One of the most fascinating aspects of liquidity management in Asia-Pacific today is its dynamic nature. Apart from regulatory change within the region, numerous other factors – such as shifts in US tax legislation and interest rates – also have a bearing. As Harish Kumar, Regional Head of Liquidity and Investment Products, Global Liquidity and Cash Management, Asia Pacific at HSBC explains, these all present corporate treasurers with an interesting range of opportunities.
Regulatory change in Asia-Pacific is now a fact of life for corporate treasuries, but given the right information and support, it is definitely not an insuperable problem. However, a critical point here is clarity. This is because regulation in the region has of late been changing frequently and often also leaving some scope for interpretation, such as whether a corporate might be deemed to fall in one or another category under a particular set of rules. A further complication is that regulation in some countries can be issued at both a provincial and national level, so ensuring compliance with both sets of rules presents additional challenges, whether or not the bank account is resident or non-resident is largely immaterial and the movement of funds is straightforward. This may no longer be the case post-Brexit. The tax implications for a particular liquidity structure, or the consequences of an entity moving funds to another entity, or to the same entity in another jurisdiction, remain unknown.
Regulatory clarity and certainty
The need for treasuries to seek regulatory clarity and certainty in Asia-Pacific is underlined by the ‘outline’ nature of some new regulation. For instance, regulations may be introduced that tighten or relax certain existing rules relating to cross-border inflows or outflows of corporate liquidity. However, the new regulations might not explicitly state the extent to which the new conditions will apply.