From the October Special Report issue of Treasury & Risk magazine

Standardize, Re-engineer, Rationalize

At the heart of SEPA is the removal of barriers and requirements that previously restricted how euro payments and collections, and hence liquidity management, were conducted across the region. With harmonized legislation and payment schemes, SEPA now provides organizations with the flexibility to operate their cash management activities irrespective of the location of their counterparts, standardize their processes and rationalize activities. While some barriers still remain to complete portability of account location, SEPA can facilitate streamlined cash management and more efficient processes.

Karin Flinspach, Citi Treasury and Trade SolutionsPrior to SEPA, domestic payments and collections necessitated accounts to be held within the country of payment while payments were executed in accordance with national rules, standards and time frames. For organizations receiving and initiating payments, these requirements lead to local bank accounts, duplicate processes, varying technical configurations, general inefficiency and cost. SEPA enables clients to hold an account in any SEPA country from which payments can be made to and collections received from the 32 SEPA countries. As a result, clients will in the future hold fewer euro accounts within the SEPA region. To achieve this, organizations will need to assess their existing account profiles and consider a number of implications, including reconciliation and control, central bank reporting, and possible legal and tax implications. This reduction in accounts will in turn help support liquidity optimization, improve working capital and aid centralisation efforts.

Liquidity Optimization

Anupam Sinha, Citi Treasury and Trade SolutionsFor organizations that operate decentralized payments and collections structures, SEPA inherently offers a greater opportunity to rationalize, standardize and centralize. However, centralised organizations can also gain process efficiency benefits and seek further optimization through account rationalization and the use of the new data fields contained in SEPA messages. SEPA messages contain new fields that help facilitate POBO/ROBO activities and the transfer of additional information to beneficiaries. Organizations should assess, for payments and collections, how they can utilize these new fields to increase reconciliation and support in-house bank activities.

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