As market liquidity tightens, multinational companies — even Taiwanese conglomerates — are becoming desperate for cash and tightening parent companies’ grip on the amount flowing to subsidiaries amid an unfavorable global credit environment, a Standard Chartered Bank (Taiwan) banker said yesterday.
One of the biggest capital flows from subsidiaries back to the headquarters of multinationals in the past six weeks may have involved as much as US$100 million, said Carl Wegner, head of transaction banking.
As a cash management strategy, most companies are also reducing the number of financial institutions they bank with to pool their global assets by moving their money to “bigger and safer banks” that provide a global platform and system to facilitate their cash management globally, Wegner said.
Standard Chartered has seen benefits from recent capital flight and is striving to position itself as an “operating bank” and conduct business with the newfound capital.
The utilization of cash management tools has become key for the survival of many companies and for avoiding defaulting amid the protracted financial downturn, he said.
In addition, Wegner said he would advise against companies buying shares back with the cash they own, which should instead be used to help the company grow.
But China-based Taiwanese companies may be able to borrow more liquidity from Chinese banks because their loan quotas are expected to expand soon, he said.
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