Multibanking

Multibanking What is Multibanking? Using many banks for cash management Use one bank as lead cash management bank Use only lead bank’s electronic banking All banks report balance and transactions into lead bank (using MT940s) Lead bank passes on information in standard format Use lead bank’s EB system to initiate payment instructions to all banks (MT101,198 or 103)

Multibanking Advantages of Multibanking Able to use the best bank in each country for local cash management needs Only one EB system to manage all bank accounts Lower systems/software costs May use best EB system or use third party system

Multibanking Problems with multibanking - Reporting MT940 is an end of day message Normally only one transmission available per day Intra-day reporting can be difficult or impossible on a multibank basis Most banks are able to do intra-day updates internally (MT941 942) but cannot send to other banks

Multibanking Reporting (cont) Bank delivering service not responsible for Non-delivery Late delivery Quality of information Lack of privacy?

Multibanking Problems with multibanking - reporting Some banks will not cooperate Extra cost – paying two banks for information Some banks cannot report via MT940s At all (a few) Automatically To a good standard May be better off buying independent software Poll parser May get intra-day or real-time information

Multibanking Problems with multibanking – payments Paying two banks to make a payment Need bilateral agreements in place Liability issues. There may be a lack of clarity as to whom is responsible Logically Morally legally

Multibanking Problems with multibanking - payments Standard bank to bank message (MT103) Auto processing? Designed to debit sending bank’s nostro account MT198 message Old standard few banks can auto process MT 101 Newer standard – not all banks can handle fully automated Automated triggering of MT 101s based on MT940 series

Multibanking Problems with multibanking – Payments In some banks means all payments received Fall into repair queue Processed with manual intervention Subject to delays- missed cut-offs Subject to input errors? Cost more to process than an auto payment

Multibanking Multibanking – payments Not suitable for treasury settlements with manual intervention Is it good enough for third party payments No end to end authentication No confirmation of execution Often no ‘non-urgent’ option

Multibanking Problems with multibanking – payments Who do we call when it goes wrong? Who sorts it out? Who pays the compensation What is covered in the service level agreement with lead bank? What documentation will need to be signed Who is legally liable for what?

Multibanking Swift Involvement Caveat – not all banks are members of SWIFT Not all banks can send and receive all message types (e.g. MT942) Message standards not always applied in a consistent manner

Multibanking Swift Involvement SWIFTNet – SWIFT’S Internet Protocol based platform. Secure and interactive Messaging consists of SWIFTNet Fin, store and forward SWIFTNet Fin Copy, clearing and settlement SWIFTNet InterACT, real time message exchange SWIFTNet FileACT, bulk messages SWIFTNet Browse, e.g. correspondent banks may look at their Nostro a/cs

Multibanking Swift Involvement MT101’s Credit Beneficiary a/c MT101 Debit Customer a/c Customer CM Bank Beneficiary Bank SWIFT Local clearing Receiving Bank

Multibanking Swift Involvement Multibank reporting Customer Corporate Electronic banking system Multibank reporting MT940/1/2 MT940 Lead bank’s own customer A/cs at other banks A/cs at own a/cs In country In country and o/s branches o/s Lead CM Bank SWIFT Network

Multibanking Swift Involvement Corporate Access to SWIFT MA-CUG Bank 1 Co A MACUG Sponsor Bank SWIFTNet Co B Bank 2 SWIFTNet Bank 3 Co C

Multibanking Swift Involvement But a company may need to join multiple MA-CUGs to cover all its banking needs Have been criticised as being High cost Administratively cumbersome Preserves a restrictive, proprietary relationship

Multibanking Swift Involvement So SCORE, Standardised Corporate Environment Bank A Bank B SWIFTNet Company A Bank C

Multibanking Swift Involvement SCORE Company must be listed Countries must support FATF Companies must comply with corporate governance and reporting requirements

Multibanking Swift Involvement Benefits for Corporates Co can use SWIFT secure network MA-CUG membership improves STP Rationalised infrastructure 24/7 availability SWIFTNet may be used as standard for bank communications Browsing for intra-day leads to better global liquidity management

Multibanking Swift Involvement So what are cash management benefits? Enhanced cash reporting Bulk payments processing Online payments initiation