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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Cash Management in the Baltic States
2004
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Agenda• Overview on CM market in the Baltics• Possibilities to manage Liquidity
• CM Solutions• Treasury Solutions
• How to Ensure Efficient CM process
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Payment Structure Non-Cash Payments (number of transactions) % Baltic Region 2004 IIQ
0
20
40
60
80
Cheques Paymentby card
Credittransfers
Directdebits
Estonia
Latvia
Lithuania
Source: Central Banks ofLithuania, Latvia, Estonia
June 2004
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Payment Structure Non-Cash Payments (number of transactions) % Nordic region
010203040506070
Cheques Paymentby card
Credittransfers
Directdebits
Denmark
Finland
Norway
Sweden
Source: ECB Blue Book August 2002
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Usage of Non-Cash Payments Baltic Region
Estonia Latvia Lithuania
Cheques Very limited Declining
Very limited Declining
Very limited
Payment by card Increasing Rapidly increasing Increasing
Credit transfers Dominant Dominant Dominant
Direct debits Limited Increasing
Very limited Very limited Increasing
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Clearing in the Baltics
• EEK through DNS system (file transfer) or RTGS (SWIFT)
• No float for domestic outgoing payments if submitted to the bank before cut-off time of last clearing
• No float for incoming payments
• International payments:
• normal (T+2)
• urgent (T+1)
• express (T+0, EUR, USD only)
• EU payments
ESTONIA LATVIA LITHUANIA
• LVL through Net Clearing System (EKS)or RTGS (SAMS)
• 1 day float for normal domestic outgoing payments.
• No float for urgent domestic payments
• No float for incoming payments
• International payments:
• normal (T+2)
• urgent (T+1)
• express (T+0, EUR, USD only)
• EU payments
• LTL through Clearing Centre or RTGS
• No float for domestic outgoing payments if submitted to the bank before cut-off time
• No float for incoming payments
• International payments:
• normal (T+2)
• urgent (T+1)
• express (T+0, EUR, USD only)
• EU payments
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Cash Pooling in the Baltic Region
Estonia Latvia Lithuania
Local zero balancing
Yes Yes Yes
Notional-pooling Yes Yes Yes
ICP Yes Yes Yes
PAN Baltic ICP Yes
ESTONIA LATVIA LITHUANIA
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Legal issues related to Cash Management set up
• No legal obstacles for local or cross-border cash pooling.
ESTONIA LATVIA LITHUANIA
• No legal obstacles for local or cross-border cash pooling.
• No legal obstacles for local or cross-border cash pooling.
• Cross-border intra-company lending / borrowing is a subject for withholding tax.
• Additional reporting required to Central Bank if cross-border borrowing / lending occurs.
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Liquidity management
Time deposit
Automatic overnightdeposit
T-bills
Current account
Money market funds
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Currency risk
• Currency - Kroon from 1994. • Currency board. Peg to Euro.• ERM2 June 2004 • Developed market of FX
derivatives for currency risk management.
ESTONIA LATVIA LITHUANIA
• Curency - Lats from 1993.
• Fixed exchange rate (+ - 1.0%). Peg to SDR.
• Peg to Euro and ERM2 Jan 2005
• Developed market of FX derivatives for currency risk management.
• Currency - Litas from 1993.
• Currency board. Peg to euro (since February 2002, earlier USD).
• ERM2 June 2004 (Government committed that EUR/LTL rate will not be changed till Euro will be launched in Lithuania).
• Developed market of FX derivatives for currency risk management.
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Other Cash Management products available in the Baltic Region
Product category Estonia Latvia Lithuania
Accounts Current account in local / foreign currency
● ● ●
Payables Domestic / Cross-border ● ● ●
Receivables Domestic / Cross-border ● ● ●
Reporting MT 940 ● ● ●
Bank OfficeInternet Bank
Banking transactions through Internet 24 hours a day
Information on current, term and securities accounts
Balance reporting
Information on bank cards transactions and limits
Credit information
Domestic and international payments
Securities transactions
Pin calculator
The most extensive branch network in the Baltics
Advisory
Client Executives
SWIFT
MT 101, 940
Straight Through Processing has the highest priority
Access to the local clearing
Domestic and international payments
Statements and balance reporting
PC Bank
Banking transactions through PC Bank 24 hours a day
Information on current and term accounts
Balance reporting
Information on bank cards transactions and limits
Credit information
Domestic and international payments
Pin calculator
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
One-point-of-entry to the true ability to handle liquidity management in the Baltic market
FOREIGN BANK
MT940 (daily/weekly/monthly/after every transaction)
by MT101
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31
March
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31
March
Cash
BALANCE REPORTING
PAYMENTS
Parent company
S E B
Edifact
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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS
Customer Services
The customer in one country Local service
Solution in more than one country
Per country or regional service
Partnerbank Local or central service
Who is involved:
Base case: local service under a central service levelFlexibility in service set up, according to agreement and business case