Cash and liquidity management
A cash pool is a structure involving several related bank accounts whose balances have been aggregated for the purposes of optimising interest paid or received and improving liquidity management.
A cash pool can be physical or notional.
A physical cash pool is a concentration account used for the purposes of managing liquidity. Surplus funds are physically concentrated into the account in order to maximise interest. Deficit accounts are covered by transfers from the cash pool in order to minimise overdraft interest.
A notional cash pool is a structure involving several related accounts whose balances have been aggregated for the purposes of optimising interest paid or received. In other words a bank looks only at the total balance of the accounts in the notional pool when calculating interest, but there is no physical movement of funds.
- Concentration account
- Master account
- Notional pooling
- Legal implications of cash pooling structures