Editorial

Reflections and projections

It’s hard to believe that the end of the year is almost upon us. For those in the corporate treasury profession, 2014 has been another rollercoaster ride. There have been highs; there have been lows; and there has been an overwhelming amount of regulation. Indeed, the beginning of the year was dominated by regulatory change, not least EMIR and SEPA.

Getting ready for the start of trade reporting under EMIR was a major agenda item (some would say ‘headache’) for many corporate treasurers. Rather unsurprisingly, a significant proportion of corporate organisations missed the 12^th February 2014 deadline for reporting and teething problems also occurred at certain trade repositories (TRs). In short, it was a half-hearted launch, with obvious areas of non-compliance.

But for officials at the European Securities and Markets Authority (ESMA), sticking to their deadline and keeping their pride intact seemed to be a better option than postponing it until 100% compliance could be achieved. Since launch, more and more technology solutions have come to market to help all parties in derivative trades to meet the reporting requirements efficiently. Banks have also stepped in to help out their corporate clients with delegated reporting services.

What isn’t yet clear is quite how and when the sanctions for trade reporting errors or non-compliance will be applied. Any TRs breaking the rules will be sanctioned by ESMA, whereas participants in a trade are subject to fines from national regulators (which could apparently reach up to €5.4m in Sweden). As of the beginning of December 2014, TRs will need to report any trades that they reject due to missing information to ESMA. This could mark the start of the authorities looking to pinpoint – and punish – non-compliance.

While there was no backtracking on EMIR, it was an entirely different scenario for SEPA. With the migration deadline set for 1^st February 2014 – and corporates having been building up to this date for years – the European Commission announced a quite unexpected change of heart. It allowed a so-called ‘grace period’ giving businesses an additional six months to prepare their new systems before legacy payments systems were switched off.

Welcomed by many smaller companies, this rather last minute reprieve frustrated many larger corporates who had dedicated a large amount of time to getting ready for the deadline. Often, this dedication was to the detriment of other treasury projects, and to personal lives too – with holidays (and even weddings!) put on hold – so the frustration was quite understandable. Nevertheless, those that were ready by the February deadline doubtless reaped the benefits of early SEPA compliance.

Although these two significant deadlines are now behind us, both SEPA and EMIR will continue to require attention over the year ahead. Projects that were rushed through can no doubt be optimised. Those outside of the Eurozone must work towards the 31^st October 2016 SEPA deadline. And mandatory central clearing of OTC derivatives is slated to begin in H1 2015 under EMIR (although the vast majority or corporates will be exempt from this, it is still worth noting what will be on your banks’ to-do lists).

Other regulations to keep a close eye on over the next 12 months include bank resolution measures, Basel III and the Financial Transactions Tax. Of course, regulation is just one piece of the overall treasury landscape, but it is likely that 2015 will be another year that is overshadowed by change.