Guidelines for Transfer Pricing related interests & spreads applied in Zero Balancing Cash Pools

Now that we have explained the background why an In-House Bank with In-House Bank accounts is required for ZBA structures, and why we should apply interest to the In-House Bank accounts, let’s have a look at different types of interest PART 2 I will look at different types of interest for commercial banks,  and how…

A Zero Balancing structure mirrors the core activity of a bank. Therefore, managing a Zero Balance Account (ZBA) structure requires a corporate treasury to operate an In-House Bank. This In-House Bank must apply Arms-Length interest to balances in its In-House Bank accounts as well as to InterCompany Lending and Depositing/Investing, both debit and credit.

To comply with OECD BEPS Transfer Pricing regulations, Arms-length must adhere to the logical spread similar to that used in core banking operations. This entails ensuring that the spread on current account interest (debit/credit) is further from the reference rate than the spread on InterCompany Lending/Depositing.

This white paper discusses, in two parts, the background and guidelines of setting Transfer pricing-related interest spreads in Zero Balancing Cash Pools.