Credit Remains Top-of-mind for Treasurers

Tight credit remains the dominant issue for most corporate treasurers, according to a Financial Services Club panel discussion focusing on ‘What do Bank’s Corporate Customers Think?’.

Held last week, on the eve of the Association of Corporate Treasurers (ACT) annual conference, the panel – consisting of two ex-treasurers and one global transaction banking executive – also identified regulations, risk and the need to cut costs as key concerns for treasurers. The two-day ACT conference starts today in Manchester.

When asked if the banks are still refusing to lend, one ex-treasurer explained that a FTSE 100 corporate in good health doesn’t have a problem accessing credit and now the price of credit is starting to come down; even a FTSE 100 company in bad condition will get help from its banks to guarantee its survival. However, smaller corporates are not getting access to credit.

The bank executive said that his bank had always maintained a cautious outlook that allowed it to continue to lend throughout the crisis – although he admitted that the bank’s risk appetite was more constrained in the current conditions. “There has been a move away from easy money. But just as the growth out of recession is slow paced, so is the loosening of credit,” he said.

The other ex-treasurer added that the treasurer’s focus is now on optimising internal sources of liquidity. “What many cash-rich companies are realising is that the traditional way of managing working capital by squeezing suppliers doesn’t work,” she said. “They are now looking at the end-to-end supply chain cost and exploring ways of using cash on a dynamic basis, for example offering suppliers early payment for discount. This creates a risk-free enhanced return and ultimately a win-win for all.”

“The trend is also towards establishing relationships with strong banking partners,” she added. “But it is hard for banks to commit to all emerging markets, which makes it difficult for a global corporate to have just one bank. Therefore, corporates still maintain a multi-banking environment.”

When asked what banks should focus on other than service, there was much agreement across the panel:

  • Straight-talking – honesty/openness from banking partners as to whether they can deliver what a corporate needs.
  • Sorting out the mess in their legacy systems, so that banks can react quicker to corporate needs.
  • Breaking down organisational silos in banks, so that corporates don’t have to deal with multiple business units separately.
  • Harmonise technology, so that corporates can connect to many banks in an agnostic way.

The banking representative put forward the final point on IT harmonisation, saying that the industry had to work toward this goal. “It is patchy across the industry but it has to go in that direction – whether a bank is pulled kicking and screaming or whether it is leading the pack, everyone will have to do it,” he said.

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