A group that invoices in three currencies, pays suppliers in two others and reports in a sixth is not unusual, and the arrangement that supports it is frequently the one that accumulated rather than the one that was designed. Accounts were opened as each market was entered, conversions happen when a balance is needed elsewhere, and nobody has established what the arrangement costs because the cost is distributed across hundreds of transactions and never appears as a line item.
The cost is real and it has two components. The first is spread on conversion, incurred each time value crosses currencies, and incurred repeatedly where funds are converted, moved and converted back. The second is reconciliation: the effort of establishing what the group actually holds, in what currency, at what rate, at any given moment, which grows faster than the number of accounts.
How account structures are usually arranged
The simplest arrangement is a single entity holding multiple currency accounts with one institution, receiving and paying in each currency and converting only when the group genuinely needs to change currency rather than when it needs to move money. This eliminates the most common source of avoidable cost, which is converting into a base currency and back out again purely because the receiving account could not hold the currency received.
Where local presence is required — because a market’s customers pay only domestically, or because local regulation requires it — a local account is added for collection, with periodic sweeps to the principal relationship rather than continuous transfers. Larger groups sometimes add a treasury function, with intercompany positions netted internally and only the net moved externally. That arrangement reduces external cost and introduces intercompany balances that require the documentation discussed in the note on transfer pricing.
Most avoidable currency cost in a private group comes from converting to move money rather than to change currency.
What institutions will support
Multi-currency accounts are widely available and the range of currencies is not uniform. Major currencies are supported almost everywhere; currencies subject to exchange control or limited convertibility frequently are not, and no account structure will overcome a restriction imposed by the currency’s own jurisdiction. Groups operating in such markets should expect to hold local relationships for local currency and to plan repatriation as a separate question.
Institutions also apply their own view to the pattern of flows. An account structure whose purpose is efficient treasury management is straightforward to explain. One in which funds move frequently between related entities and jurisdictions without an evident commercial rationale attracts enquiry, and the enquiry is harder to answer where the movements were driven by convenience rather than by an arrangement anyone recorded. The account structure should be capable of being described in a paragraph.
What to settle before opening anything
Three questions determine the structure. In which currencies does the group actually receive, and from whom? In which does it actually pay, and to whom? And in which does it report, which fixes where translation differences arise. Answered with figures rather than impressions, these usually show that a smaller number of accounts than the group expected would carry the great majority of the activity.
The remaining question is which entity holds what, and it should be answered against the group’s corporate structure rather than around it. Accounts held by an entity with no connection to the underlying activity, or funds routinely held by one entity on behalf of another without documentation, create both a reconciliation problem and a question at the next review. Where the account structure follows the corporate structure and the corporate structure follows the business, the explanation the institution eventually asks for has already been written.
This note is general in application and does not constitute legal, tax or regulatory advice. It describes practice observed across institutions and should not be relied upon in relation to any particular banking arrangement.