The Treasurer September 2005

Improving the cash environment is a work in progress

Changing regulations in Europe, market consolidation and advances in technology are all playing a part in altering the shape of the cross-border cash management landscape in Europe.

Both lawmakers and corporates have their roles. A key objective of the European Commission is to create a Single Euro Payments Area (SEPA) for euro payments. The wholly reasonable aim is to make cross-border payments within the region as efficient as domestic payments. Despite advances, recent research suggests that the objective of establishing SEPA by 2010 remains a challenge. Consulting firm Tower Group found that while the goal of unifying payments systems is clear in principle, practical complications remain. The major challenge is gaining buy-in from banks across the European Union that stand to see reductions in revenue and margins earned in providing customers with payment processing services. European banks are likely to be reluctant to invest in the pan-European payment visions without the stick of regulation. But that regulatory mandate can only come from coordination among industry oversight bodies and governmental regulations. It is doubtful those groups will reach the necessary consensus, so the 2010 deadline for harmonisation of European payments looks ambitious.

Treasurers will not be surprised that they cannot rely on bankers, politicians or regulators to achieve improvement in cross-border cash management. As part of the evolving cash environment many corporates are examining techniques such as pooling. From incountry and euro pooling towards global pooling, treasurers are seeing the advantages of gaining more reliable information, which facilitates greater control and directly generates cost savings. Allied to this type of pooling is a move towards other common services such as centralised payments. Such a move cannot be accomplished by the treasurer alone. For such a project to be successful, legal, tax and treasury functions need to work together to avoid any unintended consequences. Whether treasurers opt for pooling, shared service centres or investment in other systems, the point remains that they need to be on watch and be prepared to move swiftly. The job of liquidity management is not a task that can be done once and then left to run on its own. Changing laws and regulations at both national and international level mean that careful and frequent checking is required. However, at a time when many corporates are having to work hard to satisfy the demands of shareholders, such initiatives can play a large part in helping treasurers to ensure that the most is gained from cash resources. It might not be the most glamorous part of the job, but it remains vitally important.


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