5. MultiBank Cash Concentration

Multi Bank Cash Concentration (MBCC) are automated cash management systems for corporations with at-least one third party bank account.

It is an automated means of centralizing balances held at third-party banks of the corporate (In this process liquidity is either transferred to the various TPB accounts or Liquidity is pulled out of various TPB accounts)

It caters to the corporate need to maintain important third-party local bank relationships for rendering truly localized services while optimizing the potential yield from liquidity consolidated with a global concentration bank

This chapter contains the following sections:

• Section 5.1, "Benefits of MBCC"
• Section 5.2, "Features in MBCC"
• Section 5.3, "Sweep Mechanism"
• Section 5.4, "MBCC System Setup"

5.1 Benefits of MBCC

The benefit of MBCC can be listed as below:

• Consolidates Cash balances effectively
• Enhances yield on surplus cash
• Better overview and easier access to group-wide liquidity
• Timely access to information and improved liquidity management

5.2 Features in MBCC

The following features are provided for MBCC in LM:

• Automated movement of funds across multiple third party bank accounts, currencies, banks and geographic regions
• Multi Bank Cash Concentration though SWIFT using MT940\MT941,MT942,MT950
• Flexibility to add or delete accounts in the MBCC structure
• Flexibility of movement at end of day, intra day, weekly (particular day of a week) or Monthly (particular day of a month)
• Flexible sweep types such as Zero / Target / Threshold / Collar balancing / Percentage
• Multi-currency multi bank cash concentration
• For sweeps (both inward and outward) which involve a currency conversion the FX rate would be picked up from maintenance

5.3 Sweep Mechanism

This following steps lists out the sweep mechanism through MT920 requests:

• Mirror account & a linked CASA account for all the third party accounts are created
• MT920 generation frequencies, MT920 start time and end time are defined for each mirror account
• Cut-off time for MT101 generation for sweep ins and cut off time for MT103 generation for sweep outs are defined for each mirror account
• Cut-off time for balance update on the mirror accounts from DDA system (Post recon of MT101 with MT103) to be set.

5.3.0.1 Sweep In

The steps followed for sweep in are as below:

• Account balances from the third party accounts are collected by Generating MT920 (Requesting MT940 or MT941 or MT942) as per the pre-defined frequency parameters and time intervals for each mirror account.
• System will be capable of handling incoming MT940/MT941,MT942,MT950 which need not be in response to an outgoing MT920 i.e. incoming MT940,MT941,MT942,MT950 may or may not be in response to outgoing MT920
• Mirror account balances will be updated by processing the response/incoming MT940,MT941,MT942
• Balances will be updated based on either MT940 (Customer Statement) or MT941 (Balance report) or MT942 (Interim transaction report)
• MT 940: Balance can be updated based on the closing available balance tag of the message and duplicates can be checked based on statement number/sequence number tag.
• MT941: Balance can be updated based on the closing available balance tag of the message and duplicates can be checked based on statement number tag
• When a MT942 (Interim transaction report from the last statement or balance report or the last interim report) is received the current available balance in the external account will be determined
• The same is achieved by taking the balance from the previous MT940 or MT942 and credits are added and debits are subtracted
• If the response/incoming MT940,MT941,MT942 updates a Credit balance in the mirror account, MT101 has to be generated at the cut off time for requesting a sweep-in.
• The processing of MT103 which is received in response to MT101 will update the designated CASA Account
• MT101 generation will cater to the following sweep types on third party accounts:
  • Zero balance sweep
  • Target balancing (Fixed)
  • Threshold balancing
  • Collar balancing
  • Percentage sweep

While generating MT101 request for funds, system will take in to consideration the sweep parameters set at the other bank (can be own bank or third party bank) to arrive at the amount. In some cases there can be combination of these parameters at work.

MT	MT Message	Purpose
920	Request Message	Requests the account servicing institution to send an MT 940, 941, 942 or 950
940	Customer Statement Message	Provides balance and transaction details of an account to a FI on behalf of the account owner
941	Balance Report	Provides balance information of an account to a financial institution on behalf of the account owner
942	Interim Transaction Report	Provides balance and transaction details of an account, for a specified period of time, to a financial institution on behalf of an account owner It is used to transmit detailed and/or summary infor­mation about entries debited or credited to the account since: • The last statement or balance report, or • The last interim transaction report (sent in the period since the last statement or balance report).
950	Statement Message	Provides balance and transaction details of an account to the account owner

5.3.0.2 Sweep Out

The steps followed for sweep in are as below:

• If the response\ incoming MT940,MT941,MT942 updates a Debit balance in the mirror account, then a MT103 will be generated at the cut off time maintained for a sweep-out to regularize the debit balance on the third party account
• System will follow the sweep parameters set at the account level when arriving at the amount to be transferred via a MT103.
• The sweep parameters can be set as the following as an independent or a combination:
  • Zero balance sweep
  • Target balancing (Fixed)
  • Threshold balancing s
  • Collar balancing
  • Percentage sweep

5.4 MBCC System Setup

The following maintenance screens has to be configured to set up multi bank cash concentration structure:

5.4.1 System Set-Up Maintenance Screen

Allow multiple bank, Allow cross-border transaction and Allow cross-currency transaction options must be enabled at system level maintenance screen to allow bank to provide this feature.

5.4.2 Country Maintenance

The regulatory system must allow corporate to set-up MBCC in the country where liquidity management instance is running.

While defining a MBCC group the system will validate whether multiple bank facility is allowed in particular country.

5.4.3 Bank Maintenance

The following parameters must be enabled at bank level to support MBCC

Bank type field is required to identify the bank as internal bank or external bank.

Group name is captured to identify the accounts belonging to different banks of same group as host bank account. Based on the liquidity management products offered by bank the following options should be selected

• Domestic sweep
• Cross border sweep
• Multi Bank Cash Concentration

  

5.4.4 Branch Maintenance

The following parameters must be enabled at branch level to support MBCC

Based on the liquidity management products offered by bank the following options should be selected

• Domestic sweep
• Cross border sweep

  

5.4.5 Payment Instruction Maintenance

You can maintain payment parameter values at bank level for all the internal and external banks participating in liquidity management structure. The values captured in this screen will be handed off to payment systems to initiate domestic or cross border sweep.

5.4.6 MBCC Currency Cut Off Maintenance

Branch level & Currency level cut off are maintained in here. If the message arrives after the cut-off time, balance will not be considered for upcoming sweep schedule.

Exception messages will be logged separately.