Cash Management in the Baltic States

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Eesti Ühispank LatvijasUnibanka VilniausBankas BOS

Cash Management in the Baltic States

2004

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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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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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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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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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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



• normal (T+2)

• urgent (T+1)


• EU payments

• LTL through Clearing Centre or RTGS

• No float for domestic outgoing payments if submitted to the bank before cut-off time



• normal (T+2)

• urgent (T+1)


• EU payments

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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


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Legal issues related to Cash Management set up

• 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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Liquidity management

Time deposit

Automatic overnightdeposit

T-bills

Current account

Money market funds

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Currency risk

• Currency - Kroon from 1994. • Currency board. Peg to Euro.• ERM2 June 2004 • Developed market of FX

derivatives for currency risk management.


• 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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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


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


Pin calculator

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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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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

Documents

Cash Management in the Baltic States