Payments - cross border

India Corporate Treasury Update

Report date: 
20 Feb 2024

Commentary

Calls on India are always well attended: there is never a shortage of items to discuss. It is already a very large market, and it continues to grow – so all international companies are motivated to manage its many complexities. 

Complexity is something at which India excels: the regulations are many, varied, and never easy to navigate. It can be difficult to know exactly what they are: as often happens, we spent a lot of time trying to establish what is, and what is not, allowed. At the same time, the country has come a long way. Many things which used to be forbidden are now allowed: cash can be brought into and out of the country with relative ease, though not without red tape. The authorities are relatively flexible and business friendly. India is in the vanguard of efforts to move away from cash for retail transactions: this may be mostly for tax reasons, but it reflects the country’s leading position in technology.

At the same time, it remains a very large country, with significant regional variations, including language, climate, culture and religion – so differences will continue to exist. Our conversation covered the following points:

  • The economy continues to perform well, though competition is fierce – and, in some areas, India continues to favour national champions.
  • Operations: most peers had different legal entities in India involved in different activities: manufacturing, R&D, shared service centres, marketing, etc. Intercompany lending within the country, while permitted, can be complicated.
  • Onshore versus centralised treasury: many MNCs have local treasury teams, due to the regulations and complexity. This is beginning to change: several participants are starting to bring India into their centralised structures. 
  • Similarly, most peers are only using international banks in the country, and shutting down relationships with local banks. One participant attributed this in part to a regulatory requirement to link lending activity to transactional business – especially as the foreign banks can now provide complete services.
  • Another peer

Please Log in or Register to continue reading this commentary

Topics covered in this report: 
Bank Relationships, FX, Hedging FX, Payments - cross border, Intercompany loans, Cash Pooling - domestic, Cash Repatriation, Payments - domestic, Funding
Service providers discussed in this report: 
Citi, HSBC, JP Morgan, BAML, Standard Chartered, BNP Paribas, Deutsche Bank

Please log in, or create a free account, to read the whole report summary.

Banking & Treasury in Saudi Arabia

Report date: 
17 Apr 2023

Commentary

Saudi Arabia occupies a pivotal, and highly unusual, place in global politics and the world economy. As the world’s largest exporter of oil, and the holder of the second largest reserves of oil and gas, it is an essential part of the global economy – and has traditionally been relatively aligned with western and capitalistic countries. At the same time, it is a profoundly religious absolute monarchy, which practices a particularly conservative brand of Islam. This has always placed limits on its co-operation with western countries – limits which are being tested even more than usual in the current environment.

The current situation is particularly complex, as was clear in the call. Saudi Arabia has always imposed severe restrictions on foreign companies and banks, requiring local partners, and imposing local signatories and approvers for most, if not all, transactions. Limitations on where foreigners could live, and what they could do, have meant that many expatriate employees preferred to live with their families in Dubai, and commute to Saudi for the work week. However, the country has recently launched “Vision 2030”, which aims to open up the country and prepare it for a post oil future. This ranges from promoting tourism, allowing women to drive cars, and potentially allowing alcohol sales in specific places, to mega projects such as building a new city in the desert. It also includes pushing MNCs to transfer their regional headquarters to the kingdom. At the same time, foreign ownership is now allowed, either using a Saudi sponsor (with fees), or by paying 20% taxes. 

These developments are viewed positively by the participants – though several cautioned that there are many conflicting undercurrents in Saudi society, and the situation can always change at short notice. In all cases, Saudi Arabia is a large, and profitable, market, to which all our participants are fully committed, irrespective of the operational challenges.

Treasury practicalities:

  • Nearly all participants sell into Saudi from an offshore location, usually in USD. The currency is pegged to the USD, and there are no exchange controls, so things generally work well.
  • Several participants have opened local branches or subsidiaries, either to provide services or to act as sales offices, or technical offices to manage regulatory issues.
  • To participate in the mega projects being run by the government, it is a requirement to transfer any regional headquarters operation to the kingdom. There is direct competition with other countries in the region for this, particularly the UAE.
  • Saudi regulations state that the bank signatories and transactions mus
Please Login or Register to access the rest of this free commentary.
If you haven't previously Logged in but receive commentaries via email, simply use your email address to change your password & LogIn
Topics covered in this report: 
Bank Relationships, Banking, Funding, Intercompany loans, Payments - domestic, Payments - cross border
Service providers discussed in this report: 
JP Morgan, BNP Paribas, Citi, HSBC, SABB, National Commercial Bank

Please log in, or create a free account, to read the whole report summary.

FX & Treasury in Turkey

Report date: 
29 Nov 2022

Commentary

Europe meets Asia in Istanbul – and Turkey is very much at the crossroads when it comes to a lot of the cultural, geopolitical and even military issues which are currently roiling the world. Despite all the turmoil, Turkey remains a relatively open and thriving economy, and it is a significant market in its own right for several participants.

Turkey has been struggling for several years with a high inflation rate, and this is causing issues for all the participants. Despite this, business seems to continue and be reasonably healthy for all of them. The high inflation rate causes a series of problems, but all participants are able to fund their businesses and repatriate cash. The challenges:

  • High interest rates, though these have now fallen to a little over 10%
  • Inflation officially at 85% - but unofficial estimates are up to 150%
  • Scarcity of bank funding: given the above, it is not surprising that banks are not willing to lend – especially as the central bank now requires a deposit of 30% of the amount lent, at 0% for the first 30 days.
  • Some participants have moved to cross-border intercompany funding, onshore intercompany loans between entities, and equity, as required.
  • One participant is looking at cross border intercompany funding from a subsidiary in a third country which has excess cash. The documentation is proving very challenging.
  • Accounting: officially, Turkey has hyperinflation (over 100% in the last three years), which means the HQ’s currency has to be used as the functional currency for accounting, under both IFRS and US GAAP.
  • Hedging:
Please Login or Register to access the rest of this free commentary.
If you haven't previously Logged in but receive commentaries via email, simply use your email address to change your password & LogIn
Topics covered in this report: 
Inflation, Pricing, Hedging FX, Funding, Bank Relationships, Payments - cross border, Collections - domestic
Service providers discussed in this report: 
BNPP, TEB, Garanti BBVA, HSBC, Citi

Please log in, or create a free account, to read the whole report summary.

Argentina Treasury & FX update

Report date: 
31 Jan 2022

Commentary

The Argentina saga continues, though there seems to be some evidence of stabilisation.

Inflation continues at about 50% per annum.

It seems to be reasonably possible to get hard currency to pay for imports from third parties, as long as the import has been properly registered and approved, is from a third party, and is more recent than March 2021.

On the other hand, it is very difficult to get approval for intercompany remittances, even if these are for goods. Old outstanding balances are basically frozen, with very little progress on remitting them out.

Currency hedging is difficult to obtain, and prohibitively expensive. Most participants have given up trying to hedge peso/dollar exposures.

Most people are seeing significant build ups of peso cash. It is difficult to earn a decent return on this cash – maximum interest paid tends to be between 20% and 30%, i.e., a net loss of value of 20% after inflation. Some foreign banks, such as Citi, will not accept peso deposits.

This situation can lead to significant P&L exposure, as companies record FX losses on their dollar denominated liabilities – especially the intercompany ones.

Most participants continue to do business in Argentina, because it is viewed as a strategic market. Also, many have to support international customers, who do business there. 

As always, our members are adopting a series of interesting and innovative measures to cope with this situation. There is a lot of detail below – the quick summary is:...please sign in to continue reading

Please sign or set up a  free registration to read the rest of this commentary and get access to all CXC commentaries together with occasional free reports. (if you receive our updates, use your email to re-set your password)
Topics covered in this report: 
Inflation, Payments - cross border, Payments - intercompany, Cash - deposits, Hedging FX, Bonds - US dollar linked, Cash Repatriation, Contado con Liqui, Blue chip swap, Invoicing
Service providers discussed in this report: 
Banco de la Nacion Argentina, Banco Galicia, BBVA, BNP Paribas, Citi, HSBC, Santander, ICBC

Please log in, or create a free account, to read the whole report summary.