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Multibanking
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Multibanking
What is Multibanking?
• Using many banks for cash management
• Use one bank as lead cash management bank
• Use only lead bank’s electronic banking • All banks report balance and transactions into
lead bank (using MT940s)
• Lead bank passes on information in standardformat
• Use lead bank’s EB system to initiate paymentinstructions to all banks (MT101,198 or 103)
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Multibanking
Advantages of Multibanking
• Able to use the best bank in each country
for local cash management needs
• Only one EB system to manage all bank
accounts
• Lower systems/software costs• May use best EB system or use third party
system
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Multibanking
Problems with multibanking - Reporting
• MT940 is an end of day message
• Normally only one transmission availableper day
• Intra-day reporting can be difficult or impossible on a multibank basis
• Most banks are able to do intra-dayupdates internally (MT941 942) but cannotsend to other banks
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Multibanking
Reporting (cont)
• Bank delivering service not responsible for
– Non-delivery – Late delivery
– Quality of information
• Lack of privacy?
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Multibanking
Problems with multibanking - reporting
• Some banks will not cooperate
• Extra cost – paying two banks for information
• Some banks cannot report via MT940s – At all (a few)
– Automatically
– To a good standard
• May be better off buying independent software – Poll parser
– May get intra-day or real-time information
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Multibanking
Problems with multibanking – payments
• Paying two banks to make a payment
• Need bilateral agreements in place• Liability issues. There may be a lack of
clarity as to whom is responsible
– Logically – Morally
– legally
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Multibanking
Problems with multibanking - payments
• Standard bank to bank message (MT103) – Auto processing?
– Designed to debit sending bank’s nostro account
• MT198 message – Old standard few banks can auto process
• MT 101 – Newer standard – not all banks can handle fully
automated – Automated triggering of MT 101s based on MT940
series
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Multibanking
Problems with multibanking – Payments
• In some banks means all payments
received
– Fall into repair queue
– Processed with manual intervention
– Subject to delays- missed cut-offs
– Subject to input errors?
– Cost more to process than an auto payment
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Multibanking
• Multibanking – payments
• Not suitable for treasury settlements with
manual intervention
• Is it good enough for third party payments
• No end to end authentication
• No confirmation of execution• Often no ‘non-urgent’ option
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Multibanking
Problems with multibanking – payments
• Who do we call when it goes wrong?
• Who sorts it out?
• Who pays the compensation
• What is covered in the service level agreement
with lead bank?
• What documentation will need to be signed• Who is legally liable for what?
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Multibanking
Swift Involvement
• Caveat
– not all banks are members of SWIFT – Not all banks can send and receive all
message types (e.g. MT942)
• Message standards not always applied in
a consistent manner
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Multibanking
Swift Involvement
• SWIFTNet – SWIFT’S Internet Protocol based
platform. Secure and interactive
• Messaging consists of
– SWIFTNet Fin, store and forward
– SWIFTNet Fin Copy, clearing and settlement
– SWIFTNet InterACT, real time message exchange
– SWIFTNet FileACT, bulk messages
– SWIFTNet Browse, e.g. correspondent banks may
look at their Nostro a/cs
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Multibanking
Swift Involvement
• MT101’s Credit Beneficiary a/c
MT101
Debit
Customer a/c
Custome
r
SWIFT
CM Bank
Receiving
Bank
Local
clearing
Beneficiar
y Bank
M ltib ki
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Multibanking
Swift InvolvementMultibank reporting
Customer
Corporate Electronic
banking system
Multibank reporting
MT940/1/2
MT940/1/2
MT940
MT940/1/2
Lead bank’s own customer A/cs at other banks A/cs at own
a/cs In country In country and o/s branches o/s
Lead CM
Bank
SWIFT
Networ
k
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Multibanking
Swift Involvement
Corporate Access to SWIFT
• MA-CUG
Co A
Co B
Co C
SWIFTNe
t
SWIFTNe
t
MACUG
Sponsor
Bank
Bank 1
Bank 2
Bank 3
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Multibanking
Swift Involvement
• But a company may need to join multiple
MA-CUGs to cover all its banking needs
• Have been criticised as being
– High cost
– Administratively cumbersome
– Preserves a restrictive, proprietary
relationship
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Multibanking
Swift Involvement
• So SCORE, Standardised Corporate
Environment
Company
A
SWIFTNe
t
Bank A
Bank B
Bank C
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Multibanking
Swift Involvement
SCORE
• Company must be listed
• Countries must support FATF• Companies must comply with corporate
governance and reporting requirements
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Multibanking
Swift Involvement
• Benefits for Corporates
• Co can use SWIFT secure network
• MA-CUG membership improves STP
• Rationalised infrastructure
• 24/7 availability
• SWIFTNet may be used as standard for bank
communications• Browsing for intra-day leads to better global
liquidity management
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Multibanking
Swift Involvement
• So what are cash management benefits?
• Enhanced cash reporting
• Bulk payments processing• Online payments initiation