Likewise, Natarajan points out that any regulatory change that arises due to protectionism or a single country’s national interests “can often hinder effective regional cash management.”
Developments to watch
“While corporate treasury is not as regulated as financial institutions, they are indirectly impacted by the regulations that banks have to abide to,” comments Mah. “A case in point is the Basel III regulation which impacted corporate use of notional pooling structures.”
As such, there are a number of regulatory developments and initiatives that treasurers should be aware of in the coming months. These include:
The rise of open banking.
The growing use of central bank digital currencies.
The adoption of ISO 20022 in correspondent banking.
Changes to foreign exchange management rules.
Data and digital initiatives intended to drive digital adoption across industry and business sectors.
Treasurers may also need to be aware of regulatory changes that affect specific industries and their supply chains.
Parvez says another a key development this year is in the use of technology in reporting processes. “A number of countries are moving in this direction, and that should help companies create efficiency in their own practices,” he says, adding that treasurers should look forward to see how they can adopt these developments.
In addition, he says that China has announced regulations to further facilitate cross-border trade and investment. “They have also eased some of the cross-border borrowing and lending quota,” he says. “These can help companies in managing excess liquidity.”
And as Mah notes, sustainability and green finance are key topics for financial institutions. “Companies in specific sectors will have to comply and provide environmental data to ensure their financing needs and issue debt on the capital markets,” she says.
Staying abreast of changes
Keeping up to date with regulatory change is important, not only to avoid any compliance issues, but also to enable the company to take advantage of any new opportunities that may emerge.
There are a number of ways that treasurers can keep informed about upcoming changes. One important source is the regulators themselves, so treasurers should subscribe to any relevant circulars and news alerts. That said, keeping track of changes across multiple markets can be challenging – so treasurers should also consult other sources that may be able to help them collate and digest relevant changes.
The company’s bank partners should be able to provide regulatory updates that can help treasurers understand which regulatory developments are relevant to their businesses. “At Bank of America, we stay close to the regulators in each of the markets that we operate in and as such, we are able to provide quick updates to our clients, whenever changes are released,” says Parvez.
Other useful sources of information include:
In-house tax, legal and compliance teams.
Local in-country management teams.
Consultancies and advisory practices.
Government and industry trade associations.
Treasury peer groups and local associations.
Adapting to new regulation
While it is important to stay abreast of any relevant regulatory changes, treasurers also need to be able to adapt to any developments in order to avoid any fines or other penalties that could arise from non-compliance. As Deloitte’s Mah points out, “Treasurers need to act quickly when new regulations are announced, not when they take effect.”
She adds: “Getting new procedures or systems in place ahead of time can help ensure that organisations can finesse any delays, educate or train employees, and find the right support from different business communities.”
“Needless to say, adapting and planning for regulatory changes is important for every business,” says ANZ’s Sarup. He notes that to an extent, treasurers can mitigate challenges and changes by:
Implementing/adopting an effective treasury platform that caters to the changes and has the ability to be future-proofed.
Adopting optimum and effective heedging solutions to address short-to-medium-term geopolitical disruptions.
Having an ongoing programme management function in place to cater for regulatory changes so that they are not hampered by a lack of resources or a lack of information.
But some regulatory changes are more pressing than other. BofA’s Parvez points out that while some regulatory changes are mandatory, and must be adopted within specified timelines, “in other instances, adoptions may vary depending on the impact and timeline stipulated by the regulators.” Likewise, some changes are more complicated than others. “In any case, it is in companies’ best interests to react promptly and aim to incorporate the changes required sooner in order to ensure minimal disruptions to operations,” he says.