Bank overlay structure

Companies operating on an international scale frequently have trouble reconciling the need for efficient cash concentration operations with the use of local banking partners with whom they may have long-standing relationships and valuable business contacts. The solution is the bank overlay structure.

A bank overlay structure consists of two layers. The lower layer is comprised of all in-country banks that are used for local cash transaction requirements.  The higher layer is a group of networked regional banks, or even a single global bank, that maintains a separate bank account for each country or legal entity of the corporate structure. Cash balances in the lower layer of banks are swept into the corresponding accounts in the higher layer of banks on a daily basis (where possible, subject to cash flow restrictions). These sweeps are accomplished either with manual transfers, SWIFT messages from the networked banks to the local banks, or with standing authorizations to the local banks.  This approach allows funds to be consolidated on either a regional or global basis for centralized cash management.

Related Courses

Corporate Cash Management
Treasurer’s Guidebook