Tag: Example 1 – Cash pool leader

TPG2022 Chapter X paragraph 10.137

A functional analysis shows that M is not subject to credit risk, which remains with the cash pool members, but merely performs a co-ordination function. Furthermore M is not performing the functions or assuming the risks that a bank would. Therefore M would not earn the kind of reward that a bank would earn such as retaining the interest spread between deposits and loans. Accordingly, M would earn a reward commensurate with the service functions it provides to the pool ... Read more

TPG2022 Chapter X paragraph 10.136

As a result of the arrangements in place, M pays less interest to the bank or receives more interest than would have been the case absent the pooling arrangements ... Read more

TPG2022 Chapter X paragraph 10.135

Under the cash management services agreement the bank makes any transfers necessary to meet the target balance for each pool participant with any net surplus deposited by M or any net overdrawn position being met by the bank lending to M. The facility that M may draw on is guaranteed by X. The third- party bank pays interest to, or receives interest from M based on the overall, pooled, position. In this instance, M receives surplus funds from MNE group members H and J and provides funds to MNE group members K and L which have a funding need. Interest on the balances of the pool participants is charged or paid in accordance with the pooling agreements ... Read more

TPG2022 Chapter X paragraph 10.134

M sets up an intra-group cash pooling arrangement with an unrelated bank. Legal arrangements are put in place for all participants which allow transfers to or from M’s cash concentration account to meet a specified target balance for each pool participant ... Read more

TPG2022 Chapter X paragraph 10.133

X is the parent entity of an MNE group which has subsidiaries H, J, K, and L which participate in a physical cash pooling arrangement with fellow subsidiary M acting as cash pool leader. All participants have the same functional currency and that is the only currency in the pool ... Read more

TPG2020 Chapter X paragraph 10.137

A functional analysis shows that M is not subject to credit risk, which remains with the cash pool members, but merely performs a co-ordination function. Furthermore M is not performing the functions or assuming the risks that a bank would. Therefore M would not earn the kind of reward that a bank would earn such as retaining the interest spread between deposits and loans. Accordingly, M would earn a reward commensurate with the service functions it provides to the pool ... Read more

TPG2020 Chapter X paragraph 10.136

As a result of the arrangements in place, M pays less interest to the bank or receives more interest than would have been the case absent the pooling arrangements ... Read more

TPG2020 Chapter X paragraph 10.135

Under the cash management services agreement the bank makes any transfers necessary to meet the target balance for each pool participant with any net surplus deposited by M or any net overdrawn position being met by the bank lending to M. The facility that M may draw on is guaranteed by X. The third- party bank pays interest to, or receives interest from M based on the overall, pooled, position. In this instance, M receives surplus funds from MNE group members H and J and provides funds to MNE group members K and L which have a funding need. Interest on the balances of the pool participants is charged or paid in accordance with the pooling agreements ... Read more

TPG2020 Chapter X paragraph 10.134

M sets up an intra-group cash pooling arrangement with an unrelated bank. Legal arrangements are put in place for all participants which allow transfers to or from M’s cash concentration account to meet a specified target balance for each pool participant ... Read more

TPG2020 Chapter X paragraph 10.133

X is the parent entity of an MNE group which has subsidiaries H, J, K, and L which participate in a physical cash pooling arrangement with fellow subsidiary M acting as cash pool leader. All participants have the same functional currency and that is the only currency in the pool ... Read more