Europe’s treasury departments still focused on the basics

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Cash and liquidity management head the main concerns among corporate treasury departments in Europe this year, according to a Greenwich Associates survey.

The US research and analysis group polled over 2,500 corporate treasurers, chief financial officers (CFOs) across the continent, with cash allocation and liquidity cited as the most critical issues.

Two factors have elevated the importance of both areas. Firstly, many companies are relatively cash rich following an extended period of low interest rates and favourable credit conditions since the 2008-09 global financial crisis, but the investment climate remains volatile.

Secondly, Royal Bank of Scotland’s (RBS) decision last year to withdraw from transaction services outside of the UK, coupled with tactical withdrawals by other leading banks are causing disruption in the usually calm corporate cash management business.

As switching costs associated with changing a corporate cash management platform are heavy, turnover rates among providers traditionally are correspondingly low.

Amid the volatility caused by shifts in bank business strategies, one in five European corporate treasury departments name “switching cash management providers” as their top challenge in 2016.

Sixty per cent of the large European companies with turnover of €2bn and above use BNP Paribas for corporate banking and 38% use the bank for cash management, according to the survey results. RBS selected BNP Paribas to act as a ‘referral bank’ for its cash management and trade finance clients affected by the scale back in its global operations last year.

In corporate banking, HSBC ranks second behind BNP Paribas with a market penetration score of 51%, followed by Deutsche Bank at 46% and the trio of Citi, UniCredit and RBS.

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A European Union (EU) flag flies outside of the headquarters of the European Central Bank (ECB) in Frankfurt, Germany, on Wednesday, Aug. 1, 2012. As Denmark experiments with official interest rates below zero, European Central Bank President Mario Draghi is getting a glimpse of how extreme monetary policy decisions play out in real life. Photographer: Hannelore Foerster/Bloomberg
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