Treasury Today February 2014

Published: Feb 2014


Regulators change their tune
Question Answered
Money market funds
Market View
Accelerating US growth will affect long-term interest rates worldwide
Insight & Analysis
Mitigating FX volatility
Corporate Finance
BPO: a solution looking for a problem?
The Bigger Picture
Argentina’s debt crisis
Liquidity Investment Horizons: HSBC Global Asset Management
RMB investments in China
The future is in bits (and bytes)
Webinar Report: FXAll and Thomson Reuters
Managing currency volatility in emerging markets
The Corporate View
Gary Slawther, OCTAL
The Bank Interview
Deborah Mur, Citi
Back to Basics
The rise of separately managed accounts


Regulators change their tune

While the spectre of financial regulation still looms large, some noteworthy concessions have been announced in recent weeks by various rule makers. This is good news for both banks and corporate treasurers, and suggests that the regulators are perhaps more ‘in touch’ than many had previously thought.

In mid-January, the Basel Committee’s oversight body – the Group of Governors and Heads of Supervision (GHOS) – endorsed proposals on a common definition of the Basel III leverage ratio, with the final text including some very interesting amendments. The most significant changes revolve around the leverage ratio’s exposure measure, effectively reducing the size of banks’ balance sheets for calculation of the ratio. The GHOS itself admits that the amendments have been made on the back of comments received from the banking industry about the leverage ratio being too punitive. As a result, the rules no longer require 100% of off-balance sheet assets (including guarantees, letters of credit and the vast majority of derivatives exposures) to be counted when calculating the leverage ratio. This move will be particularly welcome among the trade finance and corporate treasury communities since the amendments finally recognise the intrinsically safe nature of trade finance products and their importance to the real economy.

January also saw the announcement of a six month ‘grace period’ for transition to the Single European Payments Area (SEPA). On the back of very poor SEPA readiness statistics, the European Commission introduced a proposal, which became applicable on 31st January, to allow market participants more time to complete their SEPA transition. Businesses and banks in the euro area now have until 1st August 2014 before legacy payment instruments are blocked. The formal SEPA deadline still remains 1st February 2014, but in reality, many corporates are likely to need the extra time. That said, regulators and industry commentators have made it clear that there is unlikely to be any further movement in the transition period cut-off. Corporates are therefore advised to stick to their original SEPA migration timetables as closely as possible.

Despite these helpful concessions, 12th February marked the beginning of another challenging regulatory requirement for corporates, namely the reporting of derivative trades (even internal ones) to a trade repository under the European Market Infrastructure Regulation (EMIR). Any company established in Europe that uses derivatives will be impacted by EMIR. In certain cases, non-EU counterparties will also come under the regulation’s scope. To help readers understand their obligations under EMIR, Treasury Today held a ‘Tackling EMIR’ Adam Smith Best Practice Webinar in early February, during which Ahold’s treasury team shared their experiences of complying with the regulation. If you missed the live broadcast, you can still hear what they had to say by accessing the on demand recording. This is an exclusive benefit of being a Premium Subscriber to Treasury Today, so simply visit treasurytoday.com/subscriptions to check your subscriber status, or to upgrade.

From there, you will also be able to sign up to Treasury Insights – our weekly delivery of independent analysis on treasury trends, straight to your inbox. Treasury Insights is not only a complimentary service, but it is also the best way to ensure you hear the full story about regulatory developments affecting the treasury function.

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