Inhouse Bank EN
Inhouse Banking
When a company’s central finance department offers banking services to its own subsidiaries, this is referred to as an in-house bank. If a subsidiary needs money or has surplus liquidity, it simply asks the parent company about financing and investment options. In addition, the head office can act as an internal clearing center for intragroup receivables and payables or as a hedging specialist for financial risks accumulated across the company. If the in-house bank handles payment transactions for other subsidiaries, this is usually referred to as a payment factory.
Contents
Group Treasury
A particular advantage of Trinity TMS is that financing and investment options can also be offered to the company’s own subsidiaries within the framework of the in-house bank. Local users inform the head office of their needs and usually receive better conditions than from external counterparties. Central financial management keeps track of all receivables and payables, can apply market-based interest rates to them, and can refinance itself externally or temporarily invest surplus funds.
As long as the banking transactions are carried out for the company’s own subsidiaries and not to meet third-party needs, the in-house bank does not require a banking license and is subject neither to the German Banking Act (KWG) nor to BaFin supervision. However, operating an in-house bank across national borders should always be legally reviewed before it is set up.
Trinity TMS Functions at a Glance
Trinity TMS offers numerous functions for setting up an in-house bank, which can be implemented as required and expanded over time, e.g.:
- Management of interest-bearing intercompany accounts for internal settlements
- Administration of all financial transactions with the company’s own subsidiaries, e.g. intercompany loans, shareholder loans, letters of comfort, guarantees, FX and interest rate hedges
- Mapping of all transactions on interest-bearing intercompany accounts
- Creation of cash pool statements and monitoring of the banks
- Calculation and posting of interest and interest accruals
- Automatic mirroring of planning data in the intercompany area
Creation of cash pool statements and monitoring of the banks
- Calculation and posting of interest and interest accruals
- Automatic mirroring of planning data in the intercompany area
- Creation of electronic account statements for intercompany accounts worldwide
- Multilateral netting for internal settlement of receivables
- Setup and monitoring of internal credit lines and limits
- Market-based interest rates through connection to official key interest rates
- Individual margin definition depending on the counterparty’s creditworthiness
- Reporting per subsidiary/group of subsidiaries from the perspective of the head office and the counterparty
Benefits
Maximum Transparency and Audit Compliance
- Improved overall view of all cash flows and financial transactions by including all subsidiaries
- Control over financing, investments, risks and hedges
- Documentation of agreements and workflows
- Monitoring of each subsidiary’s capital requirements
- Prevention of embezzlement and other fraudulent activities
- Overview of all accounts and authorized signatories in bank account management
- Possibility of reducing accounts and the associated risks
- Traceability of processes, workflows and market conformity
Time and Cost Savings
- Centralized management leads to savings, e.g. due to
- the elimination of the costs of local banking relationships and their administration
- improved bank conditions through economies of scale and, as a result,
- improved conditions for the affiliated subsidiaries
- Optimized use of internal financing potential
- Discovery of previously untapped reserves
- Interest optimization through system-supported disposition proposals (account levelling)
- Concentration of expertise for the various financial areas
- reduced use of resources in local subsidiaries
- Potential profit generation through profit center organization
Process Optimization
- Uncomplicated processing through predefined counterparties
- Fast deal conclusion between known parties
- Storage of individual margins for intercompany financial transactions
- Error prevention through secure processes and defined workflows
- Automatic interest calculation on internal transactions
- Reduced workload thanks to the mirroring function
- Straight-through processing possible from request to posting in the ERP
Accounts and Statements
As an “in-house bank”, the central finance department offers its affiliated subsidiaries financing and investment options, hedges (e.g. letters of comfort or interest rate hedges) and, if required, exchange options for foreign currencies in the form of internal FX transactions. It manages the master accounts of cash pools and, for example, settles intragroup receivables and payables multilaterally as part of netting.
All these activities generate cash flows that can be mapped to accounts in the treasury management system, just like at a bank. In contrast to “external” bank accounts, these accounts are referred to as “internal accounts”, clearing accounts, cash transfer accounts or intercompany accounts (ICA). Like a current account, internal accounts should allow fixed or variable interest to be calculated and settled using various methods. Account holders are informed either directly in the treasury system or via reports or electronic statements, just like with “external” bank accounts.
Trinity TMS Functions at a Glance
- Creation of intercompany accounts for different purposes
- Information on transactions and account balances available to the parties involved at any time
- Central overview/current status of all activities
- Support for various interest and settlement methods
- Calculation and posting of interest settlements and accruals
- as a posting basis,
- posting instructions and/or
- electronic account statements can be generated
Benefits
Time and Cost Savings
- Creation of intercompany accounts for different purposes
- Information on transactions and account balances available to the parties involved at any time
- Central overview/current status of all activities
- Support for various interest and settlement methods
- Calculation and posting of interest settlements and accruals
- as a posting basis,
- posting instructions and/or
- electronic account statements can be generated
Risk Reduction
- Limitation of foreign exchange risk by potentially dispensing with accounts abroad
- Error prevention through automated in-system processes
Process Optimization
- Automatable processes from interest settlement to posting
- Simplified procedures through predefined counterparties
- Faster processes through internal approvals
Maximum Transparency and Audit Compliance
- Transactions and settlements traceable at any time
- Option to monitor internal lines and limits
- Easy research options
- A wide range of information options for all parties involved
Multilateral Netting
In companies with production and distribution subsidiaries, multilateral netting replaces the issuing of invoices on the one hand and their verification and settlement by bank transfer on the other.
Since all subsidiaries ultimately work towards a common goal and software-supported clearing presents all transactions transparently, the netting process can be extremely simplified and accelerated with Trinity TMS.
Because resources previously used for invoicing, dispatch, verification, payment and incoming invoice control are freed up, and external costs for postage and transactions are largely eliminated, many companies can also achieve substantial savings.
The flexible module allows numerous variants that can be adapted to the needs of the respective company. A standardized input interface ensures that the required data can be imported quickly and easily from a wide variety of sources – worldwide, if necessary.
Trinity TMS Functions at a Glance
- Automated multilateral clearing via a netting center
- Receivables- and/or payables-driven
- Import of receivables or payables can be automated
- Mapping of transactions on interest-bearing intercompany accounts
- Automatic mirroring on the internal counter-account
- Periodic or permanent (daily intercompany clearing)
- Dispute management
- Cross-currency clearing possible
- Settlement by netting or periodic settlement via actual payments
- Creation of statements
Benefits
Process Optimization
- Straight-through processing from the import of receivables through multilateral clearing to the automated posting of netting results
Time and Cost Savings
- Savings on transaction costs
- Reduced staffing requirements for the intragroup clearing process
Maximum Transparency and Audit Compliance
- Clear presentation of all receivables/payables and clearing results
- Process flow, data sources and calculations traceable at any time
“The internal clearing process is now efficiently automated from the upload of receivables to posting after the netting run.”
Holger Schulz, Head of Treasury, TMD Friction Holdings GmbH
Best Practice/Blogs
Since planning and safeguarding liquidity is the most important task of a company’s finance department, Trinity has published several blog posts on best practice in this area:
