Published: May 01, 2013
Achieving Multi-Bank Efficiency in China
Alstom is a global leader in the world of power generation, power transmission and rail infrastructure and sets the benchmark for innovative and environmentally friendly technologies. Present in more than 100 countries worldwide, Alstom generated 2011/2 sales of €19.9bn and employs more than 92,000 people. The company has been investing in China for over 50 years, with 33 Chinese entities, mostly located in eastern China. At BNP Paribas’ Cash Management University, Jackson Xu, regional treasurer of Alstom, explained how the company is addressing the challenges of a multi-bank environment in China using innovative technology provided by BNP Paribas.
Alstom has been investing in China for over 50 years, with 33 Chinese entities, mostly located in eastern China
Alstom’s Chinese treasury supports the treasury and cash management needs for all entities in China on a centralised basis. Our responsibilities include cash management, risk management, bank guarantees, financing, managing the corporate card programme, and managing the relevant treasury systems and tools. In doing so, we aim to promote efficiency, control and simplicity through standardisation, automation and economies of scale. In addition, we provide expert guidance to group entities on issues such as changing regulation.
Managing cash and treasury in China brings a variety of complexities, some of which differ from those in other regions. For example, the regulators PBOC and SAFE oblige companies to open separate foreign currency and RMB accounts for various purposes with different banks. For foreign currencies, these include: capital accounts; current accounts; FX debit accounts; frozen accounts; FX loan accounts, and others for specific business purposes. For RMB, these include: basic accounts; current accounts; loan accounts; tax accounts; social insurance accounts, as well as others for specific reasons. For example, foreign currency inflows come into a frozen account and have to be specifically released through the appropriate administrative and documentation processes. This variety of accounts poses particular challenges for treasury, not least the quantity of bank account administration required, fragmentation of bank relationships, resource-intensive systems management, and ‘trapped’ cash.
To address these challenges, we approached partner bank BNP Paribas for a solution. BNP Paribas proposed its Multi-Bank Solution (MBS). This would allow us to manage accounts with multiple banks through a single electronic channel and enable us to standardise payments and collections processes in a secure environment. We quickly recognised the benefit of this approach. MBS connects to multiple banks through a host-to-host connection and converts the various formats transmitted and required by each bank (which are not SWIFT formats) into a standard international SWIFT format. This is then integrated with Connexis, BNP Paribas’ international electronic banking system, which is in turn integrated with our ERP (figure 1).[[[PAGE]]]
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The solution includes workflow tools such as approvals within the system to secure and standardise business processes across banks, accounts, entities and flow types. Furthermore, it facilitates liquidity management such as cash pooling by checking balances before cut-off times and creates payments between local accounts and BNP Paribas based on defined target balances. Although the system has powerful capabilities, it is easy to use and provides comprehensive query and reporting tools.
We have adopted a phased approach to implementation: we are currently connecting MBS to our ERP, at which stage we will then connect to SWIFT. The implementation of MBS offers considerable benefits to our treasury centre in China, and contributes significantly to our global treasury EASE project (Efficiency; Acceleration; Simplification; Empowerment). By utilising our resources more effectively, standardising processes, formats and integration, and creating a secure, robust control framework, we can focus more on value-added business activities that leverage our cash and treasury management expertise.
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