FBAR Regulation Drives Process Improvement



2.0 IntroductionThis chapter presents the review of related literature and studies after the thorough and in-depth search done by the researchers. This will also present the synthesis and relevance for better comprehension of the study.2.1 Related Literature2.1.1 Foreign Literature FBAR Regulation Drives Process Improvement By: Paul BramwellWith the electronic filing mandate of FBAR (Report of Foreign Bank and Financial Accounts) fast approaching at the end of this month, many of our customers are wrapping up projects to ensure they are in a position to meet that deadline.? ?We have been pleased to assist those customers who have taken advantage of the FBAR reporting functionality within our?eBAM solution?in order to file electronically.? FBAR has underscored the need for corporate treasury departments, especially those with a significant number of international bank accounts, to automate the record keeping and reporting of this information within specialized bank account administration technology.An interesting by-product of FBAR has been the increasing number of bank account administration improvement projects within corporate treasury departments.? The legal demand for accurate, comprehensive bank account information has been a key driver for starting these projects.? Too many treasury departments find themselves with fragmented bank account databases, incomplete bank account information, and inadequate bank account administration technology.? FBAR has forced treasury groups to re-evaluate bank account administration policies, procedures, and supporting technology.While the structure and target state of the bank account administration function within treasury may vary from company to company, the following best practices are common within the most efficient treasury departments:The existence of bank account administration policies that govern key activities, such as the opening, closing, and modification of accountsWell documented processes that concentrate the responsibility for opening, closing, and modifying accounts within a central corporate treasury department, or regional treasury centresThe existence of a centrally managed bank account warehouse, using bank account administration software, that ensures data cannot be modified without proper authorityThe use of bank account administration technology in order to do the following:Store all bank and bank account information detail, including signersEnforce bank account administration policies and proceduresAutomate bank account administration reporting, such as FBARCitation: Group Selects Kyriba for International Treasury Management System Roll-Out Kyriba, the leader in cloud-based treasury management software, has been chosen by?FTSE?250-listed?RPC Group plc, to deploy its Kyriba Enterprise SaaS (Software-as-a-Service) treasury management system. RPC chose?Kyriba?after a competitive review, and will use the system to improve its cash visibility, reduce operational risk and streamline reporting across its network of 150+ bank accounts.RPC develops a wide range of food, personal and health care as well as domestic industrial plastic packaging solutions. The company today has more than 50 operations in 19 countries, employing more than 11,000 people, with annual sales in excess of ?1.1 billon. RPC's treasury department will use?Kyribafor a broad range of functions, including cash and liquidity management, bank reporting, and financial transaction management, including debt, FX and investments."RPC has operations around the globe, dealing with a large number of currencies and banking partners. So, it's essential that we have a comprehensive, integrated solution with strong bank connectivity," said?Carl van Gele, RPC's European Finance Controller. "As we are a small treasury team, we need a system which could reliably and accurately automate most of the manual, operational tasks, enabling the team to focus on more strategic initiatives. Our cash pooling is well established across the Group and theKyriba?system will enable our treasury center to operate as an in-house bank. We assessed a number of treasury management system vendors and?Kyriba'swas the only one to fulfill all criteria.""RPC is typical of many companies we encounter today, in that it is growing rapidly, but maintains a lean treasury team," said?Andrew Burns, head of Kyriba?UK. "This means that spending a huge portion of the day on manual tasks simply isn't an option. By streamlining and automating key operational processes, such as bank reporting and cash management,?Kyriba?can help RPC's team focus on more strategic tasks and deliver proactive treasury management for the company."Citation: MANAGEMENT IN INDIABy: Ravi Akula, Head of Product Management, Global Cash Management, Deutsche Bank, IndiaA brief overview of the banking system The Reserve Bank of India (RBI), established on 1 April 1934 and nationalized in 1948, is the central bank of the country. RBI was nationalized in order to control inflation in the country effectively and to use it as an instrument of economic change in the country. Amongst its functions, RBI issues and regulates currency and coin in India, acts as a banker to government and acts as a banker to commercial banks. The government of India initiates measures such as the annual budget and half-yearly credit policy through RBI to keep the country’s burgeoning economy under control. Inflation and interest rates are controlled through variations in measures like the Cash Reserve Ratio, Statutory Liquidity Ratio, Prime Lending Rate, Priority Sector Lending, and through the slack season and busy season credit policies of RBICITATION: Coverage Ratio – Implications for US Financial InstitutionsBy: Rohan Ryan, Head of North America Liquidity Product Solutions Specialists and Stephanie Wolf, Head of Global Financial Institutions and Canada Transaction Services,?Bank of America Merrill LynchThe proposed US liquidity coverage ratio, which is a crucial part of the Basel Ilobal regulatory accord, is broadly seen as more stringent than the Basel Committee’s version and is likely to require investment in systems as well as a reconsideration of business models by some financial institutions.In October 2013, US financial regulatory bodies published their proposals for the implementation of the Basel III liquidity coverage ratio (LCR) in the US. While the final version of the proposal is yet to be published, the principal features of the plan – and its variations from the Basel Committee’s LCR Framework – are now clear: they have implications for many financial institutions (FIs) in the US.The regulatory proposal defines operational deposits and lists specific criteria that must be met for a deposit to qualify for the more favourable ‘operational’ classification within a bank’s LCR calculation. It also includes specified outflow rates for credit and liquidity facilities and defines High Quality Liquid Assets (HQLA), which must be held against assumed outflows.One difference between the US proposed LCR and that of the Basel Committee is that the latter calls for a 2015-2019 timeframe with 60% compliance in the first year, while the US approach has a 2015-2017 timeframe with 80% compliance in 2015. The accelerated timetable reflects a “desire to maintain the improved liquidity positions that US institutions have established since the financial crisis,” according to the Federal Reserve [1].In order to reach 80% compliance by January 1, 2015, FIs’ systems must be 100% capable of calculating all measurements required by the LCR. Therefore, FIs need to invest, build, test and plan for adoption of the LCR immediately.Citation: Local LiteratureTreasury Single AccountTSA is one of the priority projects of the Philippine Public Financial Management (PFM) Reform Roadmap. TSA will enable Government to consolidate cash resources on a daily basis and reduce borrowings currently necessitated by perceived cash shortages arising from holding so many government bank accounts and a fragmented system for handling receipts and payments. The Improvement of Treasury Cash Management Operations Project Implementation Unit (ITCMO PIU) is currently working on the analysis and identification of all government bank accounts, including Off-Budget Accounts (OBAs). Along with the consolidation of all bank accounts held by NGAs, and select highly-subsidized GOCCs, ITCMO also focused on the analysis of current IT systems of BTr and legal and regulatory issues.Citation: MANAGEMENT IN THE PHILIPPINESBy: Belinda G. Madrid, Head of Cash Management, Deutsche Bank AG, ManilaWITH the continuing liberalization of the Philippine economy and breakdown of trade barriers, Filipino companies must now be more efficient to survive in an increasingly global environment. A growing number of the country's companies are beginning to show active interest in cash management techniques and applications, and banks are being challenged to provide the support needed to create the international competitiveness required to take the Philippines into the 21st century.Citation: Related Studies2.2.1 Foreign StudiesSiemensOn behalf of Siemens, we act as a center of expertise for all aspects of risk management, Group financing and payment transactions. Our global treasury know-how and the treasury management-system finavigate? have been developed on the basis of an in-house-banking philosophy.We concentrate Group-wide liquidity on a daily basis, optimize financial risks and manage the treasury-related processes and activities of Siemens. These include:Bank relationship management: Coordination and optimization of the presence of bank partners in the financial markets, selection and maintenance of access to a diversified range of banks and lenders in order to limit the increasing counterpart risk from bank exposureA management overview of all bank accounts and corresponding transactions and?the?electronic transfer of bank statementsFully automated processing of global internal and external payment transactionsCentralized management of interest-rate, currency, liquidity and credit risk, as well as security prices and certain commodity price risksAccounting for all financial processes, including fully automated posting of all transactionsManagement of short-term liquidity to ensure the ability to pay all liabilities using cash pooling and longer-term liquidity managementIn carrying out these activities, Treasury takes management responsibility for most of the group’s liquid assets and financial liabilities and such assets’ and liabilities’ contribution toward the Siemens Group’s earnings, value and risk profile.We manage and monitor all?Group activities on capital markets, including bond issues and negotiations of credit lines.Furthermore, we advise and educate all operative Siemens units regarding all topics related to interest-rate, currency, cash and credit-risk management. Additionally, we support the Siemens units on all financial issues during the M&A process.In the Siemens Credit Warehouse, we bundle Siemens short-term trade receivables and actively manage the Group’s credit risks by selling or hedging exposure to specific customers. These receivables may provide Siemens with an additional source of liquidity, thereby strengthening Siemens’ funding flexibility. Our Credit Database provides operating units with online access to up-to-date credit ratings and valuable credit reports.Siemens Treasury offers a Supply Chain Finance program to wholly owned subsidiaries of Siemens in North America and Europe to optimize the capital efficiency of both Siemens and Siemens suppliers. With the help of Supply Chain Finance, the Siemens Sectors can increase their liquidity without reducing the supplier's liquidity.Citation: LIQUIDATION SYSTEMA comprehensive solution to streamline and automate the process of Liquidating a Solvent Company. In the form of a multi-tab spreadsheet, this system is designed to be re-used for each new solvent liquidation you undertake.The system may be re-used at no extra charge throughout your practice's office, saving a significant amount of time and ensuring consistency. ?You should also consider purchasing the Solvent Liquidation Decision Tree (see right), as a companion to this system. It will guide you further on avoiding numerous associated tax pitfalls.NB: You can act as liquidator for client companies - the Companies Act only debars insolvent companies from appointing their accountants as liquidators.FeaturesInstructions - A comprehensive set of instructions for using the system, including tips and guidance on taxation and general compliance issues.Checklist A - step-by-step checklist of the entire liquidation processData - Holds details of the company, the dates used in the documents, and details of the liquidatorLedger - All-in-one Ledger, Journal, Cash Book, and Trial Balance that keeps track of the monetary transactions of the liquidationDistribution - Calculates RWT, prints a schedule detailing the distribution of equity and imputation credits, and shareholder distribution statements. Can be re-used if the liquidator makes several distributions.Print 1 - Prints a covering letter to the company, Liquidator's consent to act, Directors' resolution, Director's Certificate of Solvency, Letter of Engagement to the Liquidator, and Shareholders' resolution to appoint liquidator.Print 2 - Prints the Liquidator's 1st Report, letters instructing advertisements to be placed in the NZ Gazette and a local newspaper, letter to Inland Revenue, letter to the Bank instructing closure of the account and transfer to the Liquidator, and a similar letter to the holder of funds on deposit.Print 3 - Prints a letter to the Shareholders concerning the distribution of Capital and ReservesPrint 4 - Prints Liquidator's 1st 6-monthly Report, if requiredPrint 5 - Prints Liquidator's 2nd 6-monthly Report, if requiredPrint 6 - Prints letters to the NZ Gazette and the local newspaper setting out the advertisement for removal of the company?from the RegisterTransaction treasury - adding up the benefits of cash flow forecastingCompanies prepare forecasts in order to plan ahead and ensure that effective decisions can be made at the earliest possible time. Cash flow forecasting aims to identify where, when and in what currency cash flows are expected to occur allowing management the ability to optimize the use of available cash, identify and plan how shortfalls will be funded, and how surpluses will be invested.Being able to forecast cash flow is one of the most important elements of treasury management. The primary objective is to ensure that the company has sufficient liquidity (i.e. access to cash) so that it can meet all known obligations and to allow it to continue to function. This discipline is valid in the deal space, both in terms of assessing future cash generation capabilities during the deal process and,?especially in terms of existing private equity portfolio companies, guaranteeing timely and accurate visibility of cash flow is in place to ensure financial covenants are complied with. Any size of business can quickly find itself more vulnerable to a lack of cash than to a lack of profit.Operationally, by predicting shortfalls and surpluses the business can improve investment returns, negotiate better borrowing terms and conditions and minimise external borrowing, optimizing the use of cash and of borrowing facilities and avoiding shocks. When assessing potential surpluses and deficits of cash,?it is necessary to assess not only amounts and currencies, but also the time periods in which the surpluses or shortages will occur.There can be disadvantages to forecasting as well and these mainly revolve around the time, and hence cost, spent by the business in preparing them. Often pushed from every side, further pressures and questions on the forecast variances to tight deadlines can cause friction. However, in today’s liquidity environment, can any business afford not to forecast its cash?Time Horizonsfor cash management purposes there are generally up to three time horizons for forecasting, each serving a different purpose and using different forecasting methods. As the time horizon extends, it becomes more difficult to forecast with accuracy and the usefulness of the forecast can diminish.The key to reliability and credibility is to ensure that the operational liquidity and tactical forecasts, prepared using different methodologies, are comparable across the common period that they cover (i.e. 0-3 months). By ensuring that the forecasts align within acceptable tolerance and materiality levels, the business creates the credibility to encourage decision making on both a short and longer term basis.KPIs, incentivisation and changeIt is a key part of any process to ensure that the business creates the right framework of KPIs and appropriate incentivisation at each level of the process. This can be a difficult area, and it is important to ensure that there are no rewards for under casting cash (thereby creating positive variances, but an opportunity loss for the business). Equally, being penalized twice (once for P&L changes, and again for the cash flow impacts) should be avoided.Longer term forecasts in particular should be subjected to sensitivity analysis, to quantify any uncertainties in the forecast, and any appropriate “what if” scenarios. Information should be reported in a way that is useful to those that use and rely upon it to make decisions. Easy to read dashboards are vital to ensure that outputs are understood by all levels of management, and to instil accountability and responsibility.There is likely to be some organizational change and "pain" involved, and?key steps to a successful implementation include:engaging hearts and minds by effective communication;ensuring understanding through practical and comprehensible materials;embedding disciplines with robust and routine processes; andEncouraging compliance with appropriate KPI's and incentivisation.To summarize, a?fundamental part of the cash and liquidity management process is, as for any process, planning ahead. This is particularly relevant in today’s market of less available and more expensive liquidity. Cash is rarely instantaneously available; the delay may be as short as a day for a payment, or it might be a week if the company is chasing an important sales receipt, out to weeks or months if the company needs to raise equity or to borrow in the capital markets.As a reminder, the?main actions are:Liquidity management?– ensuring available funds as and when required;Minimize cost of funds?– take advantage of opportunities to borrow at lower rates;Maximize earnings?– use and invest surpluses optimally;Foreign exchange?– manage the currency flows to reduce treasury deals;Working capital management?– identify changes for corrective action;Financial control?– compare forecast to actual throughout the business;Investing and funding strategies?– identify structural cash shortages and surpluses;Strategic investment?– funding significant capex or M&A activity from available resources; andStrategic objectives?– compare longer term variances to influence corporate strategy and anticipate market, economic and competitive changes.Citation: Local StudiesSIMM PHILIPPINESSIMM Philippines’ strategy focuses on areas that will expand the rapid adoption of e-money while also deepening financial inclusion. Throughout, project activities demand a strong component of pilot testing and experimentation to create demonstration and catalytic effects for positive feedback and organic, private sector-led growth in the m-money sector, and to build trust for all parties in using e-money. The overall project strategy relies on a two-pronged approach combining location-based pilots with national-level activities and advocacy. By focusing on the key components below the project anticipates a significant impact on the adoption and use of m-money:Payment systemSIMM will provide technical assistance to identify and facilitate ways to streamline m-money payment systems. Accounting for 55 percent of all occurring payment transactions per month, bill payment transactions constitute the single most common money transaction in the country. According to recent research, customers identify accessibility as the main reason to choose one payment service provider more than another. Cost is not identified as the major factor since in most cases clients are not charged fees for payment services. Recipients of these transactions include utility companies, insurance companies, telecoms, and credit card companies with utility payments for water and electricity receiving the largest share of these payments. Throughout the Philippines, consumers are plagued by long lines at utility payment centers creating excessive delays and lost time and resources for both the bill payers and the receiving companies. Increasing bill payment via m-money, which enables users to pay their bills anytime, anywhere, has the potential to decrease these opportunity and economic costs and strengthen a more efficient payment system.Citation: Payroll (e-Payroll) distributionSIMM will provide technical assistance to promote e-payroll disbursements to receptive businesses and government agencies. Given the volume, value, and regularity of salary payment transactions via cash payout, high economic dividends could be achieved by encouraging the conversion of these transactions into m-money payments. Cash handling costs and security risk faced by companies that manage employee payrolls through physical cash payments could be drastically reduced with the adoption of m-money. For many employees, electronic money would imply a more convenient and cheaper way of accessing their salaries. With e-payroll, employees traditionally paid by direct credit to their ATM payroll account would enjoy additional options to cash out at locations other than bank service providers.CASH MANAGEMENT SYSTEM (TSA)The Philippines?Department of Budget and Management?(DBM) has generated savings worth P437.8 million (US$9.82 million) by closing dormant and unnecessary bank accounts of national government?agencies.in a bid to improve government cash management,DBM?has installed a new system called Treasury Single Account that enables the Government to consolidate its cash resources on a daily basis, said?DBM’s Secretary Florencio Abad?(pictured).As a result of the improved visibility,?DBM?has shut down 266 dormant bank accounts as of 31 December last?year.Before the implementation of this system, the Government was incurring debt to address perceived cash shortages because the cash was lying in many bank accounts and hidden from the Treasury’s view due to its fragmented cash management system, explained?Abad.“Once [the system] is fully set in place, the Treasury Single Account will provide the government with a full view of its cash resources on a daily basis, and enable us to ‘sweep up’ dormant cash to fund upcoming payables. The P437.8 million (US$9.82 million) that we recently saved is much smaller than the billions that we can further save from borrowings and money handling costs,” he?said.Abad further noted that the Treasury Single Account is among the key projects under the Philippine Public Financial Management Reform Roadmap, which seeks to enhance transparency, accountability, and efficiency in the management of public?funds.“The Aquino Administration is working hard to transform Philippine public financial management. Through game-changing reforms such as the Treasury Single Account, we’re making sure that government spends within its means, on the right priorities, and with measurable results,” he?added.Dormant accounts refer to collections deposited in Authorised Government Depository Banks (AGDBs) but have remained inactive for more than five years. Previous reports by the?Commission on Audit?(CoA) have pointed out that dormant accounts form part of the huge cash balances being maintained by government agencies in AGDBs and other institutions. CoA will soon issue guidelines and procedures for the transfer of the P437.8 million-worth of savings from all the dormant bank accounts to the Government’s General?Fund.DBM?Undersecretary and?CIO?Richard Moya explained that the Treasury Single Account requires a complete inventory of existing bank accounts of government agencies, along with the closure of dormant ones. At present, the?Bureau of Treasury?(BTr) is still completing the inventory of said bank?accounts.“The Treasury Single Account is one of the core elements of the?Government Integrated Financial Management Information System?or?GIFMIS, a government-wide?ICT?solution that will provide accurate and real-time information on government’s finances. This will span the whole financial management process—from budget preparation and programming, to fund release and accountability reporting,” Moya?said.The Philippine Public Financial Management Reform Roadmap is steered by the?DBM,Department of Finance, CoA, and BTr. Other major financial management reforms include the Unified Account Code Structure, the Comprehensive Human Resource Information System, and Performance-Informed Budgeting, among?others.Citation: Synthesis and Relevance to the StudyIn Paul Bramwell article FBAR Regulation Drives Process Improvement “FBAR has underscored the need for corporate treasury departments, especially those with a significant number of international bank accounts, to automate the record keeping and reporting of this information within specialized bank account administration technology.” Means that the treasury needs a wide range of information and data in able to handle the process. "RPC is typical of many companies we encounter today, in that it is growing rapidly, but maintains a lean treasury team," said?Andrew Burns, head of Kyriba?UK. In this article Andrew Burns well said that a company or institution needs an effective treasury team management.On the other hand local government unit currently improving this project to come up with the better business process, The Improvement of Treasury Cash Management Operations Project Implementation Unit (ITCMO PIU) is currently working on the analysis and identification of all government bank accounts, including Off-Budget Accounts (OBAs). In Belinda G. Madrid article, the Philippines should be more competitive and focused on the increasingly global environment. “A growing number of the country's companies are beginning to show active interest in cash management techniques and applications, and banks are being challenged to provide the support needed to create the international competitiveness required to take the Philippines into the 21st century.” Thus, a well organized treasury system in any institution like those sated must pursue for its better services. ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download