P&L Report Card
It’s all very well focusing on the large corporates who we all know, but this space is so much more diverse than that – and in terms of value, many bankers will tell you in an unguarded moment, that the real value lies further down the food chain.
Most multi-nationals have very sophisticated technology and often execution desks, but when you go further down the chain more often than not the FX hedging is handled as part of its daily tasks by the accounting function and people with only a passing knowledge of the infrastructure and nuances of the market.
Those banks that have grown out of large corporate franchises have good payments solutions linked to their FX businesses and most now offer the ability to run the FX business on a “hub and spoke” basis, whereby the regional desks or subsidiaries can hedge FX exposures within strict guidelines, but in the name of the central treasury. If a bank is looking to service a corporate the basics remain, good content and dealing across jurisdictions and excellent workflow tools, including the ability to split and roll trades across dates, jurisdictions and subsidiaries – all in the widest range of currency pairs possible.
The upside for the bank is that flow from the corporate world remains largely predictable – and can therefore be warehoused for internal matching – which means value in bottom line terms.
Deutsche Bank has made great strides in this space in recent years and continues to do so with some impresive workflow tools under the Maestro umbrella; we also remain intrigued by the potential at HSBC given its extensive footprint. Given we have a perennial winner of this award, however, it is clear that any challenger has a long way to go if they are to be considered best in breed and if we had to pick out one bank that is further down that road than any other it is BNP Paribas, whose Centric platform epitomises what a good corporate actions, FX hedging technology solution should be.
Winner – Citi
The core value of Citi’s Pulse remains the workflow. It has the flexibility to allow clients to create their own subaccounts, this can be by entity or by region and these can be managed collectively or individually. The workflow solutions tool is linked to the analytics package, which is pre-configured to show the products that the user is allowed to access. The analytics provide clients with a recommended hedge programme including the mix of instruments, best suited to their hedging requirements. If required, the client can also use risk optimisation tools to express a view.
Pulse does all this, and does across more than 70 jurisdictions with the local regulatory nuances built in – it is the complete solution.
Clients can set the parameters around their exposures and when those parameters are hit, the platform initiates an alert which incorporates the bank’s recommended hedging strategy. These can be uploaded across sub-accounts as well as be allocated and validated for trading. In keeping with the advisory role of the platform, if errors occur during the hedging process, they can be managed and corrected from the screen, thus speeding up the process. Treasuries are also able to see their exposure summary and its effectiveness compared to its established hedging policy.
A treasurer can study cashflow by subsidiary and see exactly where errors are occurring and where the firm is showing slippage on execution. This helps reduce the error rate significantly and enables the corporate to operate a more efficient hedging process.
So what has Citi added in the past year? Well, remarkably, a lot!
Its efforts to further digitalise the corporate workflow process have been redoubled and integration work with the core enterprise platforms such as SAP continues. The bank has also recognised that the user interface aspect of the corporate treasury business is changing, specifically, each user is demanding a unique experience to help them effectively manage their business.
We have already noted the strength of the product but we have to reiterate how, for the corporate world, Citi’s Gateway empowers them by enabling them to build a rulesbased automated framework for their business. It is a “build-your-own” platform that allows them to see exactly what they want.
Elsewhere, Citi has enhanced how it handles orders in very illiquid currencies with local restrictions. Whilst the physical liquidity may not be there, Citi now has the ability to put its clients in a queue for liquidity when it does become available, either through an opposite order or the local central bank releasing funds. Trading in these markets can be very difficult and clients understand this, so by at least – and again – making it rules based, the client knows they are getting a fair crack of the whip.
There are developments in the corporate world when it comes to bank providers, but Pulse remains out on its own as the ultimate corporate solution, no matter where the company operates, or the local regulatory environment.