Bolstered by one of its largest quarterly increases on record, cash held by corporations in the US rose by over 6% in the Q3 of 2013. US corporate cash now stands at US$1.925 trillion, up from US$1.811 trillion at the end of June.
According to consulting firm Treasury Strategies, its analysis of data released this week by the US Federal Reserve showed that much of the increase was the result of companies going into the market and issuing bonds. Rather than companies immediately deploying that cash, over US$80bn went into bank deposits. Interestingly, reserves that banks have deposited at the Fed grew by US$250bn, demonstrating that banks had little use for the new corporate deposits.
“This is a matter of concern,” said Anthony Carfang, a partner at Treasury Strategies. “Funds continue to slosh around the financial system with nowhere to go. Corporations raise money to take advantage of current rates and simply hold that money idly in bank accounts. Banks then turn it over at a small spread to the Fed where it sits as idle reserves.”
According to Treasury Strategies partner Cathy Gregg: “We believe companies are moving toward longer-term funding of their balance sheets for two reasons. First, long-term funding is currently inexpensive, even if there is no immediate use for the cash.
“Second, corporate chief financial officers [CFOs] are increasingly concerned that regulation and particularly the Basel III requirements for banks will result in banks becoming less reliable sources of short-term borrowing in the future.”
With the end of 2017 fast approaching, many finance professionals might be counting down the days with some degree of dread. Year End is just around the corner and with it comes the many long hours accountants will spend going over balance sheets and profit and loss accounts, investigating account irregularities and chasing sign offs.
The top five sectors Asian fintech investors are interested in are data analytics, blockchain, lending, payments and regtech, according to Gary Hwa, EY regional managing partner.
On the third day of the Singapore Fintech Festival conference, there was a focus on specific applications of fintech innovation. One was trade finance, which is clearly is ripe for a revolution.
Kicking off day two of the Singapore Fintech Festival, Deloitte Chairman David Cruikshank said that fintech is significant for three reasons. First, customer expectations of services are higher than ever. Second, barriers to entry are lower than before. And finally, financial institutions (FIs) face a threat of what a competitor might do.