Notional pooling

In notional pooling, balances in participating accounts are not physically moved, but are notionally combined for the most optimal interest compensation. ING notional pooling is a combination of balance set-off and interest set-off on a single or multi-currency and single or multi-entity basis. As there is no physical movement of funds there is no commingling of funds between participating accounts. This reduces interest expenses by notionally offsetting debit and credit balances in the same currency. Notional offset achieved without the commingling of funds, i.e. avoiding intercompany lending – maintains account autonomy. It allows each subsidiary company to take advantage of a single, centralised liquidity position, while still retaining daily cash management privileges for making payments – with minimal administration.

A balance set-off pool, also referred to as ‘balance compensation’ in the marketplace, can be set up to facilitate payment authorisation. To assess whether a payment will be accepted or rejected, the balances of all accounts in the balance set-off pool will be combined. This also means that accounts in a balance set-off pool are allowed to have a debit balance position as long as there are other accounts in the same pool with sufficient credit balances.

A balance set-off structure can include accounts of multiple currencies, but all accounts must be held with ING Netherlands. It is also possible to limit the maximum debit position of a participating account by specifying a maximum debit amount.

In an interest set-off pool, also referred to as ‘interest compensation’ in the marketplace, ING pays or charges interest based on the combined/net balance of all accounts in the interest set-off pool. An interest set-off pool is always within a single currency  and all accounts must be held with ING Netherlands.

By combining a balance set-off structure with an interest set-off structure, ING can provide your organisation with notional pooling that is customised specifically for your organisations’ needs.

Each organisation has its reasons for choosing notional pooling or physical cash concentration, or both. Whatever your organisation’s requirements in either or both notional pooling and physical cash concentration, ING can create a tailor-made cash management structure optimised for your organisation.

See below an overview of the characteristics of notional pooling and physical cash concentration: