In response to an increase in demand for global treasury services, Citibank has begun offering Agency Treasury Services (ATS), its outsourcing service, over the Internet. The move follows the recent decision by Coca Cola to outsource its treasury operation to Citibank and move its European head office from London to Athens.
“We believe that this is a major milestone, not just in Europe, but globally,” says Naveed Sultan, European region head for Citibank e-business. “Customers look at systems like this with four objectives in mind: ‘Will it provide better cost management? Will it provide better continuity of the work transaction cycle? Will it provide tighter integration? And will it enable us to roll out regional and global programmes while maintaining local support?’ ATS is fundamental to meeting these four points.”
According to Citibank, using ATS will enable clients to outsource either their complete treasury operations or specific related functions, such as risk management or regulatory reporting, while still ensuring FAS 133/IAS 39 compliance.
By offering ATS over the Internet, clients will have access to straight-through processing, inputting of deal requests, authorisation of transactions and access to real time positions on a global basis, the bank says. By integrating the treasury platform with the full range of Citibank and third party services, the bank is providing corporate treasurers with a complete picture of their positions regionally and globally, and leverages Citi’s global network as well as its services, according to bank officials.
“Citibank is designing their outsourcing solution in response to customer requirements and in so doing, answering the needs of treasurers,” says Alex Etherson, European treasurer for PPG Industries, a multinational chemical company and client of ATS. “The investment comes at the right time and provides the right tools.”
Sultan points out that although the service is being driven by Citibank’s European operation, (from London) it has a global focus. The bank intends to set up regional hubs to serve North America and Asia by the beginning of next year, which will enable the bank to resolve time sensitive issues locally and ensure that customers are served as efficiently as possible, he says.
Economies of Scale
Ineke Bussemaker, global head of ATS, points out that with its 80-strong support team, outsourcing to Citibank means companies have access to a deeper well of expertise than they might otherwise be able to afford.
“Eighty people in the organisation provide a lot of back-up,” she says, “And this approach offers a number of economies of scale that both we and the customer can enjoy. Frankly, it saves them having to reinvent the wheel, and, with the level of staff we have, if there is ever a problem it is likely to be fixed more quickly because we will have seen it before.”
ATS is designed such that clients can relinquish as much or as little of the day to day control of their treasury as they wish. “If a customer decides to outsource, we can provide whatever level of involvement they want,” says Bussemaker. “The customer has the ability to buy the system and operate it themselves, let Citibank operate it for them, or any level of participation in between. We will have no decision-making power beyond what is agreeable with the customer.”
Bussemaker stresses, however, that while companies can simply let Citibank mind the back office and carry out their own foreign exchange trading, there are attractive economies of scale to be enjoyed by letting the bank carry out trades on their behalf. “We have foreign exchange, money market and commercial paper traders operating on behalf of our customers, so there are benefits for our customers in letting us net trades to attract better rates.”
The system was developed in conjunction with Trema, the financial services software provider, as part of a non-exclusive global deal. It officially launched in mid-August, and although none of Citibank ATS’s roughly 75 customers are using the online version as yet, the bank is wasting no time in contacting them to extol the system’s virtues.
“We are approaching our customers and telling them this is a wonderful opportunity,” says Bussemaker. “In terms of our competitors trying to offer a similar system, you have to ask, if they are not in this business today, are the barriers to entry too high? Is it worth the set-up costs when you only have 10-15 customers?”