Notional pooling

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

Notional pooling lets a group of companies offset the credit and debit balances of their accounts at one bank when interest is calculated, without any money moving between the accounts. If one subsidiary holds US$5m and another is US$3m overdrawn, the group earns interest as if it held US$2m. Because each account keeps its own balance, the bank relies on cross-guarantees and rights of set-off between the companies, and capital rules that count the balances gross have made it more costly to provide, so some banks restrict it or price it more heavily than physical sweeping.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.