Cross-Border Clearing and Settlement (2)
February 22, 2009 – 9:58 amBanks initiating wire transfers in foreign currencies will usually draw on the currency accounts (also called nostro accounts) established with their correspondent banks in the currency centers. If the correspondent bank has no direct relationship with the beneficiary bank, the instructions will pass through a chain of correspondent banks until a mutual relationship with the beneficiary bank is found. Even wire transfers can take five days or more before the credit is received. Specifying value dates and routing of the transfer to limit the number of correspondent banks involved in the process can speed up wire transfers.
 |
If business practice or cultural preferences dictate payment by check, a number of steps can be taken to improve cross-border collections:
-
Request a check drawn on a bank that is a member of the currency clearing system.
-
Have the items deposited directly to an account in the currency center.
-
Collect closer to the customer. Several banks now offer international lockbox-type services (also called intercept points), described later in this chapter.
-
Take advantage of local currency clearing where it is available.
-
Use a cost-benefit analysis to determine when it becomes efficient to require electronic payments.
-
Open an account at the same bank used by large customers, and have checks deposited directly to that account. This will ensure fast credit. Funds can be converted to the base currency and remitted to the concentration account as soon as they become available.
|
Taken From : Essentials of Managing Corporate Cash
