Learning Objectives:

  • Understand cash management products and services.

  • Explain the role of cash management in corporate banking.

  • Identify cash management solutions for corporate clients.

5.1 The Role of Cash Management

Cash management is a core corporate banking service that helps clients manage their liquidity, payments, and working capital. The HKSI Corporate Banking course focuses on “cash management products and services, outlining their importance for customers and banks, and the costs and benefits of using these products and services” .

The HKSI course asks students to “recognize the attractions and drawbacks of cash management products and services from both the corporate customer’s and the bank’s perspective” .

5.2 Cash Management Products

The HKSI course covers “the various products that can be used to fund corporate customer accounts” and “the different types of account that corporate customers may open” .

Key Products:

  • Current Accounts: The primary operating account for corporate clients. The Coursera course identifies “Current Account” as a core corporate liability product .

  • Fixed Deposits: Term deposits offering higher interest rates for surplus cash. The Coursera course includes “Fixed Deposit” as a core product .

  • Salary Accounts: Accounts for processing employee payroll. The Coursera course includes “Salary Account” as a product .

5.3 Sweeping and Pooling Arrangements

The HKSI course covers “detailed coverage of sweeping and pooling arrangements and how these can be used to manage liquidity and optimize interest costs/earnings” .

Cash Sweeping: Automated transfer of surplus funds from subsidiary accounts to a central concentration account.

Notional Pooling: A method of interest optimization where balances of multiple accounts are netted for interest calculation purposes, without physically moving the funds.

Cash Concentration: The process of consolidating funds from multiple accounts into a single account to maximise investment returns and reduce borrowing costs.

5.4 Cash Management Product Risks

The HKSI course covers “cash management product risks such as money laundering, know your customer, fraud, and operational risk” .

Key Risks:

  • Money Laundering: The risk that corporate cash management products could be used to launder illicit funds.

  • Know Your Customer (KYC): The risk of failing to properly identify and verify corporate customers.

  • Fraud: The risk of internal and external fraud in cash management operations.

  • Operational Risk: The risk of errors in processing, system failures, and other operational issues.

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