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Waste not, want not: BAML recycles parts to build new treasurer tool

The quickest solution is often to use what you already have. Bank of America Merrill Lynch (BAML) has taken that to heart with the development of its new Liquidity Express tool, which combines aspects of three existing services to help corporate treasurers in a new way.

To create it, the bank used parts of its Global Liquidity Platform (GLP) and CashPro Assistant forecasting capabilities and bolted them onto its virtual account management (VAM) offering. And as the three parts of Liquidity Express are already available off-the-shelf, existing customers face less of a challenge in using it.

In a nutshell, Liquidity Express is an alternative solution to notional pooling and physical cash concentration, which uses virtual accounts as the conduit of funds. Clients are able to consolidate funds from across accounts to a single balance in one account. By using virtual accounts they can monitor and report on the cash transfers. This removes the need for complex pooling structures, which are often only an option for the most sophisticated treasury departments.

Mark Smith, 

Mark Smith, head of global liquidity in BAML’s global transaction services (GTS) division, describes how the three elements interact. “Our VAM tool enables a self-service facility for treasurers who can easily set up additional virtual accounts online under the head of the one physical account. Crucially, treasurers can close virtual accounts with equal simplicity.

“Our GLP engine, which underpins physical pooling, enables the transfer of funds between virtual accounts and allows them to virtually borrow from, and lend to, one another. Finally, our reporting tool, CashPro Assistant provides the visibility and analytics treasuries needs to run the virtual structure effectively.”

Stand-alone or bolt-on

BAML reckons this is a way to provide a better overview and understanding of liquidity positions to smaller companies. But for larger corporates there are additional benefits too.

“For more sophisticated businesses, Liquidity Express can also complement a broader multi-currency notional pool,” says Henrik Lang, head of liquidity for GTS EMEA at BAML. “It does have the advantage of being used in tandem with existing liquidity structures, or as a stand-alone liquidity tool, allowing treasurers to lower running costs due to reduced number of physical accounts and sweeps.”

The product is also a good demonstration of how existing technology can be repurposed to address a specific pain point. “We’re thinking innovatively to meet our clients’ needs and address their challenges,” says Lang. “For example, clients can be up and running with Liquidity Express by simply plugging into CashPro and designating an existing physical account to run the virtual accounts from.”

At launch it is available on bank accounts based in the UK and Ireland, regardless of where the company itself is based. “Liquidity Express supports multi-currency structures and it is offered in pounds, US dollars and euros,” adds Lang. “Treasurers will only need one separate physical account for each currency to pool the funds via a virtual account arrangement.”

The key element in this is the ability to operate virtual accounts, but this is not a simple tool to engage with. Virtual accounts are unique account numbers that sit beneath one physical parent account. The holder of the parent account can give a virtual account number to each of its suppliers, making it easier to understand which payments have been made and from which company. All payments are funnelled by the bank into the physical parent account, consolidating the funds in one location.

Lothar Meenen,
Deutsche Bank

And Lothar Meenen, global head of corporate cash sales and lending at Deutsche Bank, cautions that virtual accounts are not a universal solution: “To use virtual accounts institutions have to navigate the regulations and limitations in place,” he says. “They are not the right solution for every company, it has to be assessed if it is the right way to go.

“Some jurisdictions will require real accounts for some services, such as Spain, which stipulates real accounts for tax payments.”

The virtue of virtual

For companies that can go ahead with it, there are certainly savings to be had. “With virtual accounts, treasurers only need to pay the account management fee once for the physical account,” says Smith. “So in addition to being a powerful account structuring tool, Liquidity Express eliminates the time burden associated with opening and closing traditional physical accounts, and lowers treasury costs.”

There are other benefits from not having to open multiple physical accounts. Meenen says: “Adding virtual accounts rather than physical accounts alleviates the additional KYC requirements. Clients can enhance their internal controls and also reduce internal fraud risk as payments are ultimately getting executed through one real bank account.”

While that is an advantage for customers, some banks may see this reduction in the number of accounts as a financial hit they are not willing to take.

Says Meenen: “The benefit of using virtual accounts is primarily with the client and less so the bank. They can consolidate down the number of accounts and, ultimately, the banks being used. It takes time and project management to be successful. Some companies want to go for the one-bank approach, but not every bank can afford the technology investment to offer virtual accounts.”

Although virtual accounts are not an option for all companies, they do present the possibility of operating a more sophisticated treasury operation to a wider range of treasurers. BAML’s Smith says: “Liquidity Express was developed as an alternative to notional pooling and physical cash concentration. It leverages a virtual account arrangement to help reconcile and report fund transfers from multiple accounts into a single balance position.”

Meenen adds that the wider IT landscape of companies needs to be taken into account: “When embedding virtual accounts into existing treasury processes it typically is an evolutionary step in a wider treasury centralisation and optimisation exercise, as opposed to a stand-alone measure.”


While Liquidity Express is an innovation in the use case for virtual accounts, Meenen does not see liquidity management becoming a key motivation for corporates to use them. Instead, he believes the adoption of virtual accounts comes as part of a wider trend to streamline the number of accounts in use.

“Virtual accounts have come on top of the consolidation seen under SEPA [the Single Euro Payments Area],” says Meenen. “There has been a change in the mind-set of the treasurers. They want more rationalisation and control.”

The aim of the treasurer is to have a better knowledge of cash positions. “Treasurers want views of their positions as there is a still a big challenge over visibility,” adds Meenen. “Some of our clients have 4,800 accounts with over 500 banks; is there really high visibility? There is risk involved in not having the knowledge.”

The arrival of instant payments will possibly be a catalyst for treasurers to evaluate their liquidity management structures, especially among those with consolidated accounts.

“With not as many accounts to manage, there can be a refocusing of attention on the inflow of instant payments and, consequently, even intra-day reconciliation, which in turn can enhance credit management and drive sales activity,” says Meenen. “Treasurers may want to think about instant virtual pooling.”

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