Stranded, Swapped or Pooled? Rethinking Multicurrency Liquidity in Volatile Times

Ask a group treasurer where currency risk hurts, and the first answer is usually the P&L: translation effects, or margins squeezed by an adverse move. Ask a second time and a less visible answer emerges: liquidity. A euro-reporting group can be cash-rich at consolidated level and still short of dollars in Singapore on a Friday afternoon, while sterling and Swiss franc balances sit idle elsewhere. With central banks on diverging paths and geopolitical shocks arriving without notice, that mismatch has become a structural feature of multinational treasury, not an occasional irritant.

The good news is that the toolkit has matured. The question is no longer whether to act, but which combination of physical and virtual levers fits a group's structure, and what it takes to make them work.

Where currency pressure bites

Three pressure points recur in almost every group I advise.

Fragmentation. Collections and disbursements rarely match by currency or by entity. Balances build up unevenly across currencies and jurisdictions: some trapped by tax or regulation, others simply forgotten in local accounts. Each stranded balance costs the group twice: once in foregone return, and once in the external funding raised elsewhere to replace it.

Forecasting. Exposures change faster than consolidated data can capture them. When subsidiaries report monthly in spreadsheets, the group's currency position is already outdated by the time it reaches treasury. PwC's 2025 Global Treasury Survey found that 36% of treasury teams still rely on manual steps in FX exposure management.

The hedging dilemma. Over-hedge on an inflated forecast and you tie up credit lines and collateral, and may put hedge-accounting relationships under IFRS 9 at risk. Under-hedge, and the next market move erodes margins or leaves an entity short of cash. Volatility makes both errors more likely.

“A group can be cash-rich in aggregate and still short of the right currency, in the right place, at the right time.”

François Masquelier, Chair of EACT

The physical toolkit: moving cash where it is needed

Physical tools convert and move real balances.

Cross-currency sweeps extend a classic zero- or target-balancing cash pool across currencies. Surplus balances in minor currencies are converted automatically and swept to the header account, usually leaving a target buffer at local level. Used well, they impose discipline on balances that would otherwise drift, without depriving subsidiaries of operational cash. Used carelessly, they turn every sweep into an FX trade at a spread, so thresholds and conversion rates deserve as much attention as the structure itself.

Automated FX swaps address the opposite need: funding a temporary shortfall in one currency with a surplus in another, without permanent conversion. Rule-based currency management automation tools can calculate the swap amount from actual ledger balances and forecasts, execute within predefined parameters and roll positions automatically. The gain is speed and consistency: no more end-of-day guesswork, fewer manual tickets and a cleaner audit trail. Forward points must be priced in, but they usually cost less than an external overdraft.

The virtual toolkit: offsetting without moving

Multicurrency notional pooling offsets debit and credit balances in different currencies for interest purposes, as if they had been converted, while each account stays in its own currency and entity. It removes cut-off constraints, reduces the need for daily swaps and gives a single group-wide view. But it sits at the demanding end of the spectrum. Since Basel III introduced the leverage ratio, many banks have repriced or restricted notional pools, because they cannot always net the gross balances on their own balance sheet. On the corporate side, the IFRS Interpretations Committee's 2016 agenda decision confirms that pooled balances may be offset under IAS 32 only with a legally enforceable right and an intention to settle net, which in practice requires regular physical settlement. Add cross-guarantees, transfer-pricing documentation and know-your-customer requirements, and the set-up requires real legal and tax work.

Cross-border interest optimisation is the lighter alternative. Balances are not offset; the bank simply remunerates credit balances and charges debit balances as if they were pooled. It suits trapped cash in regulated currencies, where physical mobilisation is impossible, and turns idle pockets of liquidity into a modest contribution to group performance.

Exhibit 1: physical and virtual levers for multicurrency liquidity

Cross-currency sweep

1. Main benefit: concentrates surplus currencies; brings discipline to dispersed balances.
2. Key constraints: FX spreads on each conversion; local regulations; intercompany loan documentation.
3. Best fit: groups with an in-house bank and freely convertible minor currencies.

Automated FX swap

1. Main benefit: funds short-term gaps without permanent conversion.
2. Key constraints: forward points; credit lines; needs reliable balance data.
3. Best fit: recurring, temporary mismatches across major currency pairs.

Multicurrency notional pool

1. Main benefit: offsets balances without moving cash; removes cut-off constraints.
2. Key constraints: bank capital cost; IAS 32 offsetting; legal and tax set-up.
3. Best fit: large groups with stable, well-documented structures.

Interest optimisation

1. Main benefit: rewards trapped balances as if they were pooled.
2. Key constraints: no access to the cash itself; modest financial benefit.
3. Best fit: restricted or regulated currencies.

Source: Simply Treasury analysis.

Regulatory and accounting note

1. IAS 32.42: offsetting requires both a legally enforceable right and an intention to settle net or simultaneously (IFRS IC agenda decision on cash pooling, April 2016).
2. Basel III: the leverage ratio and net stable funding ratio have raised banks' cost of notional pooling; expect periodic pricing reviews.
3. Transfer pricing: OECD guidance on financial transactions (2020) requires arm's-length remuneration of pool participants and a fair allocation of the pooling benefit.
4. IFRS 9: internal swaps and pool positions need clear designation at group level to preserve hedge accounting.

Making it work: integration and governance

None of these structures delivers value without reliable data. Host-to-host connectivity with the group's banks, supplemented by APIs where available, is the backbone. It brings intraday and end-of-day balances from every bank into the TMS, sends sweep and swap instructions back automatically, and lets the treasurer see physical and notional positions in one consolidated view. PwC found that 65% of organisations plan to expand their use of APIs. For multicurrency liquidity, connectivity is not a nice-to-have; it is the condition for trusting the structure. When forecasts falter, a clear view of positions is what separates acting with purpose from reacting in haste.

Governance matters as much as technology. Automation should execute the treasury policy, with consistent checks, full traceability and clear audit trails, while the treasurer keeps authority over thresholds, counterparties and hedge ratios. In my experience, well-designed automated structures strengthen controls rather than weaken them, because they replace ad hoc decisions taken under time pressure with rules agreed in calm conditions.

“Automation should execute the treasury policy, not replace it.”

François Masquelier, CEO of Simply Treasury

There is no universal model. The right mix depends on the group's legal structure, its geographies, the regulatory constraints of each currency and its stage of centralisation. Physical and virtual tools are not alternatives to choose between, but building blocks to combine.

What this means for treasurers: five steps

1. Map: list balances by currency, entity and bank; identify trapped and idle cash.
2. Measure: compare the cost of idle cash and external funding with the cost of conversions and swaps.
3. Prioritise: start with the currency pairs and entities that generate the largest mismatches.
4. Connect: secure host-to-host or API feeds from all banks into the TMS before automating anything.
5. Govern: embed thresholds, buffers and approvals in the treasury policy, and review them every year with tax and accounting.

Conclusion: from certainty to control

Volatility cannot be eliminated. Currencies will keep putting pressure on liquidity, and no structure will restore the certainty treasurers enjoyed when rates were low and moved together. But control is achievable. Taming the currency squeeze does not require a radical, all-at-once centralisation. It requires a deliberate combination of physical and virtual levers, connected by robust data and framed by clear governance.

The real shift is from certainty to control: deciding in advance how liquidity is deployed, how exposures are managed and how the organisation responds when conditions change. Treasurers who build that framework now will spend less time firefighting and more time steering. Their cash will be stranded less often, swapped more wisely and pooled where it counts.

Per Aspera ad Astra

François Masquelier

CEO of Simply Treasury, Chairman of ATEL, Chair of EACT