Definition for : Notional pooling

Notional pooling provides a relatively flexible way of exploiting the benefits of Cash pooling. With notional pooling, subsidiaries' account balances are never actually balanced, but the group's bank (see Concentration bank) recalculates credit or Debit Interest based on the fictitious balance of the overall entity. This method yields exactly the same result as if the accounts had been perfectly balanced, but the fund transfers are never carried out in practice. As a result, this method leaves subsidiaries' some room for manoeuvre and does not impact on their independence.

(See Chapter 47 Leveraged buyouts (LBOs) of the Vernimmen)

To know more about it, look at what we have already written on this subject