SWIFT MT101 Usage for funds repatriation

The SWIFT MT101 message can be used for various purposes. We saw in previous articles how the SWIFT MT101 is used:

SWIFT MT101 usage for funds repatriation

There is another possibility: funds repatriation. And that is the topic of this article where we will see how corporations can use the SWIFT MT101 to repatriate funds. Funds repatriation simply means to move the funds available on one account to another account held either by the same financial institution or by another financial institution. Funds repatriation is performed for cash pooling inside a company or a group of companies. Corporations resort to cash pooling to optimize the liquidity usage.

We will consider a simple example to explain the basic concepts behind funds repatriation and cash pooling.

SWIFT MT101 usage for funds repatriation

SWIFT MT101 usage for funds repatriation

Essilor is a multinational corporation with multi-bank relationship in Europe and worlwide. In the example, we consider two accounts owned by Essilor: one account is with BNP Paribas in France and the other account is with Dresdner Bank in Germany. Funds available on the Dresdner Bank account are to be repatriated to the BNP Paribas account. For this SWIFT MT101, the forwarding bank and the creditor Bank is the same. These two concepts were analyzed in detail in this article.

BNP Paribas account is called centralized account, master account or leader account. The Dresdner Bank account is called secondary account or slave account.

The table below contains the fields that are transported in the MT101 Message. The last column (comments) provides further explanation about the fields. Read them carefully.

Read this page on the SWIFT formatting rules and Character sets of MT Messages to get additional information and understand what 16x, 5n, 34x and the format of the field options mean.

Narratives and notes on this MT101 Message

As usual, there is more in this message than meets the eye. The following narrative and notes allow to get a deeper understanding of the message content.

Narrative and note 1 (Main purpose of this MT101)

Essilor (ESITFR2P) wants to repatriate funds from its Dresdner bank account to its BNP Paribas account. So it instructs the receiver (BNPAFRPP) to request Dresdner bank (DRESDEFF) to transfer funds available on its account with DRESDEFF. The amount should be credited on Essilor’s account with BNP Paribas. BNP Paribas forwards the MT101 instruction since it does hold the account to be debited. DRESDEFF, as debtor Bank, executes the instruction and send a MT103 to BNP Paribas, the creditor Bank.

Narrative and note 2 (Instruction codes this MT101)

The sender provides two intruction codes in the instruction. The first one (:23E:CMZB) is the most important one. It is the one informing the debtor bank that the instruction is for funds repatriation. The presence of this code allows to put a zero amount in the field 32B. The second instruction code (:23E:INTC) indicates that the transfer is between accounts of the same company of between accounts of companies belonging to the same Group.

The two instruction codes are used for cash pooling. That is why the accounts involved in funds repatriation must belong to the same company or to the same group. When the accounts are with different banks, generally the Banks involved sign an agreement. Parent company and the subsidiairies companies must sign an agreement too before performing cash pooling transactions. However, note that regulations about Cash pooling are various and multiple in the different countries. There are countries where Cash pooling is not allowed all. In other countries, Cash pooling can be carried out only under certain conditions.

Cash pooling is a key topic in payment that will be addressed in detail later in this blog. In the next articles, we want to take a closer look at negotiable instruments.

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