Does Brexit matter to me?

It’s not just a UK issue – treasurers everywhere need to be prepared for the ripples reaching their shores… For those organisations beyond the UK, it may be tempting to assume that Brexit is ‘just’ a local issue for the British and that it will have no impact on their own activities. But even in these early days, before any actual negotiations have got underway, this may not be an accurate assessment. If your organisation has any interaction with the UK (however indirect), it would be worthwhile considering what Brexit may mean for you. For example, do you have customers

Cash piles

There are some astonishing statistics on the amount of cash held by non-financial firms. Around the end of 2013, the average FTSE 100 company held £1.9 billion, US non-financial firms held USD 1.64 trillion, all at record levels. It is worth looking at this from both a corporate finance angle and for what it means for the role of the treasurer.

Apple Inc. sheds light on Libor

Bloomberg broke it thus:

Apple’s $1 billion of floating debt due 2016 pays 5 basis points, or 0.05 percentage point, more than the three-month London interbank offered rate, and its $2 billion, five-year floater yield 25 basis points more than the benchmark, Bloomberg data showApple Raises $17 Billion in Record Corporate Bond Sale, Charles Mead & Sarika Gangar, April 30, 2013 10:42 pm GMT+0100,

Wholesale bank deposits made hot money

If treasurers did not know before, corporate (wholesale) bank deposits have become of much higher risk, with subordination to secured and preferred creditors of banks.

Here is what I wrote in the April edition of Financial World ( – since when we can add “bail-in” to hazards facing wholesale deposits. Financial World, April 2013, Page 22: John Grout describes why moves to make banks more resilient could cut funding to the real economy and stoke the problem of hot money in shadow banking.

Wealth destruction?

Losses/value destruction will arise if/when (long-term) interest rates rise and (fixed rate) bond prices fall, or so many commentators are warning.

I don’t see it entirely like that. I think that that idea is giving far too much weight to mark to market valuation during the holding period or too much preoccupation with bond traders.

Libor: Waiting for Wheatley

While we wait for the UK government appointed Wheatley review of compiled reference rates, I am surprised that the FSA’s Lord Turner’s views on Libor currently have had so little attention in the general media.

Since my two blogs* of 17 July Lord Turner has repeated his views following a talk at Bloomberg London on 24 July. My posting on the ACT Group on LinkedIn includes a summary of what he has said: Treasurers tell us that they have far bigger worries than Libor. Maybe they have been listening to Lord Turner.

Use and misuse of derivatives

Treasurers are always learning and always having to deal with change in their own firms as well as changes in technology, financial markets, economies, fashion and convention, among others.

Two case studies are presented in this month’s faculty offering as cases of good and bad treasury management and in each case there are lessons for today’s treasurer looking for value in the financial markets and the reduction of risk in their firm.

Case Study 1

Companies: more demanding creditors of banks

Wholesale deposits

Bank funding methods generally are moving from unsecured senior bonds and unsecured inter-bank loans, CDs etc., to collateralised funding: covered bonds, collateralised borrowing from central banks, short-term funding repos, etc., etc. This subordinates wholesale unsecured deposits everywhere.