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Getting the Most out of Your Cash

Managing corporate liquidity has never been more challenging, either for cash-rich companies facing low interest rates or for smaller companies looking to finance growth.

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Corporate liquidity managers are under more pressure than ever before, and not just those who wish to borrow. In fact, nowadays, treasurers grappling with how to manage excess liquidity face a host of challenges, not least of which are divergences in monetary policies and regulatory approaches.

Low interest rates mean companies hoping to earn a substantial return on excess cash can no longer rely on leaving it in overnight deposits. Indeed, with some central banks taking their rates into negative territory, bank deposits might actually cost a company money. In addition, the impact of financial regulations, such as Basel III, on banks’ treatment of different kinds of corporate deposits further complicates the question of what to do with excess liquidity. The combined effect of these major—and, to a large extent, global—forces has overturned many of the old rules for corporate treasurers, forcing them to seek a new approach.

Yet there are new strategies and solutions that may assist treasurers in their quest to optimize their company’s liquidity management even in these pressurized times. To start with, the current challenges call for a more collaborative relationship between banks and corporates than merely that of customer and provider.

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