This case study was first published in Treasury Today.


InterContinental Hotels Group (IHG) needed to quickly adjust a previously limited short-term investment policy to optimise returns on over US$1bn, resulting from hotel sales in Hong Kong and Paris. IHG’s short-term investment policy in place at the time only allowed for unsecured investment instruments, leaving funds open to market risks with the added burden of increasing regulation due to Basel III affecting overall return and counterparty appetite.

Bert Heirbaut, Treasury Manager explains, “We identified the repo market as potentially providing the necessary security, liquidity and yield we sought from a short-term investment solution.” But documentation and operational set-up requirements are notoriously difficult to negotiate for new repo market participants, especially non-banks, while board approval would also be required to broaden their investment policy for use of a new instrument.


In a very limited time frame, IHG’s Group Treasury scoped out requirements, identified service providers, achieved board approvals and implemented (the latter taking just eight weeks) a solution which effectively enabled the firm to securely invest its excess cash with existing relationship banks at optimal yield levels in return for a conservative, controlled collateral basket of high-quality debt securities.

Critically, IHG could outsource many of the operational aspects of repo market participation – namely the day-to-day collateral management – while maintaining full control and visibility, and minimising counterparty and default risks.

Best practice and innovation

To meet urgent short-term investment challenges faced by IHG, this solution employed new techniques to enable a non-bank participant to successfully and safely enter a new, complex and unfamiliar market at very short notice.

In order to trade repo quickly with existing relationship banks, thus minimising credit risk implications, IHG used a standardised Repo Access Global Master Repurchase Agreement (GMRA), pioneered by Euroclear as part of the dedicated service it offers corporate treasurers, rather than the bi-lateral GMRA which is traditionally negotiated bi-laterally with each counterparty, and can take months, if not years, of legal negotiation.

To minimise impact on internal operations and existing risk tolerances, IHG contracted Euroclear to provide triparty agency services, effectively managing the exchange and substitution of collateral, in line with IHG’s policy of only accepting conservative, high-quality baskets of securities (including 60% AAA-rated sovereign and supra-national issuers). The arrangement supplies granular information on a near real-time basis on the value and liquidity of assets provided as collateral, thus providing IHG with a high degree of oversight and control.

By defining a low-risk solution that required minimal changes to IHG’s existing investment policy, the firm’s group treasury could explain its proposed course and receive board approval at short notice.

At a time of considerable flux and uncertainty in the financial markets, in which many corporates find themselves short of appropriate investment options to meet their core criteria, this solution demonstrates that innovative and resourceful treasury professionals can combine with flexible and responsive service providers to overcome today’s market challenges.

Heirbaut explains, “The repo market is still unfamiliar terrain for many corporate treasurers, who view it as bank-dominated and involving complex new workflows and responsibilities. This solution proves that the significant benefits of repo market participation are increasingly within the grasp of corporate treasurers, without incurring unnecessary operational burdens or unwelcome counterparty risks.”

Key benefits

  • Implemented very quickly – two months from board approval.
  • Short-term investment policy diversified to achieve significantly improved returns.
  • Able to take on a higher credit exposure due to secured nature of repos.

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Collateral management

IHG took advantage of Euroclear's specilised triparty service for corporate treasurers to win the Best Short-Term Investing Solution at the 2017 Adam Smith Awards.

Company overview

InterContinental Hotels Group PLC is the Group’s holding company and is incorporated in Great Britain and registered in England and Wales. More than 350,000 people work across IHG’s hotels and corporate offices globally.