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A bank overlay structure consists of two layers. The lower layer is comprised of all in-country banks that are used for local cash transaction requirements. The higher layer is a group of networked regional banks, or even a single global bank, that maintains a separate bank account for each country or legal entity of the corporate structure. Cash balances in the lower layer of banks are swept into the corresponding accounts in the higher layer of banks on a daily basis (where possible, subject to cash flow restrictions). These sweeps are accomplished either with manual transfers, SWIFT messages from the networked banks to the local banks, or with standing authorizations to the local banks. This approach allows funds to be consolidated on either a regional or global basis for centralized cash management.
Bank overlay structure is a useful tool for consolidating cash at a regional level, and perhaps even at a global level, thereby allowing for the centralized management of cash.
In detail the bottom layer contains the in-country banks that are used to deal with local cash transactions, such as cash receipts from locally-generated invoices to customers. The top layer is comprised of a group of regional banks that are networked together, or perhaps even a single superbank that operates at a global level. This top layer of banks maintains a separate bank account for each country in which the company does business, or for each legal entity owned by the parent company. The cash balances in the accounts located in the bottom layer of banks are routinely shifted into the accounts maintained by the top layer of banks. These cash sweeps may be conducted with manual transfers, or perhaps with standard authorizations issued to the local banks, or via SWIFT messages from the top-layer banks.
Under this arrangement, the bulk of all banking transactions are conducted in the bottom layer of banks, with occasional cash sweeps shifting funds to and from the top layer of banks.
