I have recently been in Dubai where the ACT was generously invited to deliver the treasury workshop at the latest GTR MENA Trade Finance week. The ACT and GTR have been associated in this way for a few years now in the UK, Middle East and Singapore and it allows us to reach a trade finance audience we don’t always see. Unfortunately, the date, 14 February, meant being away from home on Valentine’s Day but it was for a good cause of course. The big theme in trade at the moment is, well, the lack of it or, rather, the
This is the first instalment of an Asian double-header from Singapore and then Hong Kong, representing the ACT, meeting our members and students and a whole bunch of other people too! And meeting taxi drivers as well….and like taxi drivers everywhere, the ones in Singapore are not short of an opinion! So, you ask, what’s business like? Well, they say, given that next week is the night F1 race which shuts much of the city centre and no-one in Singapore (apart from the Government) is that fussed, it could be better! In seriousness though there is a nervousness in SE
This faculty often considers the role of banks for the corporate user and borrower, both generally and also from specific aspects of trends in finance.Corporations cannot do without banks, they are needed for many aspects of business, including money transmission, market making, broking , trade support products, asset finance, bond issuance, M & A, as well as their traditional role as deposit takers and vanilla lenders. They are under particular pressure at the moment from many directions:
Wholesale depositsBank 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.
Banks are very much the part of the financial universe under the spotlight at the moment. There are so many changes affecting them, from regulation, retail separation and political pressure on wages and bonuses, to euro zone pressure and recessionary risks of lending, that we are all becoming scared that they will not be able to act like banks and lend to corporations. Much effort, including from the ACT, is therefore to understand the implications of this and one path to follow is to investigate how non bank corporations might fill the gap left by bank lending.
We continue the theme from last month where we considered the influences of changes in the financial services sector on treasury management. These included:
The ImplicationsWe now consider the implications of these changes which are probably along three dimensions:
- Role of the treasurer
- Treasury design
- Treasury career
The approach to bank relationships is at the core of a treasurer’s agenda and should from part of an overall financial strategy. For example, if a firm decides that leverage is required to earn equity type returns for its investors, then it must be able to find a source of debt finance for that leverage. So, unless it can rely totally on bond or other markets, it must need banks to provide that leverage. It is also a very personal part of a treasurer’s job, and also on the bank’s part, as links between corporate and bank boil down to
The ACT, partly represented by the author of this spotlight, visited Hong Kong recently and has used the experience to generate material for this article. We are all aware how the centre of gravity of the planet seems to be shifting towards the east, evidenced by debt crises in the western countries, with consistent trade deficits (albeit with notable exceptions), government deficits and heavily ingrained high standards of living which seem almost unsupportable.