1 Multibanking. 2 What is Multibanking? Using many banks for cash management Use one bank as lead cash management bank Use only lead banks electronic.

1

Multibanking

2

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)

3

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

4

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

5

Multibanking

Reporting (cont)

• Bank delivering service not responsible for– Non-delivery– Late delivery– Quality of information

• Lack of privacy?

6

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

7

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

8

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

9

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

10

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

11

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?

12

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

13

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

14

Multibanking Swift Involvement

• MT101’s Credit Beneficiary a/c

MT101

Debit

Customer a/c

Customer

SWIFT

CM Bank

Receiving Bank

Receiving Bank

Local clearing

Local clearing

Beneficiary Bank

Beneficiary Bank

15

Multibanking Swift Involvement

Multibank reporting

Customer

Corporate Electronic

banking system

Multibank reporting

MT940/1/2

MT940/1/2

MT940

MT940/1/2

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

SWIFT Network

16

Multibanking Swift Involvement

Corporate Access to SWIFT

• MA-CUG

Co A

Co B

Co C

SWIFTNet

SWIFTNet

SWIFTNet

SWIFTNet

MACUG Sponsor

Bank

Bank 1

Bank 2

Bank 3

17

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

18

Multibanking Swift Involvement

• So SCORE, Standardised Corporate Environment

Company A

SWIFTNet

SWIFTNet

Bank A

Bank B

Bank C

19

Multibanking Swift Involvement

SCORE

• Company must be listed

• Countries must support FATF

• Companies must comply with corporate governance and reporting requirements

20

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

21

Multibanking Swift Involvement

• So what are cash management benefits?

• Enhanced cash reporting

• Bulk payments processing

• Online payments initiation