J.P. Morgan Analyzes Banking for Asset-Based Businesses

J.P. Morgan Structured Products B.V. has released an analysis detailing the transition of asset-based business models towards in-house banking operations that utilize virtual accounts. According to the report, this shift enables faster onboarding of new entities and bank accounts, alongside a reduction in bank and account management operational costs.

The analysis specifically addresses firms in the real estate, transportation, infrastructure, or energy industries, which often structure their operations around special purpose vehicles (SPVs). These companies continuously form new SPVs as they acquire assets, leading to complex account and subsidiary structures. Traditionally, these structures have resulted in a proliferation of bank accounts and delays due to Know Your Customer (KYC) requirements, hindering the activation of new assets.

Complex account and management structures have also increased the administrative burden on corporate treasury and liquidity management functions. Optimizing bank accounts and consolidating cash has proven costly and complicated. Companies have faced a persistent need to rationalize their bank accounts to improve competitiveness and control expenses.

Historically, asset-based businesses have relied on secured financing arrangements. However, recent changes in financing models have created opportunities to streamline bank account structures by adopting in-house banking techniques, such as 'on-behalf-of' centralization. The in-house banking model centralizes financial activities within the group treasury, improving liquidity management, process efficiency, and risk management.