Cash & Liquidity Management In Europe

Banks and other suppliers in Europe offer some of the most advanced cross-border liquidity management solutions available today. There are now several locations in Europe for managing global multi-currency exposures and these locations combined with the slow but inexorable development of SEPA, is producing even more effective liquidity management solutions. Europe has a wide range of cash and liquidity management systems and services ranging from some of the most advanced in Western Europe to quite limited solutions in Eastern Europe. In Europe there are some 45 countries, which for cash and liquidity management analysis, can be grouped into:

  • Western Europe in which the main countries are Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom
  • Central and Eastern Europe in which the main countries are Albania, Armenia, Azerbijan, Balarus, Bosnia and Herzgovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Latvia, Lithunia, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovak Republic, Slovenia, Turkey, Ukraine.

Single European Payments Area
The development of the Single European Payments Area (SEPA), the world's first major attempt to develop a multi-country payment and cash management environment, is being driven by the European Commission and the European Central Bank who "see SEPA as an integrated market for payment services, which is subject to effective competition and where there is no distinction between cross-border and national payments within the euro area. This calls for the removal of all technical, legal and commercial barriers between the current national payment markets." (Joint statement from the European Commission and the ECB, May 2006) 

There has been progress in the achievement of the Commission's and the ECB's dream, e.g. the adoption of the legal framework for payments systems (the Payment Services Directive), the start of the SEPA Credit Transfer and Direct Debit schemes, but at the moment SEPA is almost irrelevant for companies, offering few benefits of any significance now or for some time.

At the moment, not all countries, banks and companies are fully operational with the new SEPA systems and services. SEPA is, as the ECB puts it, in the Migration Phase. In June 2010 the SEPA Credit Transfer (SCT) scheme, which was launched in January 2009, was used for 9% of credit transfers in the euro area and the SEPA Direct Debit Scheme (SDD), launched November 2009, was used for some 0.05% of all direct debits in SEPA. Not surprisingly the Commission and the ECB are considering setting a deadline for migration to the SEPA payment schemes. Eventually the authorities will name the day for SEPA payment schemes to completely replace the national schemes throughout SEPA, not just in Luxembourg as they do now.

Although companies and banks are slowly putting together systems and solutions that will fully exploit the full potential cost savings and efficiency improvements when the SEPA vision is fully implemented, at present the most sensible course of action for most companies is to ignore SEPA. Banks' corporate customers should instead focus on the efficiency of their mass payments and collections, and liquidity management in the European region as a whole not just in SEPA and find a bank that will help them take advantage of the SEPA payment schemes and opportunities when and only when it is cost-effective for them to do so.

Main Developments
The main developments in cash and liquidity management solutions in Europe are currnetly focusing on:

  1. SEPA 2.0 where companies and banks are building and improving on the initial systems and services they introduced in the first phase of SEPA 
  2. improving pan-European cash and liquidity management as the countries in Eastern Europe introduced improved payment services and reduce local regulations in restricting movement of liquidity.

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