Tag Archive for: treasury

What is the cloud based system WalletSizing?

13-9-2019 | Vallstein |

What is WalletSizing?

WalletSizing® is a system in the cloud focused on giving full transparency to corporates on their spending and profitability for banks. All their banks globally, regardless of the number of banks and the type of products, varying from Fx, Cash Management, bonds, lending or asset management. Vallstein takes in all data a corporate has available on the products and invoices from the bank in an innovative easy way for the corporate where they do not need to do much with the data. Vallstein translates, maps and upload it into the system after which the corporate has all insight in their banking landscape and can do easy analysis with all the features the system offers.

What distinguishes WalletSizing® from its competitors?

Firstly, WalletSizing® looks at the entire bank relationship, across all product areas, not just transaction services or credit, but everything that is being used from all banks that maintain a relationship with the client concerned. Secondly, Vallstein takes an explicit view through the eyes of the bank on the relationship, taking all relevant Basel III /IV regulation into account. This kind of transparency is absolutely essential to identify the real room to negotiate and ensure terms and conditions that are truly fair for both sides of the table. Thirdly: technology. Vallstein provides analysis for clients maintaining multiple bank relationships across a multitude of countries with many different banking products, which is impossible to build and let alone maintain in spreadsheets.

ROS Calculation 2

 

Who will benefit from using this system?

CFO’s and Treasurers will benefit by having full transparency in the bank relationships and as a result they will have more meaningful bank reviews, RFP’s and Negotiations. Depending on the objectives a corporate has, it will allow them to be fair in their distribution of business towards banks, limit the number of banks used globally or keep banks costs in line with market practice as will be indicated by the system’s benchmarking capabilities. Where cost saving was an objective, corporates saved 26% on their bank costs on average, across the entire relationship, all products.

About Vallstein
Vallstein is the leading provider of Bank Relationship Management (BRM) solutions with a simple mission: no more black box but instead provide the full transparency that enables development of long term sustainable banking relationships.
Founded in 2000, Vallstein has a multinational team of experts dedicated to developing and implementing cutting edge financial technology solutions to help corporations constantly improve their BRM.
Having calculated and analyzed thousands of Wallets over 18 years, Vallstein brings together a unique combination of big data, innovation, analytical capabilities and banking knowledge. This provides the best practice in the optimization of bank relationships.

Do you want to make better decisions through real-time reporting?

| 05-09-2019 | TIS |

BETTER DECISIONS THROUGH REAL-TIME REPORTING:
BUSINESS INTELLIGENCE ABOUT CASH FLOWS & CASH POSITIONS

How do strategic professionals decide on the best path to success for their company? The key is in transparency and real-time reporting across company-wide cashflow and liquidity levels, bank, customer and supplier relations and working capital. When cashflow visibility is the lifeblood of your company, you want full control and knowledge. Direct access to insights on profitability and potential business risks allow users to drive better decisions based on solid business intelligence, accessible anytime and anywhere.

SCENARIO
BETTER DECISIONS: Companies now have the power of the Business Discovery Manager – a business intelligence module within the TIS cloud platform. Supplier, salary and treasury payments can be easily analyzed along with cash flows, liquidity and working capital via easy-to-use dashboards and reports. The tool, enhanced through state-of-the-art BI technology, enables users to access all strategic insights in a single, flexible, web-based and multi-bank, multi-ERP capable platform available 24 hours a day from anywhere in the world.

 

DOWNLOAD THE COMPLETE FACTSHEET HERE

 

About TIS
TIS (Treasury Intelligence Solutions GmbH) is the leading cloud platform for managing corporate payments, liquidity and bank relationships worldwide. The company delivers SMART PAYMENTS to help customers make BETTER DECISIONS.

TIS enables companies to make more efficient, more secure and more cost-effective payment transactions. In addition, TIS enables customers to make better decisions when analysing financial and operational performance based on real-time payment flows. All mission-critical processes related to payment transactions are integrated into a multibank-capable, audit-proof cloud platform. This is a single point of contact for enterprise customers when managing and analysing their payment flows across the organisation. TIS take care of managing various payment formats, communication channels with banks, and ERP-agnostic integration. Offered as Software as a Service (SaaS), the ISO certified TIS solutions are quickly up and running without the complexity and cost of a long IT project.

 

 

Why Steven decided to explore the World of Treasury

| 02-09-2019 | by treasuryXL | Kendra Keydeniers

Steven de Klein decided to take a deeper dive into the world of treasury and started the RT program in 2014. He graduated as Register Treasurer (RT) in 2017. Before moving into treasury, he studied Business Economics in Nijmegen. His first experience in treasury was a good one, “The field of treasury is much greater than most people expect” said Steven.

Steven is Cash & Currency Manager at Royal Boskalis Westminster NV, a Dutch dredging and heavylift company. With its roots in the Netherlands, Boskalis has over 100 years’ experience in hydraulic engineering, coastal protection and land reclamation. The head office is located in Papendrecht and they have an extensive network of branches around the world. They operate in 90 countries and across six continents, with a versatile fleet of more than 900 vessels and floating equipment. Shares in the company have been listed on Euronext Amsterdam since 1971.

We asked Steven 4 questions about the RT program:

  1. What for you was the main reason to start a career in treasury?

    During my final year at the Radboud University in Nijmegen where I studied Business Economics, I started at a small advisory firm specialized in (corporate) financing. That was my first experience in treasury and it suited me well. Soon afterwards I joined a development & construction company that showed me that treasury was more than just financing and before you know it, you are a ‘treasurer’.

  2. Why did you start with the RT program?

    After working within the same company for a few years I noticed that my learning curve was leveling out. I started to investigate what treasury courses and programs where available and found that the RT program is without any doubt the best and most comprehensive treasury course available in The Netherlands.

  3. How did the education help you in your career?

    Not only did I gain a lot of new knowledge about treasury, but also about related topics such as macro-economics, fiscal law and (hedge) accounting. This helps to connect the dots a lot better when you’re back at your daily job. It also brought me a new network of people, good memories and I even think my current job at Royal Boskalis Westminster NV.

  4. Are you still in touch with your peers?

    Absolutely, during the 2-year program you built a strong relationship with your peers, since you do spend almost a full day per week with them. This is also one of the bigger benefits of the RT program in comparison to at-home studies.

We have more RT stories to share with you. Read the RT story of Bouke, Michel, Jarno, Mathieu and Richard and/or read more info about the RT program here.

The post-graduate Executive Treasury Management & Corporate Finance programme combines two finance disciplines: Treasury Management and Corporate Finance. These disciplines largely overlap and are inextricably connected.

After a successful completion of all required modules, the title of Registered Treasurer (RT) is conferred by the Registered Treasurer foundation.

As of last year the Register Treasurer (RT) program at the University of Amsterdam is taught in English. This is an important change as the program used to be in Dutch.

The course started on 1 September 2019. 

 

 

Key findings from the 2019 Treasury Compliance Survey

| 26-08-2019 | TIS |

Spending too much time and energy on compliance issues? You’re not alone. 41% of large companies identified this as their number one concern about the regulatory environment. Join Strategic Treasurer and TIS on August 29th as they reveal the exclusive results to the comprehensive 2019 Compliance Survey.

The 2019 Compliance Survey polled treasury and finance practitioners on their experiences, practices, and perspectives regarding a broad variety of compliance and bank account management operations. The survey captured both the macro and micro elements of the compliance landscape that are impacting treasury, identified how new regulatory developments are being accounted for, and gained insight to the various technologies and strategies leveraged by organizations for managing compliance on an ongoing basis. This session will cover highlights from the survey and include commentary from respected industry leaders as to what this means for you.

Register here!

Date: 29th August 2019

Timing: 11:00 AM EST

 

 

 

 

 

 

Embracing technology to deliver value from treasury

| 16-08-2019 | TIS |

Join Giancarlo Laudini, SVP Global Sales & Marketing Operations, TIS and Ernie Humphrey, CEO, 360 Thought Leadership Consulting to discover what fuels career success in treasury in today’s world. We will discuss the evolving role of technology in treasury success, how to leverage technology it your advantage, and how to embrace business partnering to impact decisions across the enterprise.

 

Register here!

Date: 11th September 2019

Timing: 5 PM CET

 

 

 

 

 

 

Why Bouke decided to explore the World of Treasury

| 15-08-2019 | by treasuryXL | Kendra Keydeniers

 

Bouke Weijmans graduated as Register Treasurer (RT) in 2014. Bouke has a strong interest in process optimization and building treasury departments from the start. He currently works at Aalberts Industries as a Cash and Treasury Manager.

Aalberts Industries is a Dutch manufacturer that engineers mission-critical technologies for ground-breaking industries and everyday life.

We asked him 7 questions about the RT program:

 

  1. What was your main reason to start a career in treasury?

    Actually I rolled into the field of treasury when working at Flow Traders. During my study business administration at the VU I always believed I would develop my self in the field of process optimization. About 6 months after I joined Flow Traders the person in charge of treasury left the company and I was asked to pick up the role.

  2. Why did you start with the RT program?

    Eager to learn more about my new role in treasury I started looking for opportunities to develop myself. As a former VU student I found following classes of the RT program was the best way for me to do this.

  3. What are key words that you would use to describe the program?

    The program is small scaled and interactive, which allows active discussion between teachers and students touching issues treasurers run in during their day to day work.

  4. Which topics covered were most interesting?

    I was still a little green in the world of treasury when I started. Therefore, the topics about treasury, cash management and corporate finance where really useful.

  5. What surprising elements did the program hold that you did not expect?

    I liked the fact you also get schooled in the field of fiscal law. It gave me a better understanding how transfer pricing works and what implications this can have for a company.

  6. Are you still in touch with your peers?

    I’m not in active WhatsApp groups, however the world of treasury is quite small and you run into each other from time to time. It’s always nice to catch up at such occasions.

  7. Did following the program influence your relation with your family, friends and/or colleagues?

    Following and preparing classes takes some time and planning which means sometimes you have to say no to social events. This can be difficult from time to time but no permanent harm has been done.

We have more RT stories to share with you. Read the RT story of Michel, Jarno, Mathieu and Richard and/or read more info about the RT program here.

The post-graduate Executive Treasury Management & Corporate Finance programme combines two finance disciplines: Treasury Management and Corporate Finance. These disciplines largely overlap and are inextricably connected.

After a successful completion of all required modules, the title of Registered Treasurer (RT) is conferred by the Registered Treasurer foundation.

As of last year the Register Treasurer (RT) program at the University of Amsterdam is taught in English. This is an important change as the program used to be in Dutch.

The course will start on 1 September 2019. Why wait? Apply today!

 

 

CSDs have a role to play in a blockchain environment

| 12-08-2019 | Carlo de Meijer | treasuryXL

There is a broad consensus amongst the post-trade industry that blockchain technology will revolutionise the securities post-trade world and could radically change how assets are maintained and stored by custodians and central securities depositories (CSDs).

Blockchain technology may enable real-time settlement finality in the securities world. This could mean the end of a number of players in the post-trade area, such as central counterparty clearing houses (CCPs), custodians and others. For a long time, also central securities depositories (CSDs), as intermediators in the post-trade processing chain, thought they also could become obsolete.



This idea however is changing. While CSDs are making up their mind on their future position in the blockchain world, they are increasingly considering blockchain as enabler of more efficient processing of existing and new services, instead of a threat to their existence. But what will be their future role?

Complex/fragmented post-trade infrastructure

As we all now, the current post-trade infrastructure is highly complex and fragmented. Much of this complexity and fragmentation is the result of the various intermediaries needed in the post-trade process. They include players like banks, brokers, stock exchanges, central counterparty clearing houses (CCPs), central securities depositories (CSDs), real-time gross settlement (RTGS) systems and custodian banks.

In the current set-up of the post-trade environment, important record-keeping functions, such as those relating to the issuance, settlement, registration and safekeeping of securities, are performed centrally by different specialist intermediaries. Intermediaries also perform the post-trade servicing of assets, such as crediting dividend payments or bonus issues to client accounts, or managing rights issues and takeovers.

They are thereby dealing with siloed outdated legacy systems and technologies each having their own ledger that are not good communicating with each other.  Consequently, they spend much time and resources on reconciliation and risk management. As a result settlement currently takes two or more days in many places, involving high risks and high costs for transacting parties.

The present role of CSDs

Situated at the end of the post-trading process, CSDs are systemically important intermediaries. They thereby form a critical part of the securities market’s post-trade infrastructure, as they are where changes of securities ownership are ultimately registered.

CSDs play a special role both as a depository, involving the legal safekeeping and maintenance of securities in a ‘central depository’ on behalf of custodians (both in materialised or dematerialised form); as well as for the issuer, involving the issuance of further securities by issuers, and their onboarding onto CSDs’ platforms.

CSDs are also keeping a number of other important functions, including: dividend, interest, and principal processing; corporate actions including proxy voting; payment to transfer agents, and issuers involved in these processes; securities lending and borrowing; and, provide pledging of share and securities.

Blockchain: disruption in securities post-trade

Prospects
DLT offers the prospect of rationalising and combining post-trade activities in one single action, offering safer and cheaper record-keeping, as well as more seamless securities issuance. They thereby may create significant cost savings and efficiency gains across the securities market’s post-trade infrastructure.

  • Blockchain is linking trading partners directly. That means everything will be in place in the ledger at the time of the transaction.
  • With DLT, all of the complex systems and processes to transfer cash and equities from one account to another are not required. Everything can be embedded into the blockchain.
  • Institutions will no longer have to maintain their own databases, as with DLT there will be only one database for all participants in the transaction (so no more fragmented islands of information).
  • This will heavily ease the reconciliation process, allowing increasing transparency and efficiency in a presently highly fragmented industry.
  • It could permit the direct or real-time settlement of transactions between accounts, the simultaneous verification of transactions and the registration of ownership, and the direct and automated payment of entitlements to accounts.
  • As a result, buyers and sellers can match transactions in seconds and all parties are aware a transaction has been done.

Disruption
On the other hand, DLT has the potential to heavily disrupt existing post-trade processes in financial services. Shared ledgers of ownership promise to revolutionise the post-trade infrastructure, Thereby impacting the business model of a number of intermediaries.

Use of a blockchain network would automate the process further, with completely integrated authentication and transparency of the transfers themselves. As a result, clearing and settlement can be transformed into a single process, in which digital and digitised assets are delivered against payments instantly, thereby removing the need for a market infrastructure provider to hold a security, or token in its own physical or electronic vault.

The extent to which blockchain will disrupt existing processes in financial services is still unsure. Some say a complete disintermediation of middle and back office processes is under way, removing most (or even all) intermediaries from the post-trade processes.

Others however say the impact of this emerging technology will be less forceful, with a (limited) number of existing intermediaries to play an important though somewhat different role.

CSDs changing attitude

What is sure is that for some actors in the securities post-trade world, DLT will completely replace their businesses or even make the work of some intermediaries such as CCPs and custodians redundant. Others will still be needed, but they should question what will be their added-value within future DLT services, such as CSDs.

CSDs are changing their viewpoint on DLT including blockchain. Instead of seeing blockchain as a threat to their existence, they are now also considering them as (potential) enabler of more efficient processing of existing and new services.

“CSDs could have an important role to play in a blockchain-based settlement system. As ‘custodians of the code, CSDs could exercise oversight of, and take responsibility for, the operation of the relevant blockchain protocol and any associated smart contracts.” Euroclear Report

CSDs are believed they will continue to perform an important role as trusted, centralised financial market infrastructures (FMIs), providing gatekeeping services and oversight of the relevant blockchain.

How are CSDs reacting?

Recognising the threat as well as the opportunities of blockchain to their current services, a group of CSDs across the world has been working together and with regulators to define their future role in the blockchain post-trade environment. By working together they will ensure that CSDs from each region are represented, potentially unleashing (unimagined) network effects.

Aim of this cooperation is to explore how blockchain could be used for post-trade processes, identify, define and develop use cases in the securities depositories’ industry (including smart contracts and digital assets), and identify how existing standards could support it.

Another  group of 30 central securities depositories (CSDs) in Europe and Asia are researching possible ways to “join hands” in developing a new infrastructure to custody digital assets. The CSDs will attempt to figure out how to apply their experience in guarding stock certificates to security solutions for crypto assets.

“A new world of tokenized assets and blockchain is coming. It will probably disrupt our role as CSDs. The whole group decided we will be focusing on tokenized assets, not just blockchain but on real digital assets.”

These CSDs clearly see an opportunity to apply their knowledge and skills to the crypto currency space, where “losing your private keys means losing your coins forever”. The group’s focus is looking at how to protect these keys for crypto investors, and how the tokenization of “everything stands to change everything”. The next phase of the research will also involve some large custodian banks.

CSDs future role in a blockchain environment

There are various reasons why CSDs may continue to play a role in the post-trade bklockchain environment. That is not that strange as the primary functions of CSD may run parallel to many of those that emerge from the blockchain technology. CSDs are aware that some of those roles will neatly fit into their natural infrastructure. But there will also be some activities that will become obsolete.

Looking at the roles that could be suited for CSDs, those would be anything around safety, notary and governance.

1. Notary function
Blockchain may enable tokenisation of assets and the use of smart contracts. All these are new components in the value chain. This may mean that a digital actor will be needed to manage this tokenisation, and creation and maintenance of smart contracts, overseeing the entire securities token ecosystem. CSDs could fulfil this notary function.

1a. Asset tokenization
Asset tokenization is the representation of assets on the blockchain in the form of tokens, which are designed to be unique, liquid secure, instantly transferable, and digitally scarce – and therefore impossible to counterfeit.

In a world where securities and other assets become tokenised, some have argued that an intermediary will still be needed to issue them and create rules. Tokenised assets exchanged on a distribute ledger may still require CSDs to hold the equities, which the token represent. They would thereby fulfil the crucial notary function, both as tokenising agent and as operator of the escrow accounts in which the real assets are hold.

1b. Custody of private keys
There may also be a need for secure maintenance of personal encrypted keys. Adopting blockchain technology would allow individuals and companies to have complete control over their assets and data, accessed through a set of private keys that must be kept secure.

Emerging technologies like decentralized key recovery will allow more and more individuals to secure custody of their own assets, thereby removing the artificial and expensive separation between legal and beneficial ownership in most asset markets.

Some will choose to take that responsibility themselves, but many investors may choose to outsource the custody of their private keys and token wallets to the companies and CSDs that can provide an independent and secure safekeeping service for these private keys.

2. Record of title for securities
CSDs could  also be of value to record of title for securities. In many cases, the law mandates how title to property transfers. EU regulations state that for “any financial instrument to be transferable and tradable”(i.e. takes place on a trading venue, exchange or multilateral trading facility), securities must be recorded (registered) in book entry form in a CSD.

Under the current law, to enable having a blockchain-based system of transfer of title to securities, the blockchain would need to be the system that the CSD operates, which is not truly distributed.

Or one would need to create a new legal regime that recognizes that the transfer of title on a blockchain is effectively a transfer of title to the relevant property, and allows that in the context of securities trading. But that would take a lot of time to realise.

As a solution, the blockchain technology can be implemented through a hybrid model in which the CSD can either operate a blockchain platform itself to perform the book entry role. Or it can continue to perform this role off-chain, with the third- party blockchain platform accessing those records held by the CSD via an API (application programme interface).

3. Governance
CSDs could also play the governance role in a DLT based system – to ensure that what happens within their systems is unchallengeable. The movement from a post-trade system based around the existing infrastructure to a DLT-based system, without updating the regulatory and legal regime, could introduce a new systemic risk into the financial system. Regulators and legislators are unlikely to be comfortable in allowing the wholesale replacement of the existing infrastructure with DLT-based solutions.

CSDs are best placed to retain a ‘policing’ or governance role in a blockchain framework. This role should be the management of an insolvency of a party, particularly if there is a position that is not settled and the relevant contract is not yet completed. The involvement of CSDs in a governance and operational role could help increase trust of investors, and raise the quality of the blockchain ecosystem infrastructure underpinning these new asset classes.

4. Trusted gatekeeper: Authorisation and administration
CSDs could also be of help as trusted gatekeeper to DLT networks. While regulators will set the standards for admission to the network, the admission tests are likely to be administered by other parties. The most likely candidate for that role of trusted gatekeeper to DLT networks are the CSDs.

They are already the “first home of financial assets issued, and guardians of the integrity of every issue they accept”.

“The regulators are unlikely to want to immerse themselves in the operational details of the authorisation process.” “They will sub-contract that work to a trusted intermediary (read CSD).”

5. Other roles

A. DLT proxy voting system
One role in the post-trade environment that is already intensively investigated by CSDs is the management of a DLT-based e-proxy voting system. This would include providing general meeting services and give shareholders an easy, user-friendly and secure tool for voting remotely.

There is potential for improvement for instance in respect to the depots of voting rights. The system would automatically allow (or disallow) voting privileges for members based on what voting rights they had within a particular organization.

By using open source blockchain technology the efficiency and integrity of the Annual General Meetings and shareholder voting processes can be increased. Given that it is an end-to-end solution – from the time a meeting is announced and all the way through the voting process to the publishing of results – it means that all stakeholders will truly benefit within the process.

“By leveraging blockchain, we are able to reduce friction in the voting and proxy assignment process and also ensure that all information is transparent to stakeholders when required and with the proper security, governance and risk procedures in place.

B. Elective corporate actions
CSDs could also have a role to play at elective corporate actions.  Corporate actions recorded by the ledger may include paying out dividends, splits, issue of rights, warrants, pay-ups etc.

The user group for a permissioned blockchain network can choose who should validate these actions. They could simply give validation rights to every node. Getting issuers to publish elective corporate actions, such as rights issues and proxy votes, directly onto a blockchain, however might be a difficult step to realise.

Alternatively, this could be the role of a trusted third party, or a combination of both a trusted party and the nodes. This would imply a logical role for CSDs, creating a common registry of ownership associated with an ID.

C. Reconciliation
CSDs could also be of help in the reconciliation process. Blockchain may certainly help automate other components of the settlement process, such as reconciliation. A DLT-based reconciliation tool, with multiple trading firms participating in a record-based system, however could still occur within the CSD, which may act as the single point of reference for reconciling the various records.

D. Cross-border collateral mobilization
A final area where CSDs could play a role is in cross-border collateral mobilisation. Leveraging blockchain technology could overcome existing hurdles when moving collateral across various jurisdictions, making the transfer faster and more efficient.

“Designed to simplify cross-border collateralisation away from using multiple complex and non-standardised links towards smooth movement across various jurisdictions.”

By using CSDs it could enable a centralised, faster and more efficient allocation of fragmented security positions to cover financial obligations of market participants in multiple jurisdictions.

Concluding remarks

CSDs are likely to play an integral role but important role in any blockchain environment. Their role however will look quite different from we know them today. They can be the logical center of the system, custodying the standards, processes and governance of the system.

CSDs will have the opportunity to be agents of change. CSDs however need to adapt to meet new demands asking for delivering added value services in the new blockchain environment.

But they are not there yet! There is clearly a gap between the long-term opportunities presented by blockchain and the challenges involved in making progress.

Several blockchain initiatives in this area have failed, or are just ended their pilot stage or are very limited in scope. CSDs are also not currently building a single solution. Rather, each group is building its own platform designed to interoperate with the others.

There is thus urgent need to leverage existing business standards for the distributed ledger technology application in order to realise a global infrastructure that can smoothly operate cross border.

 

Carlo de Meijer

Economist and researcher

Towards a central bank digital currency?

| 06-08-2019 | Carlo de Meijer | treasuryXL

Since Facebook announced its plans to come up with their own digital currency named Libra, a heated debate has risen about whether central banks should issue their own digital currency.

Central banks worldwide have expressed their worries about Facebook’s plan. According to them the prospect of a tech firm (and may be also others in the future) with billions of users launching its own money potentially poses a threat to existing fiat state currencies and especially to monetary stability.

Long-time sitting at the side-lines, this plan may accelerate the idea of a central bank digital currency (CBDC). Though there are no real plans (yet), are some strong arguments for central banks to start issuing their own digital currency.

This however raises a number of questions such as: What sort of digital currency?; What would be the main arguments? What role should banks play in this process? And, what would be the impact on financial stability?

Central banks counterbalancing Libra

Central bank are seriously watching the emergence of a new global digital currency called Libra, introduced by Facebook (see my Blog: Facebook and Libra: a global digital currency, 1 July 2019). The birth of Libra thereby serves as an “alert” for central banks and regulators.

There is growing belief that if Libra could be successfully launched, it would challenge central banks’ monetary sovereignty, posing a long-term threat to central banks control of money. Any role for Libra beyond the payment function could bring changes to the rules of the global monetary system, and regulators should pay close attention to that possibility.

“From the government’s perspective, we pay more attention to its influence on financial services, monetary policy and financial stability.”

Accelerating the launch of their own digital currencies by central banks could be a counterbalance.

Reactions

The initial cautious stance towards a central bank issued digital currency, ranging from wait-and-see to very negative, has firmly changed. Central banks and governments from all over the world as well as international financial institutions like the IMF and BIS are now sounding a much more positive tone.

IMF

It is interesting to find that already last year (November 2018) the International Monetary Fund (IMF) started to examine the potential innovative nature of digital currencies and has supported CBDC proposals more positively. Christine Lagarde, at that time Managing Director of the IMF, urged central banks to consider CBDC since they could satisfy public policy goals, including financial inclusion, security/consumer protection, and privacy in payments.

BIS

While just a few months ago, Augustín Carstens, the general manager for the Bank for International Settlements (BIS), was still questioning the value of central-bank-issued digital currencies, he recently acknowledged that central banks will likely soon need to issue their own ones.

Carstens warns that “big techs have the potential to become dominant” in this area thanks to network effects. Further, the arrival of such products “might just be around the corner if there is clear evidence of demand from the public”.

 “And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies. If Facebook and big tech companies get their way, however they may have to.” Augustin Carstens

BIS is now supporting the many central banks’ efforts to research and develop digital currencies based on national fiat currencies. At the very least, the BIS concludes in its recent report, new “comprehensive” public policy is needed to “respond to big techs’ entry into financial services so as to benefit from the gains while limiting the risks.”

The potential implications of such a change towards central bank digital currencies for the stability of the global financial system however aren’t entirely clear, according to the BIS.

ECB

Though not taking an official position, a European Central Bank (ECB) official has come out generally in favour of wholesale central bank digital currencies (CBDCs).

Vitas Vasiliauskas, a member of the Governing Council of the ECB and chairman of the board of the Bank of Lithuania, said the question is not if but whether CBDCs should be retail, wholesale, or both. A retail CBDC would be available for the general public, while a wholesale version would be restricted to serve a limited circle, mostly financial institutions. In between these two types, “multiple theoretical sub-models also exist,” he said.

PBoC

The People’s Bank of China (PBoC), the country’s central bank is accelerating its efforts to introduce a government-backed digital currency, aiming at “securing a cutting-edge position in the global cryptocurrency race”. The central bank is organizing market-oriented institutions to jointly research and develop a central bank digital currency and the program has been approved by the State Council.

“A digital currency issued by the central bank can improve the efficiency of monetary policy, and help to optimize the payment system.”

China’s monetary authority identifies the nature of digital currency as “a substitute for cash”, rather than a speculative instrument. The use of cash is declining in China amid booming digital payment systems.

The central bank digital currency could be a new monetary policy tool, or an investment asset that carries an interest rate to satisfy investors’ demand for value. It might also be used as a reference for bank interest rates on deposits. The Chinese digital currency also could be used domestically. But “everything is just under discussion”.

Why CBDCs?

There are various arguments raised to issuing central bank issued digital currency based on DLT. The main are described below.

Towards a cashless society

One of the reasons mentioned is that in the Western world a growing number of people do not use cash anymore. Physical payments are thereby gradually replaced with electronic payments. CBDCs could provide a safe, liquid payment instruments to the general public. They have the potential to reduce cash handling costs since all the transactions can be made using a digital representation of money and are traceable.

…. and a formal based economy

A shift in central bank money from cash (physical money) to digital currency is another way to shift the economy from being informal-based to formal-based so that the economy becomes more tax-based, transparent, and efficient. This is especially relevant for emerging markets.

Increased financial inclusion

Another motivation  for especially emerging economies regarding CBDC proposals is financial inclusion. In many of these countries a large number of people are unbanked and/or without access to commercial banks and the internet and thus excluded from conventional banking services. CBDC might promote digitization of the economy and, thus, economic and social inclusion.

More effective monetary policy

Shifting from cash to digital currency through issuing CBDC may enhance the effectiveness of monetary policy (such as a negative interest rate policy under the effective lower bound) because of limiting the scope of cash substitution that could emerge to avoid a negative interest rate.

Implementing CBDCs can allow new monetary policy tools to be used. Alternatively, CBDCs can be used as a tool to increase aggregate demand by making ‘helicopter drops’ of newly created CBDCs to all citizens, making it easier to meet the central bank’s monetary policy target of price stability.

Safer and more effective financial system

And there are the efficiency and financial stability gains to be get from CBDC. CBDC has the potential to improve the existing wholesale financial systems—including interbank payments and settlement systems, delivery versus payment systems, and cross-border payments and settlements systems.

Allowing individuals, private sector companies, and non-bank financial institutions to settle directly in central bank money (rather than bank deposits) may significantly reduce the concentration of liquidity and credit risk in payment systems.

This in turn could reduce the systemic importance of large banks. In addition, by providing a genuinely risk-free alternative to bank deposits, a shift from bank deposits to digital cash may also reduce the need for government guarantees on deposits, “eliminating a source of moral hazard” from the financial system.

Foster fintech sector

The use of CBDCs may promote a technological environment and foster the fintech sector. This is especially relevant for emerging economies. Those economies may find it difficult to develop banking systems and capital markets that are comparable to those in advanced economies. Fintech services are new and innovative.

Encourage competition and innovation

The regulatory framework would make it significantly easier for new entrants to the payments sector to offer payment accounts and provide competition to the existing banks. It would also reduce the need for most smaller banks and non-banks to run their payments through the larger banks (who are able to set transaction fees at a level that disadvantages their smaller competitors).

What sort of central bank digital currency?

When discussing the options of central bank digital currencies we can differentiate proposals into retail CDBC i.e. targeted to the general public and wholesale CBDC issued only for financial institutions. And there are multiple in-between types that may have characteristics of both retail and wholesale.

Retail CBDC

A retail CBDC is one that will be issued for the general public. Retail CBDC based on DLT has the features of anonymity, traceability, availability 24 hours a day and 365 days a year, and the feasibility of an interest rate application.

The retail proposal is relatively popular among central banks in emerging economies, mainly because of the motivation to take the lead in the rapidly emerging fintech industry, to promote financial inclusion by accelerating the shift to a cashless society, and to reduce cash printing and handling costs.

Wholesale CDBC

A wholesale CBDC is for financial institutions that hold reserve deposits with a central bank. It could be used to improve payments and securities settlement efficiency, as well as to reduce counterparty credit and liquidity risks.

A value-based wholesale CBDC would replace or complement reserves at the central bank with a restricted-access digital token. A token would be a bearer asset, meaning that during the transaction the sender would transfer value to the receiver, without intermediaries.

This would be something fundamentally different from the current system in which the central bank debits and credits the accounts without transferring actual values.

The wholesale CBDC is seen as the most popular proposal among central banks because of the potential to make existing wholesale financial systems faster, inexpensive, and safer. The Bank of International Settlements (BIS) also shares the view that wholesale CBDC could potentially benefit the payments and settlements systems.

Some experiments have been already conducted or examined by central banks since 2016—such as those in Canada called “CADcoin” under Project Jasper, Singapore Project Ubin, Japan-Euro Area Project Stella, Brazil, South Africa Project Khokha, and Thailand (Project Inthanon). (See my earlier blogs: Blockchain and Central Banks: A Tour de Table Part I and II, 3 and 9 January, 2017).

Retail versus wholesale CBDC?

Compared to emerging economies, central banks in advanced economies are not enthusiastic about retail CBDC. And that is not surprising. Many central banks do not wish to create competition between central bank money private sector money, taken into account the limited potential benefits from using retail CBDC.

A retail CDBC would be a step too far (or too early) for them. If a central bank issued a digital currency whereby everyone (including businesses, households and financial institutions other than banks) could store value and make payments in electronic central bank money (the r-CBDC variant), this could have wide-ranging implications for monetary policy and financial stability.

Wholesale Central Bank Digital Currency would bring a number of important efficiencies. Besides their retail payments and settlements systems are already highly efficient, almost real time, and always available. Most citizens are banked, while the use of cash in most European countries – with the exception of Sweden and Norway – is still rather high (and not declining in the same speed).

Moreover, wholesale CBDC technology would allow linking to other platforms. Directly linking securities or FX platforms to cash platforms could improve the speed of trades and eliminate settlement risk. Settlement on OTC markets, as well as for syndicated lending and trade finance could speed up considerably if linked live to an instant wholesale CBDC system.

Wholesale CBDC may also simplify (cross-border) payment infrastructure, strongly reducing the number of intermediaries involved. This may improve efficiency and security, minimise liquidity and counterparty risks and reduces cost.

Deploying DLT technology would also allow “smart” features to be added to wholesale CBDC, including earmarking funds, limiting their use in time and place, applying conditional interest rates and others. Such smart features would allow central banks to explore new and powerful operational monetary policy tools, such as tailor-made interest rates.

Finally. real-time monitoring and better track-and-trace options on a unified platform should facilitate both anti-money laundering efforts by banks and supervision over those efforts.

Coordinated CBDC approach

This wholesale approach is a likely first step towards more universal adoption of CBDCs. It is less disruptive and makes global payments cheaper, faster and more secure. But who should take the initiative to build the wholesale CBDC?

Only central banks have the mandate to issue a digital currency or token and call it legal tender. They however lack extensive experience and resources needed to build and maintain such an infrastructure and, build a compliance apparatus to supervise clients and transactions.

The private sector, on the other hand, has the necessary experience and resources to do this. Next to that, commercial banks also have an incentive, as regulation is becoming ever more stringent (KYC, AML), and makes it more costly to maintain a presence in payment systems in multiple countries.

Moreover, the current international payment system, based on correspondent banking, creates various costs such as KYC and handling costs of all banks involved. There are also delays due to opening hours in different time zones while liquidity is trapped in pre-funded nostro-accounts. A single cross-border 24/7 international direct payment and settlement system therefore is very attractive for them.

In order to build a successful wholesale CBDC, one needs the private sector’s experience and the central banks, thereby taking away the various counterparty risks. Moreover, jurisdictional differences need to be harmonised. So international public-private partnerships make sense.

Though this seems controversial, one should keep in mind that the existing monetary system is already a public-private partnership. While central banks determine monetary policy and monitor financial stability, commercial banks actually create most of the money by lending. Central banks (and other government agencies) in turn license and regulate them.

The way forward

Up till recently, not many central banks so far have found strong advantages of issuing their own digital currency at this stage because of several technical constraints.

The potential launch of Libra however has been an important wake-up call for a large number of central banks.

Given that blockchain technology has been progressing fast in the settlement and payment areas (as well as DLT), central banks may now see incentives to increase their interest in wholesale CBDC proposals and consider actual implementation seriously in the near future.

Wholesale CBDC however will still have to compete with upgraded legacy systems. Both central and commercial banks should therefore take a cautious approach when building completely new alternatives. Experimental wholesale CBDC that are cross-border from the start and involve multiple commercial and central banks, should have the biggest chance of success.

A retail CBDC however may be “a faraway goal” because of the potential adverse impact on commercial banks by promoting a shift of retail deposits from commercial banks to a central bank.

 

 

Carlo de Meijer

Economist and researcher

 

BELLIN Launches SWIFT g4C Product Offering

| 30-07-2019 | BELLIN |

BELLIN, a global leader in providing treasury software and services, has successfully integrated SWIFT gpi for Corporates (g4C) in its tm5 treasury management system and completed the pilot and Early Adopter phase. With the BELLIN SWIFT product offering extended, all BELLIN clients can now benefit from fast cross-border payments as well as tracking directly in the tm5 system.

tm5, BELLIN’s treasury management system, has supported SWIFT g4C technology since as early as April, making BELLIN the first of the TMS provider Early Adopters with a customer live on g4C. SWIFT has now officially launched gpi for Corporates, enabling all users of the BELLIN SWIFT Service to consider benefiting from transparency and traceability for cross-border payments. Corporates need their own SWIFT BIC to make use of the SWIFT g4C technology. They register their BIC with gpi for Corporates and connect financial institutions that offer g4C. Started Monday, June 24, 2019, the entire SWIFT community can register their BICs for the new SWIFT g4C technology.

SWIFT g4C from pilot to live

“All of us, our clients, BELLIN and SWIFT, are bound by the desire to advance corporate payments. This is why we have worked hard in a concerted effort to implement SWIFT g4C technology,” explains Karsten Kiefer, Product Manager SOLUTION MANAGEMENT at BELLIN. “With SWIFT g4C, corporates will benefit enormously from speed, transparency and comprehensive information with cross-border payment processing. The obvious advantages will make for an immediate success story.”

The BELLIN SWIFT Service enables BELLIN clients to receive their own BIC and to gain access to the SWIFT Network as a member of the Standard Corporate Environment (SCORE). BELLIN takes care of the BIC application, connects the company to the SWIFT Network and guides the client through onboarding and configuration. The BELLIN SWIFT Service has been part of BELLIN’s portfolio since 2013, making BELLIN the very first treasury management system provider with a service of this kind. Today, over 160 customers use the BELLIN SWIFT Service.

Interview with Karsten Kiefer on the SWIFT g4C integration in BELLIN’s treasury management system and the benefits for corporates

About BELLIN

BELLIN is the global leader in technology for corporate banking and treasury. We provide solutions for the financial sector, catering to a range of clients from large multinationals to SMEs and banks. Founded by a treasurer, BELLIN has been championing innovation and out-of-the-box thinking since 1998. With the treasury software tm5 as the centerpiece, BELLIN makes a fundamental difference by offering solutions that zero in on the relationship between corporates and banks and cover everything from payments to FX, cash and risk management. BELLIN is an international company with offices on four continents, powered by a trailblazing fintech spirit and yet firmly rooted in the heritage of German craftsmanship and engineering. BELLIN delights 500 clients and over 80,000 users around the globe.

Why Michel decided to explore the World of Treasury

| 22-07-2019 | by treasuryXL | Kendra Keydeniers

 

 

Our next RT story is the one of Michel van Baardwijk. He graduated as a Register Treasurer (RT) in 2017. Michel is specialized in the Public Sector and faced many challenges working at Vestia as Treasurer.

Vestia, formally ‘Stichting Vestia’ is the largest public housing corporation in the Netherlands, which is headquartered in Rotterdam. The corporation owns (and rents out) about 78,000 houses and 8,000 other “rentable units”.

Vestia received media attention in 2011 and 2012 on the topic of interest derivatives. This attention continues until today. The follow up and the consequences of the transactions made in the past determine most of Michel’s treasury activities.

 

 

  1. What for you was the main reason to start a career in treasury?

    Actually my career in treasury was not premeditated. I liked the courses corporate finance during my studies business economics/econometrics in Tilburg, but my first jobs at Philips and the municipality of Rotterdam had nothing to do with treasury. Later when I worked as a financial manager or controller treasury was one of the many elements of the job, until the take-over by Vestia in 2011. In the re-organisation of 2013 I applied for Treasury and I got the job.

  2. Why did you start with the RT program?

    Because the portfolio of Vestia was more than 20 times the portfolio I managed before, refreshing my knowledge and skills was priority number 1. I got some training on the job by an experienced interim treasurer and I oriented on possible courses. The RT program at VU offered the best combination of theory and practice.

  3. What are key words that you would use to describe the program?

    The program is small scaled and interactive. You get to know all your fellow students very fast and there is enough time to exchange experiences.

  4. Which topics covered were most interesting?

    The most interesting courses for me were those courses I had little experience in: international finance and cash management. Piece of cake for seasoned treasurers, but new stuff for me. I also took courses in macro economics and behavioural finance.

  5. Can you describe what your research and thesis was about?

    My thesis researched the effects of new, tougher, legislation on the way treasury for housing associations is organised. I thought many had changed their processes, but most processes were already adequately organised and in control before 2012. With more emphasis on compliance after 2015.

  6. How did the education help you in your career?

    The RT program has helped me to become a professional in treasury in a short time.

  7. What surprising elements did the program hold that you did not expect?

    Behavioural finance was an eye opener for me. I took some psychology courses during university (marketing, organisation) but the impact of psychological elements on decision making was a positive surprise.

  8. Are you still in touch with your peers?

    Of course. I meet fellow students at DACT-events, we still have a Whatsapp-group and we are linked via LinkedIn.

  9. What other treasury education programs did you consider and why did you choose this one?

    I researched several other programs (NIVE QT, Improfin, modular courses), but VU offered a proven concept which was very practical for me (every week courses on Thursday afternoon and evening) and started very soon.

  10. Did following the program influence your relation with your family, friends and/or colleagues?

    Doing classes and assignments takes some planning. And sometimes you have to say No at home or at work, or skip class due to a priority job. Commuting by train gave me much time for reading and writing but not enough. Many weekends were spent writing my thesis, and also two holidays. Fortunately my wife took a course herself and my kids had their own exams.

  11. Can describe a treasury topic you learned about and you could directly apply in your job?

    In the first lecture I learned something about the consequences of a large divestment I had not thought about. Fortunately we could solve this directly. I also got more insight in the way banks were pricing loans, which resulted in better quotes.

More stories please! Read the RT story of Jarno, Mathieu and Richard and/or read more info about the RT program here.

The post-graduate Executive Treasury Management & Corporate Finance programme combines two finance disciplines: Treasury Management and Corporate Finance. These disciplines largely overlap and are inextricably connected.

After a successful completion of all required modules, the title of Registered Treasurer (RT) is conferred by the Registered Treasurer foundation.

As of last year the Register Treasurer (RT) program at the University of Amsterdam is taught in English. This is an important change as the program used to be in Dutch.

The course will start on 1 September 2019. Why wait? Apply today!