Zero-balancing (cash concentration)
What is zero-balancing, and what does it create between group companies?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
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Zero-balancing is a cash management arrangement in which the bank physically sweeps each participating account to a nil balance at the end of each day, moving surpluses into a header account and funding deficits from it. Unlike notional pooling, the cash really moves, so every sweep creates an intercompany loan between the subsidiary and the company that holds the header account. A lender reads those balances as real debts: they need documenting, they can raise tax and corporate-benefit questions, and if a subsidiary fails, its liquidator can claim what the header account owes it.
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.
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