About Me

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I am deputy editor at The Banker, a Financial Times publication. I joined the magazine in August 2015 as transaction banking and technology editor, which remain the beats I cover. Previously I was features editor at Profit & Loss, an FX and derivatives publication and events company. Before that I was editorial director of Treasury Today following a period as editor of gtnews.com. I also worked on Banking Technology, Computer Weekly, and IBM Computer Today. I have a BSc from the University of Victoria, Canada.

Friday, 15 November 2013

Major corporates spearhead MACT relaunch

November 2013

MACT is back on the scene in Malaysia, spearheaded by a number of large corporates. Its mission? To help solve pain points for treasury professionals operating in the country and across the region.

Major corporates, including Telekom Malaysia, Astro, MISC, Axiata, Genting, UEM Group Berhad, Malaysia Airline System (MAS) and SunGard, have encouraged the relaunch of the Malaysian Association of Corporate Treasurers (MACT), which took place on 9th October in Kuala Lumpur.

In an interview with Treasury Today, Anne Rodrigues, President, MACT, identified two reasons for relaunching the association in the current conjuncture: “Corporate, as well as individual members, have found the need to have a forum for discussion and the exchange of views, plus have a representative body to meet with regulators on issues of common interest. The other impetus was that an increasing number of companies are going global and thus needed MACT as a resource centre for many of their transactions. Training for new entrants joining the profession is also key and remains as one of our strategic objectives.”

The MACT wants to position itself as a “centre of excellence” for all aspects related to treasury management within Malaysia. For the past several months, it has been working toward setting up a reliable forum for treasury practitioners’ to exchange views and share information on the financial market and the economy.

It aspires to be the recognised body to articulate common views of its members to regulatory bodies, banks, vendors, and training institutes. The MACT will also work together with these parties to raise the knowledge level of treasury management in Malaysia.



Currently with less than 100 members, the association will now spread its wings to other corporates and small and medium enterprises (SMEs) within Malaysia, as well as reach out to those who have already indicated interest in order to finalise their membership. “We hope to work together with the Central Bank of Malaysia and other banks to reach out to SMEs,” explains Rodrigues. “We already have a strong database of SMEs and intend to tap into this.”

MACT is committed in its approach towards providing financial literacy and training, thereby elevating present skill levels, particularly in the complex areas of treasury management, while at the same time supporting learning and on the job training and education for newcomers in the profession.
According to Rodrigues, the greatest challenges treasury professionals in Malaysia face include:
  • Efficiency in cash management.
  • High transaction cost.
  • Tax and regulatory roadblocks.
  • Reporting efficiency across entities within the group.
  • Access to timely information for effective decision-making.


Regional integration

A main objective of the MACT is to “maintain, nurture and step up existing dialogue” with sister treasury associations in countries, including Singapore, Hong Kong, Australia, UK, and those associations affiliated to the International Group of Treasury Association (IGTA). One of the principle functions behind such information exchange is sharing of views on common issues and updates on matters of present day economic concern and interest. MACT will also serve as a single point of contact for treasurers worldwide intending to seek information on prevailing treasury practices and new regulations affecting the treasury scenario in Malaysia.

“We have been in touch with regional sister associations, as well as the IGTA, and intend to play a productive role as a reference point for information on treasury-related information required by these associations, as well as the other way around,” says Rodrigues.

Lloyds Bank and Standard Chartered extend partnership on Asian trade

November 2013

In September, Lloyds Bank and Standard Chartered announced a deepening of their relationship, specifically around Asian trade. Treasury Today caught up with Jacqueline Keogh, Head of Global Trade in the Transaction Banking team at Lloyds, to find out more.

Notwithstanding their long-lasting strategic partnership across many different product areas and geographical regions, Lloyds and Standard Chartered took the opportunity of Sibos in Dubai to announce a specific development around Asian trade, which both parties believe will “enhance the experience for UK clients importing from Asia”.

As part of this agreement, Lloyds Bank will use Standard Chartered’s on-the-ground capabilities to directly issue import letters of credit (LCs) locally in 20 Asian markets, including China, India and Korea. This provides UK clients with the benefit of local language and time zones, in-country document handing and local currency settlement, including Chinese renminbi (RMB).

In a press statement, Andrew England, Head of Transaction Banking, Lloyds Bank Commercial Banking, said: “This agreement will enable us to improve our product offering, accelerate our growth plans and is part of an on-going strategy to strengthen our international partner network.”

What’s new?


To gain a better understanding of what’s new in this deal, Treasury Today spoke with Jacqueline Keogh, Head of Global Trade in the Transaction Banking team at Lloyds. Keogh moved across to Lloyds from Standard Chartered just two months ago and is tasked with revitalising and significantly growing Lloyds’ trade business. Prior to Standard Chartered, she did an 11-year stint with SWIFT and was responsible for strategic development on many projects including the Bank Payment Obligation (BPO) and the Trade Services Utility (TSU).

Keogh says that a strategic partnership operates at a much deeper level than the correspondent banking relationships of the past. “We have a common strategy and objectives, as well as complementary geographical coverage and skills. We see each other as natural partners because Standard Chartered is focused on Africa, Asia and the Middle East, with no desire to engage in the UK other than to help their core client base. Lloyds, on the other hand, is firmly focused on the UK market.”

This new agreement “reinforces a shared strategy” on international flows and how to better serve clients, according to Keogh. “This is not for our mutual benefit, but for the benefit of our shared client base.”

The ability to issue LCs through Standard Chartered is one such customer benefit. Historically, Lloyds issued LCs through a number of correspondent banks. “From a corporate perspective, it meant being dependent on Lloyds having relationships in a multitude of countries, all with different terms and conditions,” explains Keogh. “Through partnering with Standard Chartered, we are extremely confident with regards to the level of service, price, process and how the whole transaction will be managed.” Also there is a clear escalation path in order to resolve any potential issue. “This provides greater assurance in terms of the product offering that we can provide for our UK corporate clients. Whereas with the correspondent banking model a bank is dependent on many different parties, so achieving that level of consistency and standardisation is close to impossible,” she says.

In terms of a reciprocal agreement, Standard Chartered is already directing its clients who are looking to expand in the UK towards Lloyds; however, the significance of the agreement relates to the much higher level of trade flows from the UK to Asia.

The future


Given Keogh’s experience of the BPO, we asked her whether this was an area of interest for future collaboration between the two banks. “Currently Lloyds is not signed up to the BPO, mainly because it is just beginning to revitalise its trade capability and strategy,” she explains. “It is an area that we are following very closely and, based on client demand and the on-going development of Lloyds capability, it is something that we will most likely sign up to in the future.

“When that does happen – and it is a ‘when’ rather than an ‘if’ – Standard Chartered would be a good partner to work with because it was one of the early adopters and has extensive experience of the BPO, both within its own organisation where it is on both sides of the transaction, and also in collaboration with other financial institutions,” she adds.

Keogh believes that it will take time to create the network and flow around the BPO. “Most instruments in this industry have been around for thousands of years. Therefore when a new instrument is launched, it is going to take time before it achieves the required level of adoption. But I think that it will gain momentum because the industry requires common standardised instruments around open account that operate cross border.”

Although the industry needs something like the BPO, it may not survive in its current form, according to Keogh. “There are very few people in the industry that would question the need – both from the financial industry and the corporate perspective – to have a common definition, shared standards, shared structure and shared products around open account. The BPO is the best we have today and it has the best chance of success, whether in its current form or another variation.”

Five areas of improvement for online banking

October 2013

Despite corporates wanting more, their online banking experience is lagging behind the times. Research from the Aite Group examined five key online banking initiatives to gauge corporate demand.

Corporate customers’ expectations in regards to their online banking experiences are higher than ever before, driven in part by the customised experiences treasurers enjoy in their personal lives from online retailers such as Amazon.com. However, most corporates are served through outdated bank technologies.

For example, according to the Aite Group’s recent report ‘Enhancing the online customer experience: feedback from corporate treasurers’, it is “not uncommon for corporations to face multiple system logins, non-intuitive customer interfaces that require searching and navigating the website, and reports that don’t meet their needs. The result has been low customer satisfaction levels and a corporate perception that banks don’t understand their needs.”

In order to better understand market conditions, the Aite Group surveyed 185 US-based corporates, mainly Union Bank clients, regarding the impact of several planned bank initiatives on improving their overall online cash management experience.

The research took stock of the following five bank initiatives:
  1. Dashboards: 66% of those surveyed believe that a more customised dashboard is ‘very important’ to ‘extremely important’ to improving their overall online cash management experience.
  2. Tighter system integration/portal creation: more than half (52%) of treasurers surveyed believe that single sign-on and a consolidated view will enhance their online banking experience.
  3. Easier data exchange between bank and corporate systems: 67% say that having tighter integration and easier data exchange between the bank site and their ERP/accounting system for better straight through processing (STP) to improving their overall online cash management experience is ‘very important’ to ‘extremely important’.
  4. Reporting: only 19% of corporate treasurers surveyed describe their bank’s reports as ‘highly customisable, easy to use and provide their organisation with that they are looking for’; whereas 22% create almost all of their own reports.
  5. Real-time data: 81% of corporate treasurers state that access to more real-time information is critical to improving their online cash management experience.

In conclusion, the report states: “Tomorrow’s problems can’t be solved with yesterday’s technology. Banks must invest in newer, more flexible systems, break down silos to pave the way for integration, and focus on system usability.”

EuroFinance 2013: Regulations, relationships and rationalisation

October 2013

Over 1,900 attendees from more than 60 countries gathered together for EuroFinance’s International Cash and Treasury Management conference in Barcelona last week. Three ‘Rs’ were part of almost every panel discussion and case study presentation: regulations, relationships and rationalisation. In addition, technology and innovation remained cornerstone topics of the conference.

Incoming regulations are still top of mind for most treasurers, as evidenced at the EuroFinance conference held in Barcelona from 16-18 October. Attracting more than 1,900 delegates, including approximately 720 corporate treasurers, the conference streams reflected the need of corporate treasurers to know more and get ahead of the game. Two noteworthy session titles included ‘Wrestling with regulators’, led by Damian Glendinning, Treasurer at Lenovo, and ‘A game you can’t afford to miss: staying one step ahead of the banks’, which was ING’s interactive game to gain a greater understanding of how Basel III will force banks to alter their business models and the tough decisions that lie ahead.

Despite only having a handful of sessions addressing the Single Euro Payments Area (SEPA), this was one of the most popular points of discussion inside and outside the main conference session, with the migration end date less than 20 weeks away. PwC and Citi hosted a breakfast briefing, while BNP Paribas presented a SEPA case study over lunch.

Most agree, however, the time to talk is over and greater action needs to be taken. As reported in a previous insight, the ‘Treasury Verdict’ voting plenary results showed that only 14% of respondents are compliant today; in addition, only 8% of those polled are currently completely prepared to use SEPA Direct Debits (SDDs). But the situation remains even direr for the small and medium-sized enterprise (SME) sector.

SEPA fatigue is pervasive throughout the corporate and banking community – there is a great need to move from ‘what now’ to ‘what next’. As one banker said: “We are all tired of talking about SEPA problems – now we must move on to the solutions.”



With great uncertainty still remaining around how the regulatory changes will play out, corporates are increasingly turning to their banks for trusted and detailed advice. This is driving a much deeper relationship between corporates and their banking partners. In a plenary on the final day, entitled ‘Banks: altogether now or bust’, Jennifer Boussuge, Head of Global Transaction Services – EMEA, Bank of America Merrill Lynch (BofAML), touched on this point. “I don’t believe that the regulatory environment is going to change anytime soon. If anything, I think the uncertainty, volatility and rapid pace of change is going to continue – it is the new normal. Therefore, we all need to understand how we can function in this new environment.

“Some of the key considerations that we need to look at is the risk/reward trade-off and the balance between the two. We have to look at the increasing cost of credit for banks and what that means for corporate clients. Corporates need to ensure that they have shored up their bank relationships and are having open conversations, to be able to understand first of all how the regulation impacts their financial institutions and then the knock-on effect for them.” Boussuge stressed that communication will be critical to this valued partnership, in order for banks to keep pace with the corporate’s needs.

Speaking on the same panel, Rajesh Mehta, EMEA Head of Treasury and Trade Solutions, Citi, agreed, saying that already the “dialogue is becoming much more strategic” as a result of trying to work through the regulatory issues together.



On the flip side, however, to maintain such an intimate relationship takes time and effort – and much mutual trust. This is driving corporates to re-evaluate their core banking relationships and, wherever possible, reduce the number of banks they work with. In the ‘Treasury Verdict’ voting plenary, 39% of corporates in the room said that they had reduced the number of banks they work with.

One example of a bank rationalisation case was provided by Tom Jack, Assistant Treasurer, Mondelez International, a Kraft Foods spin-off with revenue of $35 billion, who explained the treasury’s three-year banking simplification project in his session entitled ‘Feel the fear and do it anyway: from workflow to liquidity management’. The aims of the project was to “simplify, harmonise and establish a stable foundation to move forwards from”. The company went from 29 clearing banks down to one (Citi) for the whole European region. It also went from 0% straight through processing (STP) for payments to 95% STP.

However, most corporates would not be so quick to move to just one bank – effectively putting “all our eggs in one basket,” admitted Jack. He explained that this was the reason treasury went down a bank agnostic route by using SWIFT and a single file format ISO 20022 XML. “We wanted to ensure that we had an easy mechanism in place to change banks, should we need to.”

Technology and innovation


New technology and innovation were very much part of the EuroFinance agenda in Barcleona, and many banks took the opportunity to run closed sessions for their clients on specific developments.

For example, Swedbank ran a lunchtime briefing for its customers on digital payments – looking at how tomorrow’s consumers will act and how businesses need to adapt to these changes. Jesper Ahrgren, Business Development Manager in the Digital Engagement Department, gave some interesting analysis as to how the digital wallet is beginning to dominate. He explained that this was best thought of as a container for payment instruments interacting with other apps, which was where the customer perceived real added value and would in turn led to increased acceptance of the technology. Some of the domestic developments in the Swedish market are providing interesting trends that we may all be following before too long.

With a little help from your banks

October 2013

With a swathe of new regulations coming down the pipeline, how can corporates cope? A panel during the Corporate Forum at Sibos in Dubai argued that the answer lies in a strengthening of the relationship between corporates and their banking partners.

Most corporate treasurers tend to be more reactive than proactive when it comes to new regulations, according to François Masquelier, Treasurer, RTL Group and Honorary Chairman and Founder of Euro Associations of Corporate Treasurers (EACT). Speaking at a Corporate Forum panel entitled ‘How treasurers are coping with regulations’ at Sibos in Dubai last month, Masquelier explained: “Apart from a few exceptions, most treasurers do not actively anticipate a new regulation and its impact – they always come late or even after the event.”

Masquelier believes that this is where treasurers’ associations, such as the EACT, can step in to be “proactive and anticipate the treasury community’s needs ahead of the game”. He used the example of discussion with the European Payments Council (EPC) regarding the Single Euro Payments Area (SEPA). The need to federate the national associations in order to be stronger and listened to by the EU body in Brussels became crystal clear. “SEPA was a great opportunity for us and it profiled the EACT. We decided to be part of the game and not let the banks and software vendors define the payment schemes and formats alone,” he said. “But this was brand new for us because we were accustomed to acting in nation silos.”

Attempting to influence the evolutionary process of emerging regulations is one area that collective action can bring results, but fundamentally dealing with the impact of regulations transposed into national terrains is very much an individual company response. John Christensen, Assistant Treasurer, New Ventures and Products, PayPal, said that as a consequence of the changes going on in the regulatory environment, PayPal’s treasury reviews its bank counterparties and constantly looks at its allocation, not only in terms of credit but also risk. “Treasurers now need to have real-time data of ratings, spreads, balances, etc. They need to be having a conversation with their banking partners about what to do, which is not just about products and services but how comfortable they are with the risk involved. That is a different type of dialogue – it’s not just about agreeing prices.”

Christensen is tasked with the objective of keeping PayPal’s treasurer abreast of Dodd-Frank and Basel III. “The impact that will have on us is directly related to what the banks will be required to hold as capital buffers,” he explains. “Some of those costs will be passed on to us via processing or underwriting fees for debt, or the capacity of that bank to re-enter into our revolver. We have to think about all these things in advance because it will affect which bank will want to continue doing business with us, and we need to ensure that we have a clear line of sight over what we are offering those banks.”

Coming out of the financial crisis, ‘counterparty’ is a loaded term. According to Tom Schickler, Global Head of Liquidity, Payments and Cash Management, HSBC, most treasurers have credit default swap (CDS) spreads on their desks and are looking at them on a real-time basis. “That is the reality today. So what are we doing about it? I believe that the answer is about enriching and elevating the dialogue, so that we are less transactional and more strategic. How can we partner together to deal with the challenges we face?

“Although regulations are painful and can be viewed as a problem, the main motivating force for regulators is greater transparency. Basel III, which is a set of guidelines that are meant to be interpreted globally and enacted into law, presents such an opportunity because through transparency we can simplify, streamline and globalise approaches, and that takes risk out of the equation. This is true not just for banks but for corporates as well, so we can focus our effort and capital on the things that add value from a corporate perspective,” he said.

Both corporate treasurers on the panel described how they were working towards deepen the relationship between themselves and their banks, which is necessary for navigating the uncharted waters of the oncoming regulations. Masquelier said that after the crisis, his company reinforced its bank relationship policy with its core banks in order to “protect our company”, effectively cutting its ties to Tier 2 and 3 banks. “One of the positive aspects of these regulations is that it gives you an opportunity to concentrate and reduce the number of counterparties. Unless they have credit needs that can’t be solved by the market, most corporates are trying to reduce the number of banking relationships.”

Masquelier added that it is important to make sure the counterparties are satisfied with the relationship. “It has to be a win-win or at some point they may change their strategy. If you are not a profitable customer, they could decide to cut the relationship.”

Christensen acknowledged that PayPal uses more banks globally than it has in its credit facility and views that as a problem. “Bringing the number down is very important to us because changes in regulations raises the question as to whether the banks going to participate in the revolver going forward. So we have to be razor sharp as to what business we are taking to which banking partners.”
This deepening relationship has paid off. Christensen reports banks being remarkably open about their business. “When we had questions about our counterparties’ balance sheets and other concerns, our banks have been very forthcoming. They have immediately offered a call with their CFO. The two or three banks that we have called have been very open – they know that other treasurers will also have the same questions as word gets out pretty fast.”

Arwa Hamdieh, Co-Founder, Financial Services Association (UAE), said that in the Middle East corporates are now using the strong relationships with the banks to communicate beyond the issues that they are looking to resolve immediately. “Corporates in this region are using their banks as means to communicate to regulators, which is an indicator that the relationship is stronger. We are focused on developing the dialogue and explaining the importance of working collectively,” she said.

SAP’s FSN: the difference a year makes

October 2013

During last year’s Sibos in Osaka, Treasury Today attended the launch panel of SAP’s Financial Services Network (FSN). One year on, we caught up with Sanjay Chikarmane, SVP and General Manager of FSN, at the event in Dubai to gain a better understanding of what is on offer.

Last year’s launch of SAP’s Financial Services Network (FSN) at Sibos in Osaka left more questions than answers as to what made this connectivity initiative different from those that came before it. As reported in an earlier Insight, despite the big banking names involved – including Bank of America Merrill Lynch (BofAML), the Bank of Tokyo-Mitsubishi UFJ (BTMU), Deutsche Bank, Nordea, Standard Chartered, Citi and the Royal Bank of Scotland (RBS) – there was a lack of clarity on what exactly ‘it’ was.

Developments this year seem to have shed more light on the question, especially since the solution was made available to financial institutions and their corporate customers in March. According to Sanjay Chikarmane, Senior Vice President and General Manager of Enterprise Information Management (EIM) and FSN, speaking to Treasury Today at this year’s Sibos in Dubai, the FSN sits in the SAP HANA Cloud between a corporate and a bank, enabling the corporate’s SAP enterprise resource planning (ERP) system to send transaction files to the FSN, which in turn transforms them into any bank format and routes them to the bank, and vice versa. The secure network is owned and managed by SAP as an on-demand offering.

Banks can benefit from a simplified approach to electronic service development, deployment and delivery. Corporate treasurers will be interested because it solves the issue of multiple banks and formats, at a time when most are looking to cut costs. “The FSN has a zero IT footprint,” Chikarmane says. “Corporates don’t need to upgrade their ERP systems to join the network. It is a rapid deployment solution, taking just a few weeks to configure, and we have developed a package onboarding service.” SAP will use a scalable pricing model, based on the number of transactions, so that corporates of all sizes can benefit from the solution.

The FSN also leverages SAP’s 2012 acquisition of Ariba, the cloud-based network that connects 730,000 buyer and suppliers, to solve three other persistent problems for corporates: poor reconciliation, staying up-to-date with master data and gaining visibility across an organisation’s cash position. “Reconciliation can be a problem for corporates, as there is often not enough information in the ERP system to reconcile transactions. With thousands of suppliers on the Ariba network, which is connected to the FSN, it is possible to merge reconciliation information with the bank statement – providing an automated ‘touch-less’ reconciliation,” explains Chikarmane.

Secondly, when dealing with thousands of suppliers, many corporates’ vendor master data can fast become out of date. “We capture vendor data through the Ariba network, so can provide our corporate clients with up-to-date master data.”

Thirdly, many corporates run different ERPs across different regions which makes it difficult to have true global visibility over their cash position. SAP is planning to launch a cash visibility application in 1Q14, which will route all transactions through the FSN.

The real test will come when the first banks are operational on the network in 1Q14. Although currently aimed at the top banks, with each bank identifying two corporate clients to pilot the programme, Chikarmane says that SAP intended the solution to scale down to the smaller banks. Once SAP has what it considers to be enough banks on board, then it will take its offering directly to the corporate community.

BPO: SWIFT’s viewpoint in Dubai

September 2013

Sibos, SWIFT’s four-day user conference, has engulfed Dubai this week, with more than 7,300 bankers, technology vendors, consultants and a few corporates registering to attend. The main themes of the conference are around the changing global dynamics, regulatory reform and operational excellence. Incorporating all of these elements, the Bank Payment Obligation (BPO) is getting a lot of air time inside and outside the main conference agenda.

Everything is the biggest or tallest in Dubai – and SWIFT’s user conference certainly plays in this big league. With more than 7,300 registrants (although less actual attendees), Sibos is claiming to be the largest banking conference in the Middle East to date. Seventy-two percent of attendees have come from Europe, the Middle East and Africa (EMEA), with 12% from the Americas and 16% from Asia. Unlike in Osaka last year, the Chinese banks are also in attendance.

The main themes of the financial messaging consortium’s conference are around the changing global dynamics, regulatory reform and operational excellence. But it is the Bank Payment Obligation (BPO) that is stealing the stage, whether inside or outside the main conference agenda. Maybe that is because it encompasses all three themes: it is proving to be much more popular in the still vibrant Asia region; it may help to mitigate some of the risk surrounding regulatory reforms; and it should make the lives of corporates that much easier through greater efficiency in trade. Or maybe it is because SWIFT has decided to make a big push this year to ramp up adoption.

Since the International Chamber of Commerce (ICC) approved the basic legal framework of this new payment method for trade in April this year, the uptake has remained surprisingly low. To date there are just six banks live on BPO, and these are all Asia-based. Six more banks are ready to go live, and 53 banking groups are adopting BPO.

Conversations with a number of banks on the conference floor has indicated a lack of demand for, or understanding of, BPO. Without corporate customers clamouring for this tool, the banks are hesitant to put much effort into rolling it out; however, that leaves the industry waiting for a groundswell of first movers to really push it forward.

Which is the reason why SWIFT has gone on an educational offensive, as much for the banking community’s benefit as for the corporates. But BPO is caught between the proverbial rock and a hard place: for corporates, it is a tool that could take away the pain of letters of credit (LCs); whereas the banks, who benefit from LC fees, would prefer to see it replace open account transactions – which accounts for 85% of global trade yet is a space where the banks have no role to play. SWIFT is trying to position it in the middle, claiming that there will be a coexistence of LCs, BPO and open account.

At a Barclays breakfast briefing, ‘BPO: reshaping global trade’, Andre Casterman, Global Head of Corporate and Supply Chain Markets, SWIFT, was clear that BPO was not a product in itself, but a tool that products can be built upon. “BPO is a decision between two corporates, similar to the LC world. Bankers need to build a commercial value proposition around this tool.” He argued that BPO allows supply chain finance (SCF) to start when it should, ie pre-shipment financing and purchase order services.

James Bidwell, Head of Product Development, Global Trade Product at Barclays, gave some indication of the challenges BPO presents for banks, namely how to prepare to go live while minimising the cost associated with such a large change programme. For example, to change to the ISO 20022 format and fully automate the upload into SWIFT’s Trade Services Utility (TSU), or another matching engine, is a big spend for banks right now.

Reassuring the bankers in the room, Bidwell argued that the BPO is not “an electronic LC”, positioning it as a way to speed up the process but not necessarily replace LCs. He agreed with Casterman that it is “all about SCF” and that the success of BPO will be driven by corporates. When issues around the ability to match shipment data was raised by an audience member, Bidwell stated that “BPO is not a panacea”, and there will still be times when an LC is appropriate, especially when dealing with new trading partners.

At the end of the session, Bidwell put the call out to any banks who would like to work with Barclays in pushing forward adoption.

What do corporates want?

Interestingly, in a session entitled ‘Exploring the evolution of SCF’, which is part of the dedicated Corporate Forum stream, Gary Slawther, Treasurer, Octal Petrochemicals, was vocal in his support for BPO. “I like BPO for it provides a level of liberation. The main benefit is that it puts the power into the treasurer’s hands. With this new tool, I no longer have to negotiate with the banks.” He believes that as soon as there is a critical mass of corporates using BPO, then everyone will follow.
Controversially Slawther went as far as to say that the LC is “dead”, effectively arguing that it is possible to take LCs out of the picture, as they only provide “a bank account and credit”. However, the LC death toll has been heard many times in the past and yet they continue to be an important risk mitigation tool.

The Corporate Forum opening plenary attracted more than 150 people, with approximately 20%-25% of the audience from the corporate community. In its second and final day, the forum will look at payments and trade in Africa, how corporates are coping with the ever-increasing burden of regulation and mandate management.

Whither go European money market funds?

September 2013

On 4th September, the European Commission (EC) released its long-awaited proposals for increasing money market fund (MMF) regulation. Treasury Today spoke to industry players to gauge their reactions, as well as understand how these proposals will affect corporates.

In a move to address financial systemic instability, on 4th September the European Commission (EC) put forward a number of proposals to regulate the European money market fund (MMF) industry, in a similar way that Basel III’s Liquidity Coverage Ratio (LCR) has put constraints on banks to ensure that they adequately manage their liquidity.

The proposed regulation, which will apply to all MMFs domiciled, managed or marketed in the EU, affecting nearly €1 trillion in investor assets, requires:
  • Certain levels of daily/weekly liquidity in order for the MMF to be able to satisfy investor redemptions – MMFs are obliged to hold at least 10% of their assets in instruments that mature on a daily basis and an additional 20% of assets that mature within a week.
  • Clear labelling on whether the fund is short-term MMF or a standard one (short-term MMFs hold assets with a residual maturity not exceeding 397 days while the corresponding maturity limit for standard MMFs is two years).
  • A capital cushion (the 3% buffer) for constant net asset value (CNAV) funds that can be activated to support stable redemptions in times of decreasing value of the MMFs’ investment assets.
  • Customer profiling policies to help anticipate large redemptions.
  • Some internal credit risk assessment by the MMF manager to avoid overreliance on external ratings.


Industry frustration

In a statement, the Institutional Money Market Fund Association (IMMFA) lambasted “this ill-considered regulation”, saying it will “effectively mandate a conversion to variable NAV (VNAV) MMF to the detriment of investors, issuers and the economy in general”.

The association, which has 22 members who operate funds and a number of associate members, supports the introduction of minimum liquidity requirements, ‘know your client’ policies, enhanced transparency, and the use of trigger-based liquidity fees and gates (similar to the Securities and Exchange Commission’s (SEC) proposals, which ends its consultation period on 17th September). However, it stands firmly against a 3% capital buffer for CNAV MMF and argues that it won’t contribute towards enhancing systemic stability.

“Some of the measures in today’s EC proposal will make a positive contribution to the robustness of MMFs, but there are several which are extremely unhelpful, to investors and to the short-term debt markets in general,” said Susan Hindle Barone, Secretary General of IMMFA, in the statement. “We reject the assertion that there is a greater degree of systemic risk inherent in CNAV MMFs. The EC has not demonstrated that CNAV funds are more susceptible to run-risk than VNAV funds, and the discrimination between these two accounting techniques is unjustified.”

With the requirement for a 3% capital buffer, IMMFA expects that CNAV providers will convert their funds to VNAV, as it is uneconomic for an asset manager to hold 3% capital against an MMF. The buffer will also have a significant impact on the wider economy. The association calculates that, at 3%, the European-domiciled CNAV MMFs would have to raise €14 billion, €10 billion by banks and €4 billion by independent asset managers. Assuming banks are currently levered by 20-25 times, reassigning the capital from other business to cover the MMF buffer would withdraw €200 billion-€250 billion from the European economy.

In addition, given the SEC’s decision to reject the use of capital buffers for US MMF, the IMMFA believes that there is now a “serious risk that cross-border arbitrage opportunities will be created”. In an interview with Treasury Today, Hindle Barone says: “The SEC flatly rejected the use of capital buffers, so I can’t see them reconsidering this measure any time in the near future. Instead, they are considering a mixture of moving to VNAV and/or the use of liquidity gates and fees. European regulators don’t like to draw attention to the fact that they are going down a different path than the SEC, but they are. As an industry association, we hope that good sense prevails and the US and Europe jurisdictions become more aligned, but we continue to be disappointed.”

The proposed reforms will need to be agreed with the European Council and Parliament, a process unlikely to be completed before the May 2014 European elections. However, once the regulation is accepted into law, the transition period for these changes is only six months. This will not be feasible given the extensive operational and educational changes which would be necessary. “This is one of the biggest challenges in the proposals,” says Hindle Barone. “It is not practical to make sweeping changes and expect them to be implemented in six months.”

What about corporates?

The biggest investors in MMFs are corporate treasurers who need to hold large amounts of cash on a short-term basis and who do not want to put all of their cash in one single bank deposit account. MMFs provide a high degree of liquidity, diversification and stability of value which is combined with a market-based yield. In Europe, the split between CNAV and VNAV models is roughly 50/50, according to the EC. The 3% buffer would apply to CNAV funds, to build up a cash reserve and give the fund a buffer in the event that the value of the share dips below €1.

Mireille Cuny, Global Head of Liquidity and Investment Solutions, Société Général Corporate and Investment Banking (SGCIB), thinks that it is fair that the regulators underline the fact that there are no capital guarantees with MMFs. “Corporate treasurers are realising that, in an environment where short-term rates are very low, credit spreads are decreasing and asset managers have increasing internal costs because of incoming regulations, the return on MMFs can be very low or even negative.”

But will the proposed regulation change corporates’ investment strategy? Cuny believes that MMFs will remain attractive for those corporate treasurers that manage less cash, ie up to €50m, and who can’t develop the minimum expertise needed in-house. “If a corporate has few resources but a lot of volatility in its cash, then an MMF is probably a good investment instrument because the company can still benefit from diversification and an asset manager’s expertise. In addition, if a corporate is managing a lot more cash, it might still make sense to use MMFs for the very volatile cash between one and 30 days maturity. But for cash beyond the 30-day mark or for higher amounts where a corporate needs to monitor its diversification, then it is probably better to invest directly in commercial paper, or look for a bank deposit with some investment solution attached.”

An example of new developments in the latter space is SGCIB’s liquidity and investment solutions desk launched in 2011. Via the desk and in dialogue with its corporate clients, the bank has developed rolling deposits paying a fidelity premium, increasing at each roll. The ‘roll period’ is defined with the client according to their business constraints. The bank also offers notice call accounts and other solutions with daily liquidity, by taking into account the client’s estimate of the steadiness of the cash.
SGCIB’s rolling deposit solution has attracted more than €1 billion. “It is not only the €1 billion which is impressive, but also the fact that corporate clients all over the world are interested in this solution,” says Cuny.

What you can do

As the proposals start moving through the political process, there is still time to influence the decision-makers. The IMMFA is working together with the Association of Corporate Treasurers (ACT) to ensure that the corporate voice is heard. Each member of the association will also be reaching out to its investors to get involved in the debate.

Hindle Barone recommends pointing out directly to local MEPs, as well as representatives from the Bank of England (BoE) and the Treasury how damaging these proposals could be. “We are encouraging anyone who cares about this to make their voices heard, whichever avenue that takes,” she says. “We are trying to explain that this has a real impact on the broader economy and we struggle to get that message through.”

And input from the real economy could make a significant difference to the end result. For example, in his keynote speech at the annual IMMFA dinner in June, Sajid Javid MP, Economic Secretary to the Treasury, indicated the UK government’s strong commitment to the MMF industry. The time is nigh to get involved in the debate.

Is SWIFT service bureau consolidation a good thing?

September 2013

Treasury Today asked a similar question at the beginning of the year with regards to consolidation in the TMS space, after Wall Street Systems swallowed IT2. But does it make a difference that SWIFT itself is pushing for greater consolidation in the market?

With Bottomline Technologies’ recent announcement that it was picking up two SWIFT service bureaus (SSBs) – Sterci and Simplex – in one go, whether or not consolidation in the marketplace is in the best interest of the clients they serve becomes a topic of immediate concern.

According to SWIFT, of the more than 850 corporates who have a SWIFT BIC, 80% are supported by an SSB. Worldwide there are more than 130 SSBs that operate their own infrastructure.
The SSB space has seen a rash of acquisitions over the past few years. This isn’t Bottomline’s first foray: in October 2010 it picked up SMA Financial. In addition, SunGard acquired Syntesys in September 2011, whereas Fundtech was an early mover, acquiring three bureaus: BBP (1999), Datasphère (2004) and Synergy Financial Systems (2008).

For Bottomline, these recent transactions build on the financial messaging expertise that SMA Financial brought to the organisation. “That experience has been a great success for us – the business doubled in terms of revenues in three years and brought us some important customers – so that made us hungry for more,” Marcus Hughes, Director of Business Development, Bottomline Technologies, told Treasury Today. “By adding Sterci and Simplex, the group now has more than 530 financial messaging customers in over 20 countries using us for SWIFT, with 200 SWIFT experts in key financial hubs, such as Geneva, Frankfurt, London, New York, Paris, Toronto and Singapore. We have expanded our global footprint in order to support our growing customer base.”

But is consolidation in the best interest of the market as a whole? Hughes argues that the trend has been encouraged by SWIFT itself and its member banks. "The financial community wants fewer but stronger SSBs to mitigate operational risk, which is consistent with what we are trying to accomplish – we are helping that flight to quality.”

It is true that in the recent years SWIFT has made the criteria for operating as a SWIFT-certified SSB much stricter, including the new SWIFT Shared Infrastructure Programme. All service bureaus will have to comply with minimum operational practice requirements by the end of 2013, and with even stricter standard operational practice requirements by the end of 2015. The intention is for SSBs to “demonstrate high standards of security and resilience, as well as appropriate business practices”, according to SWIFT.

Bottomline is creating a new global centre of excellence in financial messaging with a growing product range to support its customers, to make them feel “secure and confident” about their SWIFT connectivity, explains Hughes. The company is also adding many value-add services in the cloud around payments, reconciliation, data transformation, SWIFTNet funds messaging, data management, etc, in order to reduce cost and risk and cater for a full range of customers – banks, corporates and non-bank financial institutions (NBFIs).

This trend towards consolidation in the SSB market is set to continue and may impact the treasury management system (TMS) market, according to Enrico Camerinelli, Senior Analyst in Wholesale Banking at Aite Group. “Bottomline adds the capability to reach out to both corporate and banks, which further increases its competitive advantage. It can also claim experience in supply chain finance (SCF). This additional capability positions Bottomline as a serious partner for TMS vendors which want to help their clients extend the reach beyond the four walls of the corporation. Therefore, Bottomline is a serious contender in the TMS arena for a possible acquisition of a local treasury system vendor.”

Do you have a plan B for SEPA?

August 2013

The golden rule in any project design is to always have a Plan B. It’s becoming clear, however, that there is no fall-back plan for the Single Euro Payments Area (SEPA), despite all indications that many corporates will not be ready in time.

One in three companies is still at risk of not being ready for the upcoming Single Euro Payments Area (SEPA) deadline of 1st February 2014, according to a PwC report, ‘SEPA Readiness Thermometer August 2013 update – Prepare a Plan B’. A survey of 150 companies about their state of readiness indicate that companies have underestimated the effort required to comply, and few of them have a back-up plan should they fail to be ready in time.

According to PwC, 26% of respondents admit they have no readiness activities planned. This percentage has not decreased since its January survey.

“If every third company were unable to instruct its bank to settle its obligations, this would be alarming news to all,” explains Bas Rebel, Senior Director Treasury advisory at PwC in the Netherlands. “This goes beyond reputational damage to the individual company; it may create a backlog in repairs at banks and liquidity problems for beneficiaries.”

Interestingly, despite the European Payments Council’s (EPC) edict that “there is only plan A, so act now”, effectively dismissing the possibility of postponing the deadline, a mere 20% of respondents believe that the regulators will strongly enforce the deadline and disallow legacy formats to be processed by the banks. A few respondents (6.5%) still expect and actual postponement of the official deadline.

But corporates shouldn’t rely on this possibility becoming a reality.


Prepare your back-up plan

SEPA projects take on average six to 12 months. With less than 110 working days left until 1st February, the pressure is on for corporates to reach compliance in time for the deadline.
In the eventuality that they are not ready, less than half (46%) of the respondents admit to not having thought about a back-up plan, with 16% relying on assistance from their bank. Hardly any respondents have implemented or tested a back-up plan.

“The 34% of companies at high risk of not meeting the deadline should now seriously consider a back-up plan,” says Rebel. “But they should understand that a back-up plan cannot be implemented overnight. It needs preparation and does not necessarily provide a shortcut for all aspects of ‘plan A’.”

In the report, PwC makes a number of recommendations for those corporates preparing their plan B. The back-up plan should provide a clear scenario that can be followed should they be unable to make payments after the go-live date, such as:
  • Temporarily switch back to the legacy payment schemes.
  • Prepare for using a conversion service to produce SEPA-compliant payment batches.
  • Prepare a communication plan to inform your stakeholders about delays.
  • Have a credit facility on standby to cover short-term liquidity dips, in case your clients are unable to make payments.
  • Prepare alternative payment products, such as bill payments, online money transfer schemes or other payer initiated payment schemes, in order to be able to get paid.
To read the full report, please click here.