York (global master account in New York)
J.P. Morgan New York
J.P. Morgan Singapore
J.P. Morgan In Country AU Co
AUD SG Co SGD
AU Co AUD
SG Co SGD
IHB USD
HK Co HKD
HK Co HKD
J.P. Morgan London
UK Co GBP
DE Co EUR
IHB USD
CH Co CHF
IHB USD
JP Co JPY
JP Co JPY
UK Co GBP
DE Co EUR
CH Co CHF
NO Co NOK
3rd party Banks NO Co NOK
JP Co JPY
AU Co USD
SG Co USD
HK Co USD
JP Co USD
UK Co USD
DE Co USD
CH Co USD
NO Co USD
Legend In-House bank a/c (J.P. Morgan) Operating a/c (J.P. Morgan) Operating a/c (3rd party banks) Collections & payments Automated sweep (J.P. Morgan) Multibank sweep Multicurrency Notional Pool Physical cash concentration
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