Multibanking

Multibanking

What is Multibanking? Using many banks for cash management Use one bank as lead cash management bank Use only lead banks electronic banking All banks report balance and transactions into lead bank (using MT940s) Lead bank passes on information in standard format Use lead banks EB system to initiate payment instructions to all banks (MT101,198 or 103)
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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
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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
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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
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Multibanking
Problems with multibanking - payments Standard bank to bank message (MT103)
Auto processing? Designed to debit sending banks 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
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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
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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
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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?
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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

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Multibanking Swift Involvement

SWIFTNet SWIFTS 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

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Multibanking Swift Involvement

MT101s
Custome r

Credit Beneficiary a/c

CM Bank Beneficiar y Bank

MT101

SWIFT

Debit Customer a/c

Receiving Bank

Local clearing
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Multibanking Swift Involvement

Multibank reporting
Customer

Corporate Electronic banking system

Multibank reporting MT940/1/2 Lead CM Bank

MT940/1/2

SWIFT Networ k

MT940

Lead banks own customer a/cs In country

A/cs at other banks In country and o/s

MT940/1/2 A/cs at own branches o/s

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Multibanking Swift Involvement

Corporate Access to SWIFT MA-CUG
Co A Bank 1

Co B

SWIFTNe t

MACUG Sponsor Bank

SWIFTNe t

Bank 2

Co C

Bank 3
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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

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Multibanking Swift Involvement

So SCORE, Standardised Corporate Environment
Bank A

Company A

SWIFTNe t

Bank B

Bank C

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Multibanking Swift Involvement

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

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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
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Multibanking Swift Involvement

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

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