Citigroup is teaming with the fintech IntraFi to create a new service that will let Citi’s corporate and institutional clients sweep any excess cash they have into U.S. branches of foreign banks. The service, dubbed Yankee Sweep, is designed to help corporate clients manage their money better and obtain higher yields on deposits, Citi said in announcing the partnership Monday.
Citi’s Treasury and Trade Solutions group holds more than $670 billion of customer deposits from large corporations, financial institutions, public sector entities and middle-market clients. It has cash concentration services that let clients automate the movement of money around the world and across their subsidiaries.
A typical large corporate client might hold more than 100 accounts at the $2.3 trillion-asset Citi in different countries.
“One of our clients’ goals is to consolidate that cash at the end of every day across different jurisdictions so that they can then cover any overdrafts that they may have as well as invest any surplus,” said Michael Berkowitz, North America head of liquidity management in Citi’s Treasury and Trade Solutions.
He declined to comment on whether the bank has been getting a lot of requests to move money out of Russia.
Citi’s corporate clients are seeking to become more efficient with their cash, Berkowitz said.
“They're looking to digitize their processes and we seek to digitize processes for them as well,” Berkowitz said. “They’re aiming to achieve the best possible return while ensuring an adequate level of liquidity. They want to easily move money from one country to another in an automated way.”
Clients using Yankee Sweep will be able to spread excess cash across a small number of foreign banks with U.S. branches, through one account at Citi.
The U.S. branches of non-US banks are generally willing to pay an attractive yield for excess cash, Berkowitz said. He declined to say what a typical yield on these accounts might be.
“We're able to provide clients with a yield that is in excess of what they would earn on money market funds,” Berkowitz said.
Citi’s clients will bear the counterparty risk of the underlying institutions.
“We select financial institutions that have strong credit ratings that are generally comparable to those of Citi and other large native institutions,” Berkowitz said. He also pointed out that through the Yankee Sweep service, these clients also achieve counterparty diversification.
“IntraFi also has algorithms they utilize to meet the needs of our underlying corporate clients as to where to spread the excess cash, as well as to meet the funding needs of those third party financial institutions,” Berkowitz said. “As we build up our client base, and there are a larger number of third-party financial institutions, there's additional complexity in terms of determining how much cash should go to any one given bank on any given day, based on new flows into the account.”
The bank is in the process of doing a technology integration with IntraFi that will help automate the movement of funds from Citi to the destination banks.
