“We are in the process of appointing new bankers for the group and our Treasury department is being told by the bank that its systems do not allow it to distinguish between instructions in respect of payments to third parties and transfers of funds between our own group company accounts. This means that we are being asked to provide board resolutions to the bank which say that certain employees may give instructions without financial limit in any circumstances, although our internal delegated authorities (DAs) do place such a restriction on the employee in certain circumstances i.e. in respect of payments to third parties.
We are amending our financial procedures to make clear to employees that their ‘unlimited’ authority must in fact be exercised in accordance with the DAs but we are aware that there is an internal control issue concerning the difference between the authority given to employees under the DAs and the authority that they have under the bank mandates.
May I ask if other companies have experienced a similar situation and, if so, how they dealt with it? I have to admit to surprise that a major international bank claims not to be able to offer its global corporate customers what I would see as a fairly basic control process.”
Banks asking for board resolutions in regards to financial limits and payments authorities is not uncommon. We have a standard signing mandate for each subsidiary delegating authority to initiate transfers
Virtually all our payments are made electronically due to the risk of paper based transfers, with a few cheques being the exception.
Within the electronic banking platform there are dual signatory requirements with transfer value limits in place.
We do not differentiate between internal & external payments when transferring fund between parties with different banks, however as all our uk subsidiaries are with the same bank this allows us to make inter account transfers rather than 3rd party transfers, thus distinguishing between internal/external.
I believe that you ought to think more carefully about the lax controls that you want to have on transfers between companies within the group. In these troubled times, is is often surprising when one company gets into distress, and if you have left the power to transfer money around within the group to junior employees, your directors are taking a considerable personal risk. We have the same controls on intra-group transfers as on 3rd party transfers, and as CFO I wouldn’t have it any other way. Remember Lehman’s nightly cash sweep to New York.
We have a standard signing mandate which in based upon 2 sigantures and by value bands i.e over £50K the payment must be sigend by an Exec Comm member or director and one other.
We do not differentiate bewteen “internal” and “external” payments as suggested above
We have dual signatory requirements on our transfers as well as financial limits which, in the past, seemed possible to ignore, but have been reinstated and work effectively. I’m not sure why your bank is not permitting you to structure the authorities in accordance with your internal procedures.
I’m happy to put our treasurer in touch with yours if that helps.