Basic International Cash Management Tools (2)
June 14, 2009 – 2:46 amIt is important that users’ expectations be realistic as to what a global balance report can provide.
In the past, in order to be able to initiate transfers, a company had to subscribe to the proprietary electronic banking platforms of all their banks. These multiple subscriptions were not always convenient and posed additional access-security risks for the company. The SWIFT MT 101 message (see Appendix C) provides a solution by allowing a chosen “host” electronic banking platform to act as the conduit to transmit wire transfer messages to other banks.
The MT 101 is a message sent through an initial bank but destined for action by another financial institution. It can be used not only to pay funds but also to defund an account and consolidate balances with the concentration bank. Exhibit 7.2 illustrates how the MT 101 works, enabling a single electronic platform to manage an entire banking structure.
In the Real World: Bilateral Agreements
The MT 101 message type will prove to be very beneficial to treasurers. However, before it can be implemented, an agreement has to be in place between the customer and the “host” bank, and the host bank must also have executed a bilateral agreement (known as a bilat) with all the prospective recipient banks. The bilats are important because they define responsibilities and service levels between the parties. Some banks are even insisting on bilats with their own branches. Over the last few years, the major banks have been steadily increasing the number of bilats that are in place. A corporate customer with banking arrangements not covered by the existing agreements will have to wait until a new bilat Is negotiated, which can require considerable time.
Taken From : Essentials of Managing Corporate Cash
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