## Cash pooling in direct investment ## Source details **Canonical URL:** [Cash pooling in direct investment](https://www.imf.org/-/media/files/data/statistics/bpm6/approved-guidance-notes/d18-cash-pooling-in-direct-investment.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bpm6/approved-guidance-notes/d18-cash-pooling-in-direct-investment.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bpm6/approved-guidance-notes/d18-cash-pooling-in-direct-investment.pdf.json) --- ### Background and relevance - Cash pooling arrangements provided by banks allow corporations to externalize intra-group cash management to manage global liquidity more effectively and with lower costs. - Cash pooling helps maximize the use of internal funds and minimize the cost of capital. - Financial innovation created different cash pooling arrangements that can span entities located in the same or in different economies, allowing for pooling of cash in real time. - Cash pooling became more popular after the onset of the financial crisis due to limited access to capital markets, reduced bank lending, low returns and higher risks on banks' deposits, prompting corporate groups to maximize use of internal financing. - Cash pooling is currently very relevant in certain European countries and is mainly offered in the United Kingdom, France, and the Netherlands. - In the euro area Balance Sheet Items (BSI) statistics, only the Netherlands is reporting (notional) cash pooling activities. - The ECB found in 2019 that banks offering cash pooling arrangements were generalized in the European Union; cash pooling vis-à-vis intra euro area counterparts was particularly relevant for insurance corporations and pension funds as well as for nonfinancial corporations. - The offer of cash pooling arrangements by banks was concentrated in three main types: (i) single legal account, (ii) physical cash pool, and (iii) notional cash pool. While economically similar under the debtor/creditor principle, the statistical treatment differs with impacts on functional category classification and geographical and sector identification of counterparts. ### Main types of cash pooling arrangements - Single legal account - Consists of (a) a set of virtual transactions/operational sub-accounts used by individual companies and the parent company for day-to-day operations; and (b) a top/master group account (usually held by the parent company) which constitutes an obligation of the pooling bank vis-à-vis the beneficiary and concentrates the funds of the group. - Virtual sub-accounts track intra-group positions but do not provide a direct relationship with the bank; information on virtual transactions is usually part of the service provided by the pooling bank but not necessary for the bank’s accounting system and therefore should be in a separated system. - From the bank’s point of view, only changes in the top/master account should be reported as this reflects changes in its claims vis-à-vis the parent company, the only direct client in this cash pool type. - Physical cash pool - Each participating company holds an account with the pooling bank; there is usually a master account held by the parent company. - Balances of surplus accounts are transferred to the master account on a regular basis (e.g., daily at close of business); the parent transfers liquidity from the master account to accounts in deficit at period end. - All participants are counterparties of the bank; deficit balances from participants appear temporally as assets on the bank’s balance sheet. - Subtypes: - Zero-balancing cash pool: full balance of surplus accounts is transferred to the master account regularly. - Target-based cash pooling: specifies a positive threshold; when individual balances exceed threshold, liquidity is transferred to the master account; when below threshold, liquidity is transferred from master to individual accounts. - Notional cash pool - All bank accounts represent legal relationships between the pooling bank and participating entities, which are direct counterparties of the bank. - Pooling is performed by creating a notional top/master account that virtually consolidates positions but does not represent a resource or obligation of the bank. - No liquidity transfers resulting in inter-company loans take place; funds remain in the assets of the bank as a loan to a particular participating entity, guaranteed by cash pooling members, subject to lower charges, restrictions, and implicit interest, and typically drawable only to the extent that the overall pool has a positive net balance. ### Statistical nature, classification issues, and reporting implications - Cash pooling is not per se a financial instrument; it is a bank arrangement that involves deposits and loans between participants. - Proper classification requires identifying the cash pooling arrangement type to determine the actual debtor and creditor. - Potential impact of misreporting depends on the size and occurrence of cash pooling activities. - Bank reporting should generally be able to distinguish real from virtual transactions; key question is whether entities participating identify operations as cross-border transactions and whether they have sufficient information to classify them as loans under other investment or as intercompany lending under direct investment (DI) depending on the scheme. - BPM6 does not specifically mention cash pooling arrangements; the Guidance Note follows the debtor/creditor principle applied to financial transactions, positions, and related income and does not propose changes to current standards. - The Guidance Note proposes including detailed descriptions of cash pooling types and their different statistical treatments in the updated BPM and compilation guide to assist identification and reporting. - From the banking sector perspective, banks should report cross-border transactions and positions when they have legal claims/obligations vis-à-vis nonresident parties participating in cash pooling arrangements; internal bookkeeping entries in virtual accounts should not be seen as bank transactions/positions. - Parent companies and subsidiaries should be able to report internal booking entries as intercompany lending (assets and liabilities) depending on the direction of funds (creditor or debtor). - Identification via DI surveys is needed when pooling takes the form of single legal account or physical cash pool. - If an overdraft or loan is received by a pooling participating subsidiary and covered by a single legal account or a physical cash pool, the creditor is the parent company (holder of the top/master account) and the recording is done as inter-company loans in DI (except for debt between affiliated financial intermediaries specified in BPM6 paragraph 6.28). - If an overdraft or loan is based on a notional cash pool, the creditor is the pooling bank and the debt should be recorded in other investment (unless a DI relationship between the bank and the debtor modifies classification per BPM6 paragraph 6.28). - Misrecording may lead to net errors and omissions, geographical asymmetries, and deterioration in quality of the functional category split in the financial account. ### Illustrative scenarios and recording — single legal account (excerpts) - Example setup (Scenario 1.1) - Parent Company A resident in Country A; subsidiaries B, C, D resident in countries B, C, D respectively. - Single legal cash account: top account held by Company A with Bank X, resident in Country A. - Cash pool total: 100 EUR (40 from the parent, and 20 from each of companies B, C, D). - Transfers from B, C, and D to the top account are recorded in balance of payments and IIP due to cross-border dimension; deposit by Parent Company A is domestic and not included. - Result: increase of assets of the banking sector of Country A vis-à-vis countries B, C, and D; Country A records 3 inter-company loans vis-à-vis countries B, C, D of 20 each, totaling a position of 60 for the other sectors because the parent is the single legal owner of the account while part of the funds were provided by the subsidiaries. - Follow-up transaction (Scenario 1.2) - In the month after setup, Company B purchases a debt security worth 30 EUR issued in Country Z. - Payment goes through the top account: the top account is debited 30 EUR and paid to Country Z or another country depending on instructions. - Accounting effects: elimination of the inter-company loan of B to A and creation of a loan of A to B worth 10 EUR. - The payments going through the bank mean other investment of Country B is not impacted. - Recorded bank closing balance: Bank X records an overnight deposit of 70 EUR as a liability with the parent company in Country A. ### Physical cash pooling — overview and recording - At the end of the first day only 10 EUR will be left in the accounts of B, C, and D, which gives rise to intragroup loans in the balance of payments because companies B, C, and D are not resident in Country A. The loans to the parent amount to 10 EUR for each company. - Bank X records a decrease in liabilities—currency and deposits—of 30 EUR vis-à-vis the companies in countries B, C, and D, as in the balance sheet of Bank X these 30 EUR are now a domestic obligation to the parent company. - Table 2.1 (recording of a physical cash pooling scheme) shows: - Financial account: Assets 1060, Liabilities 60 (opening); Transactions 0 Assets, 0 Liabilities; Closing Assets 1060, Liabilities 60. - Intercompany loans: Transactions indicate 30 (liabilities) and closing intercompany loans of 30. - Curr. & dep./loans (S12T): Opening 1060 Assets / 60 Liabilities; Transactions -30 Liabilities; Closing 1060 Assets / 30 Liabilities. - Net IIP / net errors and omissions: 1000 opening, 1000 closing. - The closing balance sheet of Bank X records overnight deposits (liabilities) vis-à-vis A (70), B (10), C (10) and D (10). ### Scenario 2.1 — Physical cash pooling transaction (Company B buys a debt security for 30 EUR) - Company B purchases a debt security issued in Country Z worth 30 EUR. - Company B instructs Bank X for payment but has only 10 EUR available; it uses the cash pooling arrangement resulting in a (temporary) overdraft of 20 EUR shown in the balance of Bank X (payment carried out via the individual account of B). - At the end of the day the parent company transfers 30 EUR from the master account to cover the overdraft and achieve the target of 10 EUR for Company B's account. - Effects on positions and balances: - Reduces loan assets vis-à-vis the parent company by 10 EUR. - Gives rise from the point of view of the parent company (Country A) to an intracompany loan asset of 20 EUR vis-à-vis Company/Country B. - The bank makes the payment to the security seller; assuming the seller will use their assets abroad, this is recorded as a reduction in assets (currency & deposits) for Other MFIs. - Table 2.2 (recording of the transaction) shows: - Country A financial account: Opening Assets 1060 / Liabilities 60; Transactions Assets -10 / Liabilities -10; Closing Assets 1050 / Liabilities 50. - Country B financial account: Transactions Assets 20 / Liabilities 20. - Portfolio investment: 30 (Country B). - Intercompany loans: Country A Transactions 30 (liabilities), Country B Transactions 20 (assets) and -10 adjustments; closing intercompany loans positions reflect 20 and -10 entries. - Curr. & dep./loans (S12T): Country A opening 1060 Assets / 30 Liabilities; Transactions -30; Closing 1030 Assets / 30 Liabilities. - Net IIP / net errors and omissions: Country A 1000 opening / 1000 closing; Country B 0. - The closing balance sheet of Bank X records on the liability side overnight deposits of EUR 40 (A), 10 (B), 10 (C), and 10 (D). ### Notional cash pooling — overview and recording - In notional cash pooling, accounts represent a legal relationship between the bank and the participating entities, which are thus direct counterparties of the bank. - The bank performs pooling by creating a notional top account that virtually consolidates positions of pool participants but does not represent a resource or an obligation of the bank. - No liquidity transfers resulting in inter-company loans take place. - Only the cross-border positions between companies B, C, D and Bank X resident in Country A give rise to an aggregate liability position of 60 EUR. - Table 3.1 (recording of a notional cash pooling scheme) shows: - Financial account: Opening Assets 1060 / Liabilities 60; Transactions 0 / 0; Closing Assets 1060 / Liabilities 60. - Intercompany loans: Transactions 0 and closing 0. - Curr. & dep./loans (S12T): Opening 1060 Assets / 60 Liabilities; Closing 1060 Assets / 60 Liabilities. - The closing balance sheet of Bank X records liabilities vis-à-vis A (40), B (20), C (20) and D (20). ### Scenario 3.2 — Notional cash pooling transaction (Company B buys a debt security for 30 EUR) - Company B buys a debt security issued in Country Z valued at 30 EUR. - Payment goes through B’s individual account; B lacks sufficient funds leading to an overdraft of 20 EUR in its individual account shown in Bank X’s balance sheet. - In contrast to physical cash pooling, no liquidity flows occur at the end of the business day; funds remain assets of the bank as a loan to Company B. - The loan is guaranteed by the cash pooling members, subject to lower charges, restrictions and implicit interest, and typically can only be drawn upon to the extent the overall pool has a positive net balance. - Transaction results include a reduction of 20 EUR in the liabilities of Bank X vis-à-vis Country B since the deposit no longer exists as an asset of B and a new asset of Bank X vis-à-vis Country B arises due to the overdraft (10 EUR). - Table 3.2 (recording of the transaction) shows: - Country A financial account: Opening Assets 1060 / Liabilities 60; Transactions Assets -20 / Liabilities -20; Closing Assets 1040 / Liabilities 40. - Country B financial account: Transactions Assets 10 / Liabilities 10; Portfolio investment 30. - Intercompany loans: Country A Transactions 0; Country B Transactions 0; closing intercompany loans 0. - Curr. & dep./loans (S12T): Country A Opening 1060 / 60; Transactions +10, -30, -20; Closing 1040 / 40. - Curr. & dep./loans (S1P): Country B Transactions -20 / 10. - Net IIP / net errors and omissions: Country A 1000 opening / 1000 closing; Country B 0. - The closing balance sheet of Bank X records on the asset side a loan of 10 (B) and overnight deposits (liabilities) vis-à-vis A (40), C (20) and D (20). ### Outcomes, recommendations, and reporting observations - The Guidance Note recommends including descriptions of cash pooling types and their different statistical treatments under updated Appendix 6a: Topical Summary—Direct Investment and adding relevant examples in the updated compilation guide. - Descriptions and examples will help reporters and analysts understand the relevance of proper adherence to the debtor/creditor principle in reporting. - DITT members generally do not see problems identifying debtor/creditor counterparts from bank reporting, although cash pooling activities are not separately reported in most cases; information from virtual bookings is not reported by banks and therefore cannot generate double counting. - DI company reporting shows heterogeneity: most countries do not identify cash pooling separately in DI surveys; this is not considered problematic if reporters can identify actual debtors and creditors and avoid mistaking the payment service provider for the creditor. A few members reported occasional respondent questions, so clarifications and descriptions in the manual update will be helpful. - Committee members unanimously agreed that including descriptions of main types of cash pooling and their different statistical treatments in the updated BPM and examples in the Compilation Guide is relevant; the guidance should reflect differences in financial accounting guidance and how they may impact data collection. *Guidance Note: SECTION I: THE ISSUE (Cash pooling in direct investment).* ### SECTION I: THE ISSUE ### SECTION I: THE ISSUE ### Background and relevance - Cash pooling arrangements provided by banks allow corporations to externalize intra-group cash management to manage global liquidity more effectively and with lower costs. - Cash pooling helps maximize the use of internal funds and minimize the cost of capital. - Financial innovation created different cash pooling arrangements that can span entities located in the same or in different economies, allowing for pooling of cash in real time. - Cash pooling became more popular after the onset of the financial crisis due to limited access to capital markets, reduced bank lending, low returns and higher risks on banks' deposits, prompting corporate groups to maximize use of internal financing. - Cash pooling is currently very relevant in certain European countries and is mainly offered in the United Kingdom, France, and the Netherlands. - In the euro area Balance Sheet Items (BSI) statistics, only the Netherlands is reporting (notional) cash pooling activities. - The ECB found in 2019 that banks offering cash pooling arrangements were generalized in the European Union; cash pooling vis-à-vis intra euro area counterparts was particularly relevant for insurance corporations and pension funds as well as for nonfinancial corporations. - The offer of cash pooling arrangements by banks was concentrated in three main types: (i) single legal account, (ii) physical cash pool, and (iii) notional cash pool. While economically similar under the debtor/creditor principle, the statistical treatment differs with impacts on functional category classification and geographical and sector identification of counterparts. ### Main types of cash pooling arrangements (descriptions) - Single legal account - Consists of (a) a set of virtual transactions/operational sub-accounts used by individual companies and the parent company for day-to-day operations; and (b) a top/master group account (usually held by the parent company) which constitutes an obligation of the pooling bank vis-à-vis the beneficiary and concentrates the funds of the group. - Virtual sub-accounts track intra-group positions but do not provide a direct relationship with the bank; information on virtual transactions is usually part of the service provided by the pooling bank but not necessary for the bank’s accounting system and therefore should be in a separated system. - From the bank’s point of view, only changes in the top/master account should be reported as this reflects changes in its claims vis-à-vis the parent company, the only direct client in this cash pool type. - Physical cash pool - Each participating company holds an account with the pooling bank; there is usually a master account held by the parent company. - Balances of surplus accounts are transferred to the master account on a regular basis (e.g., daily at close of business); the parent transfers liquidity from the master account to accounts in deficit at period end. - All participants are counterparties of the bank; deficit balances from participants appear temporally as assets on the bank’s balance sheet. - Subtypes: - Zero-balancing cash pool: full balance of surplus accounts is transferred to the master account regularly. - Target-based cash pooling: specifies a positive threshold; when individual balances exceed threshold, liquidity is transferred to the master account; when below threshold, liquidity is transferred from master to individual accounts. - Notional cash pool - All bank accounts represent legal relationships between the pooling bank and participating entities, which are direct counterparties of the bank. - Pooling is performed by creating a notional top/master account that virtually consolidates positions but does not represent a resource or obligation of the bank. - No liquidity transfers resulting in inter-company loans take place; funds remain in the assets of the bank as a loan to a particular participating entity, guaranteed by cash pooling members, subject to lower charges, restrictions, and implicit interest, and typically drawable only to the extent that the overall pool has a positive net balance. ### Statistical nature, classification issues, and reporting implications - Cash pooling is not per se a financial instrument; it is a bank arrangement that involves deposits and loans between participants. - Proper classification requires identifying the cash pooling arrangement type to determine the actual debtor and creditor. - Potential impact of misreporting depends on the size and occurrence of cash pooling activities. - Bank reporting should generally be able to distinguish real from virtual transactions; key question is whether entities participating identify operations as cross-border transactions and whether they have sufficient information to classify them as loans under other investment or as intercompany lending under direct investment (DI) depending on the scheme. - BPM6 does not specifically mention cash pooling arrangements; the Guidance Note (GN) follows the debtor/creditor principle applied to financial transactions, positions, and related income and does not propose changes to current standards. - The GN proposes including detailed descriptions of cash pooling types and their different statistical treatments in the updated BPM and compilation guide to assist identification and reporting. - From the banking sector perspective, banks should report cross-border transactions and positions when they have legal claims/obligations vis-à-vis nonresident parties participating in cash pooling arrangements; internal bookkeeping entries in virtual accounts should not be seen as bank transactions/positions. - Parent companies and subsidiaries should be able to report internal booking entries as intercompany lending (assets and liabilities) depending on the direction of funds (creditor or debtor). - Identification via DI surveys is needed when pooling takes the form of single legal account or physical cash pool. - If an overdraft or loan is received by a pooling participating subsidiary and covered by a single legal account or a physical cash pool, the creditor is the parent company (holder of the top/master account) and the recording is done as inter-company loans in DI (except for debt between affiliated financial intermediaries specified in BPM6 paragraph 6.28). - If an overdraft or loan is based on a notional cash pool, the creditor is the pooling bank and the debt should be recorded in other investment (unless a DI relationship between the bank and the debtor modifies classification per BPM6 paragraph 6.28). - Misrecording may lead to net errors and omissions, geographical asymmetries, and deterioration in quality of the functional category split in the financial account. ### Illustrative scenarios and recording (single legal account — excerpts) - Example setup (Scenario 1.1) - Parent Company A resident in Country A; subsidiaries B, C, D resident in countries B, C, D respectively. - Single legal cash account: top account held by Company A with Bank X, resident in Country A. - Cash pool total: 100 EUR (40 from the parent, and 20 from each of companies B, C, D). - Country A reporters: Bank X (S12T) and Parent Company A (assume part of sector S1P). - Transfers from B, C, and D to the top account are recorded in balance of payments and IIP due to cross-border dimension; deposit by Parent Company A is domestic and not included. - Result: increase of assets of the banking sector of Country A vis-à-vis countries B, C, and D (assuming Bank X has accounts in other banks resident abroad). - Country A records 3 inter-company loans vis-à-vis countries B, C, D of 20 each, totaling a position of 60 for the other sectors (S1P) because the parent is the single legal owner of the account while part of the funds were provided by the subsidiaries. - Follow-up transaction (Scenario 1.2) - In the month after setup, Company B purchases a debt security worth 30 EUR issued in Country Z. - Payment goes through the top account: the top account is debited 30 EUR and paid to Country Z or another country depending on instructions. - Accounting effects: elimination of the inter-company loan of B to A and creation of a loan of A to B worth 10 EUR. - The payments going through the bank mean other investment of Country B is not impacted. - Recorded bank closing balance: Bank X records an overnight deposit of 70 EUR as a liability with the parent company in Country A. ### Outcomes (summary of recommendations and reporting observations) - The GN recommends including descriptions of cash pooling types and their different statistical treatments under updated Appendix 6a: Topical Summary—Direct Investment and adding relevant examples in the updated compilation guide. - Descriptions and examples will help reporters and analysts understand the relevance of proper adherence to the debtor/creditor principle in reporting. - DITT members generally do not see problems identifying debtor/creditor counterparts from bank reporting, although cash pooling activities are not separately reported in most cases; information from virtual bookings is not reported by banks and therefore cannot generate double counting. - DI company reporting shows heterogeneity: most countries do not identify cash pooling separately in DI surveys; this is not considered problematic if reporters can identify actual debtors and creditors and avoid mistaking the payment service provider for the creditor. A few members reported occasional respondent questions, so clarifications and descriptions in the manual update will be helpful. - Committee members unanimously agreed that including descriptions of main types of cash pooling and their different statistical treatments in the updated BPM and examples in the Compilation Guide is relevant; the guidance should reflect differences in financial accounting guidance and how they may impact data collection. *Guidance Note: SECTION I: THE ISSUE (Cash pooling in direct investment).* ### 13. Since at the end of the first day only 10 EUR will be left in the accounts of B, C, and D, this will ### Cash pooling in direct investment ### Physical cash pooling — overview and recording - At the end of the first day only 10 EUR will be left in the accounts of B, C, and D, which gives rise to intragroup loans in the balance of payments because companies B, C, and D are not resident in Country A. The loans to the parent amount to 10 EUR for each company. - Bank X records a decrease in liabilities—currency and deposits—of 30 EUR vis-à-vis the companies in countries B, C, and D, as in the balance sheet of Bank X these 30 EUR are now a domestic obligation to the parent company. - Table 2.1 (recording of a physical cash pooling scheme) shows: - Financial account: Assets 1060, Liabilities 60 (opening); Transactions 0 Assets, 0 Liabilities; Closing Assets 1060, Liabilities 60. - Intercompany loans: Transactions indicate 30 (liabilities) and closing intercompany loans of 30. - Curr. & dep./loans (S12T): Opening 1060 Assets / 60 Liabilities; Transactions -30 Liabilities; Closing 1060 Assets / 30 Liabilities. - Net IIP / net errors and omissions: 1000 opening, 1000 closing. - The closing balance sheet of Bank X records overnight deposits (liabilities) vis-à-vis A (70), 10 (B), 10 (C) and 10 (D). ### Scenario 2.1 — Transaction involving physical cash pooling (Company B buys a debt security for 30 EUR) - Company B purchases a debt security issued in Country Z from a resident outside Country A, worth 30 EUR. - Company B instructs Bank X for payment but has only 10 EUR available; it uses the cash pooling arrangement resulting in a (temporary) overdraft of 20 EUR shown in the balance of Bank X (payment carried out via the individual account of B). - At the end of the day the parent company transfers 30 EUR from the master account to cover the overdraft and achieve the target of 10 EUR for Company B's account. - Effects on positions and balances: - Reduces loan assets vis-à-vis the parent company by 10 EUR. - Gives rise from the point of view of the parent company (Country A) to an intracompany loan asset of 20 EUR vis-à-vis Company/Country B. - The bank makes the payment to the security seller; assuming the seller will use their assets abroad, this is recorded as a reduction in assets (currency & deposits) for Other MFIs. - Table 2.2 (recording of the transaction) shows: - Country A financial account: Opening Assets 1060 / Liabilities 60; Transactions Assets -10 / Liabilities -10; Closing Assets 1050 / Liabilities 50. - Country B financial account: Transactions Assets 20 / Liabilities 20. - Portfolio investment: 30 (Country B). - Intercompany loans: Country A Transactions 30 (liabilities), Country B Transactions 20 (assets) and -10 adjustments; closing intercompany loans positions reflect 20 and -10 entries. - Curr. & dep./loans (S12T): Country A opening 1060 Assets / 30 Liabilities; Transactions -30; Closing 1030 Assets / 30 Liabilities. - Net IIP / net errors and omissions: Country A 1000 opening / 1000 closing; Country B 0. - The closing balance sheet of Bank X records on the liability side overnight deposits of EUR 40 (A), 10 (B), 10 (C), and 10 (D). ### Notional cash pooling — overview and recording - In notional cash pooling, accounts represent a legal relationship between the bank and the participating entities, which are thus direct counterparties of the bank. - The bank performs pooling by creating a notional top account that virtually consolidates positions of pool participants but does not represent a resource or an obligation of the bank. - No liquidity transfers resulting in inter-company loans take place. - Only the cross-border positions between companies B, C, D and Bank X resident in Country A give rise to an aggregate liability position of 60 EUR. - Table 3.1 (recording of a notional cash pooling scheme) shows: - Financial account: Opening Assets 1060 / Liabilities 60; Transactions 0 / 0; Closing Assets 1060 / Liabilities 60. - Intercompany loans: Transactions 0 and closing 0. - Curr. & dep./loans (S12T): Opening 1060 Assets / 60 Liabilities; Closing 1060 Assets / 60 Liabilities. - The closing balance sheet of Bank X records 4 overnight deposits (liabilities) vis-à-vis A (40), 20 (B), 20 (C) and 20 (D). ### Scenario 3.1 — Notional cash pool initial positions - Parent company (Country A) individual account records a deposit of 40 EUR. - Subsidiaries B, C, D individual accounts each record deposits of 20 EUR. - After the cash pool agreement Bank X keeps liabilities vis-à-vis the same counterparts; no intra-group loans are recorded. ### Scenario 3.2 — Transaction involving notional cash pooling (Company B buys a debt security for 30 EUR) - Company B buys a debt security issued in Country Z from a nonresident valued at 30 EUR. - Payment goes through B’s individual account; B lacks sufficient funds leading to an overdraft of 20 EUR in its individual account shown in Bank X’s balance sheet. - In contrast to physical cash pooling, no liquidity flows occur at the end of the business day; funds remain assets of the bank as a loan to Company B. - The loan is guaranteed by the cash pooling members, subject to lower charges, restrictions and implicit interest, and typically can only be drawn upon to the extent the overall pool has a positive net balance. - Transaction results include a reduction of 20 EUR in the liabilities of Bank X vis-à-vis Country B since the deposit no longer exists as an asset of B and a new asset of Bank X vis-à-vis Country B arises due to the overdraft (10 EUR). - Table 3.2 (recording of the transaction) shows: - Country A financial account: Opening Assets 1060 / Liabilities 60; Transactions Assets -20 / Liabilities -20; Closing Assets 1040 / Liabilities 40. - Country B financial account: Transactions Assets 10 / Liabilities 10; Portfolio investment 30. - Intercompany loans: Country A Transactions 0; Country B Transactions 0; closing intercompany loans 0. - Curr. & dep./loans (S12T): Country A Opening 1060 / 60; Transactions +10, -30, -20; Closing 1040 / 40. - Curr. & dep./loans (S1P): Country B Transactions -20 / 10. - Net IIP / net errors and omissions: Country A 1000 opening / 1000 closing; Country B 0. - The closing balance sheet of Bank X records on the asset side a loan of 10 (B) and 3 overnight deposits (liabilities) vis-à-vis A (40), 20 (C) and 20 (D). --- _Source: https://www.imf.org/-/media/files/data/statistics/bpm6/approved-guidance-notes/d18-cash-pooling-in-direct-investment.pdf_