Treasury Today Country Profiles in association with Citi
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September 2009

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Editorial

Interesting times

For the last two years, late summer has been a disruptive time of the year for the financial community. In August 2007, news of the sub-prime crisis began reverberating throughout the world, although few predicted the far reaching consequences at that stage. September of the following year was even more dramatic, seeing the collapse of a number of financial institutions starting with Lehman Brothers. For a while, industry commentators were talking in terms of a ‘financial Armageddon’ and the complete collapse of the financial system.

While the reality has – mostly – been less apocalyptic than some feared at the height of the crisis, the repercussions of the financial and economic crisis have been felt deeply across all levels of the industry and have included the ‘credit crunch’, volatile trading markets, the collapse of banks, companies and governments and rocketing unemployment. The authorities have responded with dramatic measures ranging from government bail outs, tighter regulations and unprecedented cuts in interest rates to fiscal stimulus packages and quantitative easing.

For treasurers, the challenges and opportunities brought by the disruption in the market are continuing to make themselves felt. On the one hand, treasurers have found their access to credit severely restricted; on the other, they have become much more aware of counterparty risk, particularly in the context of banking partners. Both have led to changes in the relationship between banks and corporates. Other emerging trends have ranged from an increased focus on financial supply chain management to the use of forward start facilities to secure a commitment from banks to renew a credit facility on an agreed future date.

The phrase ‘May you live in interesting times’ is often referred to as a curse – an interpretation which is as apt now as ever. No one in the financial industry could claim that the last two years have not been interesting, and this looks set to continue for some time. While commentators continue to talk of ‘green shoots’, reinforced by the recent return of Germany and France to economic growth, it is important to temper optimism with an awareness of how much has happened in the last two years – and how much further we have to go.