Richard Parkinson (TT): Although we are here to talk about global cash management, we can’t ignore the context in which we’re working. We’re facing a banking crisis that seems to be continually unfolding, with support still being needed for some banks around the world. We’re also living through a so-called euro crisis. How is this impacting your relationships with clients today?

Jennifer Boussuge (BofAML): The macroeconomic situation is definitely prompting clients to seek risk mitigation solutions. For example, they’re very concerned about their foreign exchange exposures and also about potential currency restrictions in certain countries. It is very important for the bank to develop solutions to help mitigate that risk. We’re seeing a similar trend on the trade finance side as well, with corporates increasingly interested in trade finance facilities that allow them to improve working capital management and transfer risks associated with payables and receivables to their banks.

Overall, we are seeing more and more companies putting enterprise risk management models in place to identify and measure both internal and external risks, and so prioritise and establish risk tolerance levels. Clients are certainly leaning on their banks to help them figure out what contingency planning they need to be doing.

David Aldred (Citi): Jennifer is right that treasurers are undoubtedly reassessing their priorities and working out what they need to focus on. What is particularly interesting is that the euro crisis has focussed our clients on looking at the developed markets, whilst at the same time balancing some of the emerging market challenges they have.

On the relationship side, things have become far more transparent and we are holding open conversations with clients around how they operate globally and also what credit is available to them. So in many ways the crisis has strengthened relationships because we find clients being a lot more open, we’re able to discuss beyond the transaction services side and look more at their end-to-end processes like the supply chain. And that’s what it’s all about. Where can we as a bank add value? Our clients need to be successful in this environment. They need to be able to generate growth, be it in developed or developing economies. And if you’re not relevant for the clients in those markets then you’re not adding value.

Filipe Simão (BNP Paribas): One thing we all agree on is that it is very difficult to predict where all this is going. Clearly clients are expecting flexible, relevant solutions from their banks and this is reflected in the RFPs we have received lately. Every RFP has included a question along the lines of ‘how does your proposal accommodate a possible breakup of the euro?’ Aside from this, bank counterparty risk is a huge focus. Last year when we met, we talked about ‘knowing your bank’ and I think this is becoming more and more important.

Michael Mueller (Barclays): That last point is especially true at a time when corporate cash piles are still growing. I would say that corporates are arguably sitting on more cash than at any time in the last 20 years. That raises the question of counterparty risk. How do you invest that cash? Which banks can you leave the money with? What happens in a potential redenomination scenario, especially where you’re dealing with euro balances, and in some cases, substantial euro balances?

Neal Livingston (RBS): Another interesting feature of this focus on ‘de-risking’ among corporates is that it has raised the level of dialogue with the commercial side of all our clients’ operations. So we’re no longer having conversations just at a CFO and perhaps Board level, but the divisions in the businesses are also now deeply engaged in this dialogue with their treasury counterparts. As well as being a different set of people taking part in the conversation, the themes are slightly different than five or ten years ago too. For instance, look at the largest global multinationals out there today – some of them are stronger, better capitalised and higher rated than many of their financial counterparties.

Turning to the euro crisis specifically, it’s worth noting that there is a small minority of clients who are actually looking at this as a potential opportunity. So, depending on how you might enter the crisis or a redenomination scenario, it could actually give you a potential competitive advantage.

Martin Runow (Deutsche Bank): An additional point of interest from a corporate treasurer’s perspective is that the crisis has raised their profile and standing within their organisation massively. After all, this is a crisis on the back of a number of crises now, so they have been through this before and become more adept at ensuring they have the right information at hand when the CFO comes knocking. In other words, clients are still asking us to help around enhancing visibility and control.

On the counterparty side, I fully agree with what has been said. What we have seen is also a trend to consolidate with fewer bank counterparties – although this might sound counterintuitive, it’s about working with partners who you know and trust. And here the control and visibility aspects again come into play, meaning your bank group needs to be manageable in terms of size and complexity.

Richard Parkinson (TT): On the euro cash management front, we also have the SEPA migration date looming. What are you seeing corporates doing, and what are you telling corporates to be thinking about in the whole euro/SEPA arena?

Filipe Simão (BNP Paribas): Clearly there are two ways of seeing the arrival of SEPA, or the approach of the end-date. You can either look at it as having a technical migration to comply with, or you can also see it as an opportunity to rethink the way payments and collections are processed. And it’s not a question of thinking of how to do it differently, but how to do it in a more efficient manner.

You find that the mindset actually differs from market to market. If you look at retailers and utility companies, they are more interested in getting the technical migration from their domestic means of payment to the SCT in place. But if you look at the MNCs, they are really (re)discovering the benefits of payment factories and collection factories. The concept of these processing hubs dates back to the 90s but due to the recent regained interest on SWIFTNet and SEPA it’s something that’s really gaining traction.

“If you don’t want to be stuck with scarcity of resources towards the end-date, you should seriously consider talking ASAP to your vendors and to your banks who have experience in doing this.”

Filipe Simão, BNP Paribas

Martin Runow (Deutsche Bank): The fact that we now have an end-date is a blessing for many corporates, and for the others, it simply forces their hand. SEPA is a regulatory project that you will have to embark on, that you need to find resources and budget for. As timeframes for SEPA migration are short, it is important to mitigate project risks, such as avoiding dependencies between SEPA compliance and wider centralisation and optimisation objectives. If these can be achieved within the same timeframe, then many corporates will certainly wish to do so, but they can equally be achieved as a second phase.

But don’t leave it at that. Look at the opportunities too. I fully agree with Filipe, I think it’s a fantastic opportunity to do all those things that you always wanted to do in Europe. Streamline your account structure, talk about risk mitigation, reduce the number of banks you work with and concentrate what you can.

Jennifer Boussuge (BofAML): We hosted a meeting at the bank a few weeks ago with a number of treasurers from global MNCs. Across the board, they said that there’s a huge desire for greater standardisation and simplification, and that SEPA will help them achieve that. It was also interesting to hear one of our clients say they’ve used SEPA as a way to push through XML in Europe. Having done this for SEPA, they can roll out this programme across other geographies, and the project gets them one step closer to the standardisation that they’re striving for around the globe.

David Aldred (Citi): The euro crisis has resulted in many of our clients adopting a ‘back to basics’ approach. Control and visibility of cash has been a key priority for clients. Clients should now be focussing on SEPA migration. This is a great opportunity to review account structures and end-to-end transaction processing efficiency. Having a clear strategy on XML is a key consideration for our clients as well. Doing nothing is not an option and we are here to guide our clients throughout this migration.

Neal Livingston (RBS): We’re seeing quite a polarised world right now. After talking about SEPA for five years, I think a lot of corporates have completely switched off because they’ve heard so much about it. But with the end-date in place, it’s now a reality and they can’t put it off. Of course you’ve got the clear earlier adopters, whether it’s the government-sponsored entities, as in the Netherlands and Finland and so forth, the utilities, or a few other select corporates. They are doing a good job at engaging others in the broader dialogue around how SEPA impacts and improves their processes.

Nevertheless there are a number of others, who either don’t believe the end-date will really happen or who are choosing not to believe the end-date exists. So we’re starting to see a gap in execution, and our view is if you haven’t moved, or you don’t move very quickly on SEPA – and these are big change projects – you will almost certainly miss the end-date.

Richard Parkinson (TT): Is the euro crisis stopping people?

Michael Mueller (Barclays): It’s certainly a factor. On the one hand you have a long-term SEPA project, on the other hand you have a very acute euro crisis and instability that is causing a situation where people tend to think short term, rather than long term. So I can fully understand when corporates say ‘let’s work through the euro crisis before we think about SEPA’. Nevertheless, it’s hard to ignore the fact that there is a SEPA end-date and the industry is moving towards that.

So that, I think, creates a bit of a dilemma for some corporates who haven’t really started yet. We need to help corporates in making the business case for SEPA as there are probably some really tough conversations going on with FDs of corporations who have not yet migrated to SEPA.

Jennifer Boussuge (BofAML): But I would say that corporates need to be linking the two themes instead of looking at them in isolation. So they need to be thinking about SEPA as a risk mitigator with regard to the euro crisis, and a way to enable getting these funds out of some of the countries that they’re concerned about, whilst also retaining continuity of payments. That’s certainly what we are encouraging our clients to consider.

“At times like these it is vital to reassure our clients that we are here through the good and the bad times. Essentially, we’re on a journey together to achieve greater transparency, better risk management and operational efficiencies.”

Jennifer Boussuge, Bank of America Merrill Lynch

David Aldred (Citi): Yes it has been a distraction. However, I think that this is actually a catalyst for our clients to look at their trading models. We’ve talked about risk management. Clients are undoubtedly leveraging their ERP systems and treasury systems much more. They’ve reprioritised within their projects and are accelerating certain ones – such as creating in-house banks. ‘Payment on behalf of’ and ‘receipt on behalf of’ can really insulate you from some of the counterparty risk issues you have, if you have a much more efficient trading model. And SEPA is certainly a catalyst for that. Also, let’s not forget XML can be leveraged for global efficiency – so there are added opportunities there too.

Filipe Simão (BNP Paribas): SEPA payments are increasing, but then the SCT is in many ways the easy part. The difficult part is the SDD, where volumes are still extremely low – around 0.4%.

And of course it’s the cross-border SDD that actually presents the biggest opportunity for corporates. It is absolutely vital that corporates decide what their stance is and start to act as soon as possible. If you don’t want to be stuck with scarcity of resources towards the end-date, you should seriously consider talking ASAP to your vendors and to your banks who have experience in doing this.

Michael Mueller (Barclays): And crucially those banks need to be able to provide a whole range of products and services, from those that service clients with a comprehensive, centralised transaction processing infrastructure all the way to those who really don’t have the resources at the moment, especially in the format conversion space. SEPA is a really big ask of corporates and I don’t think that all customers will be in a position to get there by 2014 in terms of having the fully-fledged centralised set-up, AP/AR direct debit and so on. Those corporates need to be taken on a journey, in a way, by their bankers, to make sure that they can comply but also deal with the other day-to-day tasks and priorities which can be a significant undertaking.

Martin Runow (Deutsche Bank): And to add to Michael’s point: the journey has to start now or the ship may otherwise sail. Many discussions with clients circle around the euro sovereign crisis and SEPA at the same time. These two topics can be combined, eg through the risk mitigation potential of SEPA, which should help reduce complexity in the composition of clients’ bank groups in Europe.

Richard Parkinson (TT): What if I, as a corporate, just don’t move to SEPA? What happens? What are the risks?

Neal Livingston (RBS): The risk is whether or not your banks will be able to digest and process your message type/ convert everything.

Michael Mueller (Barclays): In some markets that’s just not possible.

Filipe Simão (BNP Paribas): And on direct debit it just doesn’t work.

Neal Livingston (RBS): True, there is a carve out for unique local payment types, which is still subject to some definition, but anything that’s more universal is at risk that it will not be processed by your bank.

Martin Runow (Deutsche Bank): Also if you use high value wires as a fall-back, you will still need to have basic payment information available (for example, your beneficiary’s IBAN), otherwise you will be unable to process even a wire within Europe. In other words: doing nothing is not an option at all.

David Aldred (Citi): The risks can be quite high. Increased costs and inefficient operating processes which could potentially impact working capital and supplier relationships are other examples.

Funding

Richard Parkinson (TT): Looking elsewhere in the cash management space, diversification of funding sources seems to be quite a trend at the moment. Obviously companies are trying to look internally for funds when they can, more efficient cash management and working capital management, but what’s going on here? Is this seeking of alternative funding impacting the client and core bank relationship?

David Aldred (Citi): If we look at treasury models, the centralised treasury structures and cash pools have achieved quite a lot in terms of recycling cash and there’s more efficiency that can be achieved from these type of structures. But there has been a dislocation in the capital markets. Basel III for example will certainly have an impact on project finance as banks will have to look at capital allocations for longer-term financing. Tapping new funding sources is a key consideration for treasurers.

What we’re undoubtedly seeing in addition to what clients can achieve with DSO/DPO efficiencies is leveraging alternative types of financing, be that supply chain finance, receivables finance, or export credit agency (ECA) finance. So there’s a wider variety of funding sources that are being used, but it is a challenging market.

Filipe Simão (BNP Paribas): Looking at the wider financing discussion, I think that historically the European bank credit market has been quite cheap compared to the US. So what we’ll probably see going forward is that European corporates will start acting like their American counterparts. This could mean going to the commercial paper market or a bond market for long-term investments, for example.

Obviously in addition to that, corporates will continue to optimise liquidity within the group and look at trapped liquidity in sub-optimal working capital processes. But I think the main trend that we’ll see is a more homogenised way of funding between Europe and the US going forward.

Jennifer Boussuge (BofAML): Arguably the change in the funding dynamic can be a catalyst for strengthening the corporate’s relationship with their core bank. We have a multi-pronged relationship with every client, and together with our integrated model in which we’re providing solutions across business lines and products, we’re able to offer multiple funding options. For example, finding ways to free up liquidity through process improvement, or leveraging various cash management instruments to deliver increased control of cash can actually strengthen that relationship as it helps the corporate to achieve value.

Michael Mueller (Barclays): I’d say that combining those discussions is an absolute necessity today and combining products works well for both sides, rather than looking simply at straightforward lending products. It’s a refreshing approach and a really positive direction to be moving in.

Neal Livingston (RBS): While I agree with most of what’s been said, there are a few points to add. One is that banks have got to really understand their client’s funding needs at the point of delivery. Traditionally that was a more generic approach but now its more targeted, so it’s being very precise about how you deliver, what you deliver and where you deliver.

Secondly, and we started to touch on this earlier, is the development in the broader financial markets. It is obvious to us that there are companies that have access and those who do not have access, and that is now a source of competitive advantage, or disadvantage, as the case may be. Hence the hoarding of liquidity on balance sheets, hence the defensive measures that we’re seeing coming in.

How that liquidity ultimately gets released back into the system will fundamentally come back to the state and health of play of the economy. The worry is that we may just be seeing the first or second wave of a cycle of hoarding that carries on. This means that corporates will not release this liquidity unless they’re forced to by their shareholders, they have superior projects where they can invest or their risk profile changes.

Richard Parkinson (TT): It’s clear that the banks are deleveraging, but to what extent are your balance sheets still available to your corporate clients?

Martin Runow (Deutsche Bank): Banks and corporates alike are placing greater scrutiny around the strength and the composition of their counterparties. And while we may be putting more focus on due diligence, we are definitely providing balance sheet too. It might be that we are doing that in slightly different ways, as David highlighted, in the form of structured export finance, trade finance or financial supply chain solutions, but the support is definitely still there. An added benefit which comes with higher level of scrutiny and focus is that the relationship between corporates and their core banks is actually improving, as they find themselves working much closer together and aligning their strategic objectives.

David Aldred (Citi): It is clear that the environment we operate in is challenging and will remain so for some time to come. However, for their defined client market I believe that banks are making available their balance sheets. Not just traditional term credit but in working capital and trade finance facilities.

Richard Parkinson (TT): Is anyone getting squeezed in that process though, because inevitably it’s easier to make your balance sheet available to the really big names?

Jennifer Boussuge (BofAML): At the bank, we put the client at the centre of everything we do – and strong, open relationships are the linchpin to everyone’s success. I can’t over-emphasise the value of relationships, particularly in today’s challenging economic environment. At times like these it is vital to reassure our clients that we are here through the good and the bad times. Essentially, we’re on a journey together to achieve greater transparency, better risk management and operational efficiencies. Relationship is not classified by size alone – it’s far deeper than just targeting the largest MNCs.

Technology

Richard Parkinson (TT): A topic we’ve hinted at already is cash management technology. Can we turn first to mobile technology and what the value is for corporates?

David Aldred (Citi): Digitisation is a megatrend we can’t ignore. It’s happening. When we look at just the whole move to mobile technology and digital technology, our clients are telling us that they want mobile solutions. This is not a case of a bank building a solution then looking for a problem. It’s about being relevant for our clients. And this shouldn’t be confused with mobile wallet solutions, which are completely different when you look at, say, the unbanked in Kenya where there are more mobile phones than there are bank accounts. It’s a completely different subject.

So how are we using mobile technology for treasurers? Well, we know that treasury resources are limited, and yet the demands on treasurers are increasing. When travelling, the treasurer wants information and to see data and risk positions, and to be able to approve payments on a robust and reliable platform. That’s what’s driving this. And certainly that’s where a bank like Citi has invested. The take-up has been phenomenal, so this is not something that’s a hobby. This is a very real business that our clients are asking us for and are using.

Jennifer Boussuge (BofAML): The drive toward mobile banking for corporates is consumer-driven, with the general public increasingly interacting and conducting transactions through mobile platforms. However, I would add that today mobile technology is not yet seen by our treasurers as a ‘must-have’, and adoption rates vary by industry. I think it can provide a lot of flexibility around a number of processes, but without mobile technology, those processes can still happen.

Nevertheless, I think mobile banking absolutely merits exploration, as it will most likely evolve over time. However I do still think that clients have some outstanding concerns that need to be addressed before it will be fully embraced, for example compliance with internal controls.

That said, we continue to invest and innovate in mobile technology in response to industry drivers such as increased regulation, greater demand for cash efficiency, trade finance and deeper risk awareness. This is key in order to remain competitive and to help corporates manage their money from working capital through to liquidity and investments.

Neal Livingston (RBS): Let me give you a scenario where mobile works well. Most companies are now managing their daily liquidity within 15 or 20 minute time windows of very tight tolerances around liquidity coming in, liquidity going out. They’ll make multiple investments or disbursements during the course of the day. These are really time sensitive activities that they’re doing. The convenience and universality of the mobile or tablet is quite compelling as a tool to enable that process, in particular for the authorisation process. So from a convenience point of view, mobile solutions are definitely the way forward.

It is true that there may be some security and compliance-related issues still to be solved, but these are not insurmountable. For the banks around this table though, and certainly for our bank, the much more fundamental question is one of design. Mobile solutions offer a fundamentally different user experience – one that users have gotten familiar with in the consumer space. The expectation is that when you’re using a mobile solution for corporate purposes, you will have a similar experience.

That goes all the way back into your technology architecture and reverse engineering the design of your platforms and your systems to start with the mobile or the tablet first, not to start with an online experience. That’s a fundamental change in thinking and technology design.

Michael Mueller (Barclays): As a service provider, you have to be very specific with respect to the area that you’d like to cover from a treasurer’s perspective in the mobile space. Alerts and notifications can certainly be useful but mobile payments and mobile wallets are an even hotter topic right now. Yes, this is mainly in the consumer space but there’s no reason why this shouldn’t cross over into the corporate space.

We are seeing some proactive industries in this respect. The telecoms companies and card providers for example are getting ready in this space, and some banks are ready now, but I think we’ll see a lot more traction. For treasurers, it will definitely influence the way payments and receivables will be managed moving forward.

Filipe Simão (BNP Paribas): On the receivables side, handheld devices are already used by our clients’ sales teams to check the availability of credit lines and input future-dated invoices. Those invoices will be under the bank’s guarantee, and will be paid even if the account balances are insufficient on the due date.

The use of mobile technology differs from market to market. In the corporate banking market, group treasurers on the road use them to monitor and release sensitive payments initiated by their teams or group subsidiaries. We have had a number of applications doing that, in Turkey and other markets, for quite some years. In the business banking market, the requirement is for treasurers to be able to initiate payments, wherever they are. Across all markets, the value of mobile technology in cash management is now a perceived reality for corporates. Both banks and software vendors have a role to play.

Martin Runow (Deutsche Bank): I do think the convenience of not being tethered to your desk is fantastic. Again it comes back to really understanding the way that your clients work and responding to their needs – whether that be with balance sheet or just making their working life easier with a mobile solution.

Richard Parkinson (TT): Corporates are increasingly looking to standardise their technology today, while operating with multiple banks. Should banks therefore be investing in collaborative, standardised solutions to help their clients, rather than still building proprietary tech?

Neal Livingston (RBS): First of all, any technology development has to fit with your customers’ needs and what your corporates are telling you is important. Whether that’s done through collaborative means or third-party software providers, that has to be part of the operating model that we adopt. And for me there’s no contradiction between something you might mutually develop and then independently commercialise.

As to multi-access proprietary technology versus non-proprietary technology, I think the technology is actually going to answer this question. Because what we will increasingly see corporates expecting and demanding is a much more relevant, modular and highly specific set of services that are very tailored, not just to their individual needs but to the needs of the individual user within that client community. And that, by design, means you need to have a set of common standards for how these things work.

“Some banks will be on a fairly ‘fast track’ Basel III pathway, others will be on an alternative track, such as Dodd-Frank. Others, realistically, are still on Basel I and may remain at that stage.”

Neal Livingston, RBS

Jennifer Boussuge (BofAML): I agree that there is a need for both multi-bank and proprietary technology as we serve a variety of clients that don’t all fit the same profile. Depending on the client, their credit needs and how large their bank group needs to be, for many, proprietary systems are completely sufficient and will meet all their needs. But for the large, multi-banked corporates with more budget to invest in technology — those looking for standardisation and consistency of data across the globe or the regions in which they operate — we need to look at more ‘bank neutral’ solutions.

Earlier, we talked about XML as a standard. Today, many banks are collaborating to make sure those standards are interpreted in the same way. But I think we also have to think about documentation standardisation and initiatives like eBAM. The latter is also an area in which clients would very much like to see more inter-bank cooperation. A lot of clients look at eBAM as a risk mitigation tool, providing control and oversight for their many accounts that are being accessed by a lot of people.

David Aldred (Citi): I believe banks are investing however it is a question of balancing this investment. Investment in open standards such as XML and SWIFT based communication is a great example of collaboration and is a major focus for Citi. The XML bank harmonisation meetings are also illustrative of this harmonisation and desire for banks to work together which benefits our clients significantly. There will always be a core base of clients who are reliant on a proprietary technology platform and banks need to support these clients with significant investment. Banks’ target markets differ, so collaboration on this front is a challenge.

Michael Mueller (Barclays): I think it’s much more about propositions moving forward as opposed to products. It’s more about combining best practices from different areas that you find in the industry rather than developing huge boxes and proprietary products that link corporates to banks in a very tied way.

In addition, the whole business model is changing somewhat and is far more based on standards that are only partially defined by the banks. For example, there are environmental and technological standards that solutions also need to comply with, not just banking standards. We will have to adopt these standards too and basically approach technology development more intelligently.

“It will become increasingly important for corporates to become more flexible when it comes to allocating business to different providers. I think the most relevant development in that space is on the SWIFT for Corporates side.”

Michael Mueller, Barclays

Martin Runow (Deutsche Bank): What really matters is making sure that clients have the flexibility they need. In an environment where corporates are reconsidering their bank relationships, multi-bank solutions will inevitably be attractive to them. Also, I think there is a danger of losing that innovative and competitive edge, if technology is solely built on a collaborative basis

Regulation

Richard Parkinson (TT): What advice are you giving to corporates on preparing themselves for the impact of regulation such as Basel III? What should they be thinking about and watching out for?

Filipe Simão (BNP Paribas): Linked to some of the topics we covered earlier, Basel III is really forcing banks and corporates to be more transparent about their relationships, in particular on the cash management front. The liquidity and credit aspects of Basel III will impact weightings in terms of the size of the customer base, how you discount deposits from retails as opposed to FIs. I think that really levels the playing field and you have a much more open relationship with your clients, which should benefit both sides.

So the message from me is to engage in dialogue with your banking partners and just have honest, up front conversations around the effects of regulation.

Neal Livingston (RBS): It’s a very interesting point. I think most companies will have a range of service providers, certainly if they are operating internationally. They may have some international businesses or banks that support them. They may have some regional domestic banks. The regulatory impact is very different depending on the geography, depending on the size and scale of the organisation. So the conversation with treasurers and clients is really about getting to know that picture very well and getting to know where your counterparties sit across the regulatory spectrum.

Some banks will be on a fairly ‘fast track’ Basel III pathway, others will be on an alternative track, such as Dodd-Frank. Others, realistically, are still on Basel I and may remain at that stage. This means it’s really important for corporates to understand the impact that regulation has on their banks and how they operate. How will the bank value your business for example?

Ultimately though, I think the transparency point is what will allow clients to have informed conversations with their banks, and to put their relationship bank group together in an intelligent way.

Michael Mueller (Barclays): At Barclays, we have always maintained a close, proactive and collaborative dialogue with all our clients, to ensure that they are aware of the impact of all regulations that may have an impact of the services that we offer.

Many of our large and sophisticated corporate clients already work with us and their other group bank partners and are studying the impact of the regulation on their banking relationships independently. With this group of clients we are working together closely to share experiences, ensure mutual understanding and transform the way they work with their banks to mitigate any potential negative impact from the introduction of regulatory action.

As you can imagine, we also need to consider a broad range of smaller clients who do not have the bandwidth, interest or expertise in the subject matter and its impact. It is our responsibility to find the right way of providing information and offering products that are sufficient for them to make decisions that suit their individual business needs.

Jennifer Boussuge (BofAML): I would say there are two things that corporates need to be thinking about as they look at the regulatory landscape. One is the impact of this regulation, in particular in the trade finance space, what effect or impact is that going to have on some of their smaller suppliers? And what is that overall impact going to have on their supply chain?

The second is around cost transparency. Again, we recently have had in-depth conversations with a number of treasurers and we know that as a bank, there’s a cost to becoming compliant with this increased regulation. And corporates really want to understand the impact that is going to have on their costs and their fees. They’re really asking for greater transparency from their banks.

David Aldred (Citi): This reinforces relationship banking. Two-way, open and transparent conversations between the client and their bank will be important. Ensuring that the right type of credit facilities, across all asset classes, are available to manage working capital and support the broader supply chain whilst also understanding the costs dynamics will be critical. Diversification of funding sources is a consistent trend and our clients will be watching out for alternatives.

“What we’re undoubtedly seeing in addition to what clients can achieve with DSO/DPO efficiencies is leveraging alternative types of financing, be that supply chain finance, receivables finance, or export credit agency (ECA) finance. So there’s a wider variety of funding sources that are being used, but it is a challenging market.”

David Aldred, Citi

Richard Parkinson (TT): And what’s the answer to those questions? How is this going to impact the trade space and what happens about passing costs on?

David Aldred (Citi): We’re already starting to look at our book under Basel III, examining the return on risk-adjusted capital on both sides and trying to look at the rates of return that are required, as well as the various hurdle rates that are needed for economic capital.

It is still too early to say where that will happen, but it will affect the cost and the availability of funding for corporates, because each bank will look at Basel III and look at their funding costs, and will either be able to deploy that capital at a certain rate or not. That’s a statement of fact. So that will, to Jennifer’s point, potentially impact trade finance and the broader supply chain.

What this means is that you may potentially see some providers withdraw from certain markets, which will limit the availability of trade finance for some corporates. Being open and transparent with our clients about the impact of Basel III will be key.

Neal Livingston (RBS): Just to drive home the point on funding, this is not a high level conversation around separation of retail and commercial corporate investment banking, whether it’s here in the UK, the US or the regulations we’re seeing emerging in places like Singapore. Those liquidity regulations combined with Basel III impacts are going to lead to a higher cost of funding and a higher cost of capital type of world.

As such, it’s really important that corporates understand the drivers here. And indeed, some corporates have the appetite capacity to participate in the dialogue, which is fantastic, because our voices resonate much more loudly when they are supported by and endorsed by our clients.

Jennifer Boussuge (BofAML): I think that’s an excellent point and one we’ve been making to many of our corporates. Obviously the financial services sector has been very active and vocal vis-à-vis the regulatory bodies regarding our concerns about the impact that regulation is going to have on funding. But it’s equally, if not more important, for the corporates to come together and start speaking with a louder voice to these regulatory bodies, in terms of what it is going to mean for their businesses and ultimately for the global economy if this happens.

Martin Runow (Deutsche Bank): I believe that corporates are realising that the cost of funding will be affected and that there probably will be some unintended consequences of Basel III on trade finance. This could become a major issue not only for large multinational corporations, but also – and especially – for smaller companies and those in the emerging markets. In this context, I can only echo Jennifer’s view: corporates need to make their voices heard with the regulators as well. There is no sense in regulation intended to make banks more stable, but having a negative effect on the real economy.

“I believe that corporates are realising that the cost of funding will be affected and that there probably will be some unintended consequences of Basel III on trade finance. This could become a major issue not only for large multinational corporations, but also – and especially – for smaller companies and those in the emerging markets.”

Martin Runow, Deutsche Bank

Looking to the future

Richard Parkinson (TT): What or where do you see the biggest cash management opportunities for treasurers over the next year or so, and why?

Michael Mueller (Barclays): As we touched on earlier, it will become increasingly important for corporates to become more flexible when it comes to allocating business to different providers. I think the most relevant development in that space is on the SWIFT for corporates side. That’s still an area that is not as well used as some of the proprietary technology, and I think it will become more relevant to corporates moving forward, simply driven by the fact that it gives flexibility to allocating business and I think that will drive many of the other points that we’ve discussed here already.

David Aldred (Citi): In short, working alongside their banking partners, treasurers have the opportunity to transform and increase efficiency by establishing new global processes which enable them to achieve growth in new markets. Given increasing regulations it is a question of balancing control versus growth. Leveraging XML and SWIFT to ensure best practice in shared services is a major opportunity as is ensuring control and visibility of cash. Ensuring that treasury processes and best practice are applied to emerging markets, such as RMB, plus maximising working capital management will be consistent priorities.

Jennifer Boussuge (BofAML): There’s a lot of powerful information available within the treasury organisation, and with that comes an opportunity to leverage it more fully as the currency of the future. Treasury departments need to think about how they can drive more value into other areas of their organisation, such as helping sales people sell more effectively by knowing when credit becomes available through the capture of an auto-reconciled invoice via straight through reconciliation. Essentially, it’s about managing their businesses more effectively through the thoughtful use of information at their disposal.

Neal Livingston (RBS): And as you do that with information, you create the efficiencies, the space, the resources and the thinking room, to become really data hungry and become highly analytical around your processes and strategies. If you look at all the best in class treasuries today, they are absolute data machines: they just consume analysis. And so that’s where the value chain is going.

But you can’t do that if your day job is focused around administrative tasks, pushing payments around and authorising. And so you have to create the efficiencies and make that investment in order to move up the value chain.

David Aldred (Citi): That’s why mobile is so important.

Filipe Simão (BNP Paribas): Well, I think that if you’re looking just two years into the future, SEPA is going to be a big opportunity. And this goes well beyond treasury. It also allows corporates to access markets where they’re not physically present. So we’ve got clients collecting centrally across eleven markets without bank accounts on the ground. SEPA has a really strong potential to organise and improve the way corporates collect.

Martin Runow (Deutsche Bank): I absolutely echo those thoughts. SEPA presents corporates with the opportunities they need around payment factories and efficiencies. Moreover, they can get end-to-end information flow and a fast and efficient payment system, all for the price of one regulatory project that they are obliged to undertake anyway. So for European corporates, SEPA is definitely where their focus should be.

Richard Parkinson (TT): Thank you everyone.