“When I was a banker I had a great member of staff who did a great job and got a large bonus from me. She thanked me and then retired to Italy,” said Avinash Persaud, an ex-banker and chairman of Intelligence Capital, who cited this as an example of how the incentives were all wrong in banking and often resulted in unintended consequences, during his final day address to the EuroFinance 2013 audience of corporate treasurers. “We as an industry used to pay life-changing bonuses which shrank the timeframe people operated in, leading to bad banking decisions: one big bonus and someone could retire.”
From his perspective as an ex-banker, Persaud advised the treasury attendees at the final day of the EuroFinance 2013 conference in Barcelona, Spain, how to spot a bad bank and instead choose a good banking partner. “The banks that failed during the 2008 crisis were often ‘challenger’ banks like Northern Rock in the UK with its 120% mortgages because they were too keen to break into the market. You should watch out for aggressive behaviour like that (and take it as a warning sign).”
Others illustrations of a bad bank that treasurers should watch out for in their bank / counterparty risk policies included:
- Paying too large a bonus to bank staff.
- Making too much ‘noise’ in the market (i.e. bankers traditionally were reserved and there are good reasons why they should be).
- Being the ‘darlings’ of the stock market is not necessarily a good thing either. HSBC, for instance was criticised for not being aggressive enough before the 2008 crash, said Persaud, but their relatively cautious approach means they have come out of it well.
Watch out for too many banking insiders on the board as well, added Persaud, in conclusion.
Bankers Call For Better, More Honest Relationships
Most treasurers may look to drive banks down on price but they should also realise that they are facing increasing regulatory pressure and costs due to Basel III, Dodd Frank, FATCA and a raft of other new regulations. These are adding to the cost of credit admitted the banking panel in the next session at EuroFinance 2013, comprising of Jennifer Boussuge, Head of Global Transaction Services, EMEA, Bank of America Merrill Lynch (BofA Merrill); Rajesh Mehta, EMEA Head of Treasury and Trade Solutions, Citi, and Daniel Schmand, MD and Head of Trade Finance and Cash Management Corporates, EMEA at Deutsche Bank.
The title of the session was a clue as to its contents. ‘Banks: Altogether Now or Bust’ was an obvious plea for corporate treasurers to engage more fully in their relationships with banks, and vice versa, so that both sides can talk honestly about how new regulations are going to increase the cost of credit.
“We as banks need to understand how to function in this ‘new normal’ regulatory and market environment. We have to look at the increasing cost of credit for banks and what it means for corporates,” candidly admitted BofA Merrill’s Boussuge.
According to Citi’s Mehta: “Banks are being used as instruments of policy enforcement, such as with FATCA for example.” If this is happening – and it is – argued the bankers on the panel then clients have to be made aware of these extra responsibilities and the costs facing banks. A deeper, more honest relationship necessarily has to be established.
This was a point that Deutsche Bank’s Schmand agreed with, commenting that: “We need to look at the engagement model. We have to be able to have true discussions and sometimes even to be able to disagree. On infrastructure projects, for instance, you need special financing and bank support.” There is no ‘one size fits all’ regulation was his point, and there has to be some context to regulatory policy and to the relationships between corporate treasurers and banks.
With that thought in mind many of the attendees at EuroFinance 2013 began to pack their belongings and head off to the airport or the beach in Barcelona as the three-day conference began to wind down, but not before sharing their opinions and reactions to the event with ‘gtnews’.
Vox Pops: Treasurers’ Show Reaction Quotes
“The key thing of interest for me at any conference is to gauge how treasury is evolving and EuroFinance 2013 has been a good opportunity to do this,” said Marco Schuchmann, manager, payment factory and operations, at the Dutch headquartered global paint company Akzo Nobel. In an exclusive discussion with ‘gtnews’ Schuchmann said that his two main take-aways from EuroFinance 2013 show were regulations and bank-to-corporate relationships. “The regulatory framework is getting stricter and stricter with Basel III, Dodd Frank and the European Market Infrastructure Regulation (EMIR) on the horizon, plus the single euro payments area (SEPA) imminent and many others. These regs will have an impact – for instance on bank pricing for trade finance in the case of the Basel III capital adequacy regime and this was evident at the show.”
“In terms of corporate-to-bank interaction and vice versa I’ve noticed a real trend towards the relationship model in Barcelona with banks increasingly looking to help and cater to treasury needs, especially if they are a large corporate with high transaction volumes, but a genuine desire for partnership is there.”
“The take-away from the show for me has been the increase in risk management sessions and the increase in its importance,” said Severine Le Blevennec, treasury director, EMEA, Honeywell, in discussion with ‘gtnews‘. “Traditionally it’s been about foreign exchange (FX) risk, commodity risk and so forth for treasurers, but that is changing with counterparty risk and other risk factors moving up the agenda. We now have compliance risk as well, and regulation has been another key theme that has been evident at the show.”
Big data was the big issue for Neil Peacock, global head of cash management at ABB, who picked out as his highlight a day one presentation in conference stream six entitled ‘The Business Game Changer’ given by John Fritz, director, strategic software alliances at Advanced Micro Devices. “It was on the usability of big data and was very thought provoking,” he said. “The presenter somewhat tongue in cheek showed some slides showing a camera going up a rat’s bum as part of a clinical study on irritable bowel syndrome (IBS), to map an illness genome and compare possible treatments using data analysis techniques,” explained Peacock. “If for no other reason than it was so radically different from anything else I’ve ever seen at EuroFinance before, then I’d to pick that as an unusual ‘highlight’!” he joked. Turning to the relevance of big data for the treasury, Peacock cited its ability to get all accounts payable (A/P) data together in one place, for example, and to mine data for truly useful knowledge. “If all that data can then be put in one environment – say in SQL – then you could really see the benefit. Useful big data has to be the aim.”
“Our agenda before we came to the show was to meet with our TMS supplier IT2 and other technology vendors to discuss the European Market Infrastructure Regulation (EMIR) reporting obligations and what compliance solutions they were planning to offer in this space,” explained Royston Da Costa, group assistant treasurer, in charge of treasury systems and development at Wolseley, to ‘gtnews’. “We have done so and also got benefit from being able to meet with peers and banks to discuss our future plans.”
According to Robert Dunlop, vice president and group treasurer of Styrolution Group, a thermoplastics supplier, pinpointing a single show highlight at EuroFinance 2013 is not easy because he enjoyed many of the presentations. “Stephane Garelli’s opening economic outlook [on day one – see day two report here -Ed] was certainly enlightening and it was refreshing to see the conveyance of such an important topic – about global competitiveness – conveyed with such levity,” he said. “Regulation was another important subject at the conference. Now and over the coming months, treasurers are going to need to navigate the ever changing regulatory landscape and understand the direct impact to the corporate,” he told ‘gtnews‘. “We will be looking to our banks for translation, deciphering and support as things unfold and become clearer. The opportunity to network with peers was also welcome – in my opinion, it is why we are all here.”
Views From the Banks, Vendors and Consultants
According to John Salter, managing director of cash management and payments, Lloyds Bank, his show highlight at EuroFinance 2013 has been the tone of his conversations with European corporates, which have been really positive. “In the past it has been about managing the recession, but we’re now talking about managing the recovery. Treasurers are looking at strategic lending and optimising cash to support growth. Working capital management conversations are still dominating but it is not because they need to survive anymore but because corporates want to grow or invest. Treasurers have been through the pain [of the recession] and come out with more efficient structures that they are now looking to exploit. I’ve met 20 customers in the last 48 hours and almost exclusively there has been a positive tenor to the discussions.”
For Enrico Camerinelli, a senior analyst for wholesale banking at Aite Group, and a regular ‘gtnews’ contributing editor, the interesting thing about EuroFinance 2013 has been the focus on supply chain finance (SCF). “Treasurers more and more have a good understanding of SCF and are increasingly asking banks if they can help, or exploring their own opportunities,” he said.
The key take-away for Garry Young, director of IP solutions at CGI, concerns the single euro payments area (SEPA) which he presented on at the EuroFinance show with RBS, in a day one presentation entitled ‘Last Chance Salon’, referencing the impending 1 February 2014 migration end date. “I was worried about SEPA fatigue before arriving because it’s been such a long cross-border payments harmonisation project, but instead there’s been somewhat of a SEPA panic as treasurers realise the scale of what needs to be done in the next 16 weeks. There is no plan b to complying or likelihood of delay, but tech-wise there are conversion services available to aid quick compliance.” His stance is backed up by the latest European Central Bank (ECB) SEPA Indicator figures which show only about half of organisations have adopted SEPA credit transfers (SCTs), while the figures for SEPA direct debits (SDDs) are still in single figures. The dash for SEPA compliance needs to start now.
Etienne Bernard, head of transaction services, EMEA, RBS, is also concerned about SEPA after presenting a case study at EuroFinance 2013 about auditing your cash and payments strategy with Franz Bramboeck, group treasurer at Austria’s Tyrolit – Schleifmittelwerke Swarovski. But he isn’t so interested in the compliance process, which “only has a few months to run” he says, but rather about how companies should use the opportunity to update their systems to gain treasury efficiencies: perhaps moving to an in-house bank (IHB) model, payments factory, or Payments-On-Behalf-Of (POBO) methodology on their back of their SEPA compliance project. It’s not something that can be done now with the deadline looming if no action has yet been taken but getting future benefits should be the focus, not mere tick-box compliance. “The real thing of interest for me,” continues Bernard, “is how treasury is becoming part of the commercial agenda now and more strategic. It’s not about just cash management anymore but working capital management, mitigating risk and so forth – that’s the key trend.”
Erik Zingmark, global head of cash management at Danske Bank, disagrees however, urging treasurers not to forget the fundamentals of cash management and to occasionally “get a piece of paper and a pen and run through the key steps, procedures and balance sheet of your treasury. You’ll be surprised what cash and other things you will find.” Not that Zingmark is a technophobe – far from it and indeed his bank was pushing their single technology platform at the show – but he is right to advise treasurers “never to forget the basics”.
More Vox Pops: Trends and Reactions to EuroFinance 2013
The final day of EuroFinance 2013 included a vendor shootout where Bottomline, Reval, SAP and SunGard discussed the technology mix and innovations available to treasurers, looking at the cloud versus installed solutions and what treasury management system (TMS) consolidation means for the sector following the purchase of IT2 by Wallstreet Systems earlier in the year. For Gunther Peer, regional vice president, solution consulting, EMEA at Reval speaking to ‘gtnews’ about his show highlights TMS consolidation and its impact on development budgets, the amount of support going forward and what technology tools treasurers might have in the future were all valid topics that have much discussed at the show – both in that presentation and outside of it. “The Software-as-a-Service (SaaS) trend is clear in my opinion, and risk tools are increasingly in demand too,” he added. “But remember this is mainly in developed markets. In emerging markets more basic requirements apply, with the need to obtain cash visibility paramount and the idea of payment factories and so forth is not yet relevant because the supporting technology infrastructure is not yet in place.”
Andrew Owen, managing director, global payments at SunGard AvantGard, is noticing the market waking up to payment factories in the US. “The market in Europe has lead the way in this regard and there has still been interest in it here at this show, but what’s interesting to me is that the US market for PFs is at last growing. In addition, corporate-to-corporate payments which use new ‘challenger’ networks, and don’t go via banks, is a definite trend both here in Europe and elsewhere.”
For Per Trifunovic, chief executive officer (CEO) at BBP-Fundtech and his colleague, Christoph Hugo Stiefel, a senior sales manager, Asia-Pacific and particularly the topic of the increasing liberalisation of the renminbi (RMB) is a show highlight. “Despite the fact that the event has a European focus global corporations naturally act globally, so of course RMB is of interest to everyone,” he said. “The growing strength of Chinese brands (and their increasing penetration of the Fortune 500 listings) is another show hot topic for me and demonstrates the shift in trade flows from West to East in action.”
Leo Lee, the head of the international treasury centre for China’s Huawei Technologies, based in the Netherlands, was presenting at EuroFinance 2013 about the establishment of the firm’s Dutch-based treasury hub and its move to SWIFT to cope with its international growth. The fact that he was here in Barcelona proves Trifunovic’s point about the growing strength of newcomer Chinese brands – another clear trend of the show.
David Aldred, industry sales head for energy, power and chemicals at Citi treasury and trade solutions, was at his 14th EuroFinance trade show so is in a good position to discuss what is new this year and trending in comparison to previous years. “For me there were three key trends in 2013”:
- Intense client engagement: my meetings with clients at the show have been marked by intense conversations about how to optimise treasury operations.
- Obtaining process efficiencies: There are a number of drivers for the push towards getting more process efficiencies at treasuries, apart from the normal drive for a better bottom line. SEPA historically has certainly been part of it, as have other regulations, but it is also a fact that treasurers are being asked to do more with less and that requires automation. The reduction in treasury staff numbers is evident across cash, card and trade finance functions and is another driver for efficiency.
- Benchmarking: Corporates want to know what other corporates are doing and that is natural but increasingly they want a measurement too so that they can benchmark against each other and obtain best practice.
Regulation was another theme at EuroFinance 2013, as evidenced by the opening presentations on the final day in Barcelona. For Suzanne Janse van Rensburg, head of liquidity and investments, GTS, EMEA, Bank of America Merrill Lynch (BofA Merrill) it is an interesting picture globally. “We’re seeing deregulation in the emerging markets, such as the RMB liberalisation moves, but on the flip-side increased regulation in Europe. For example, Germany is toughening up the rules around notional pooling in relation to the participation of German subsidiaries.”
According to Maha El Dimachki, head of GTS corporate sales, EMEA at (BofA Merrill), the show trend most prevalent for her was the need for treasurers to be more strategic. “Treasurers need to be advising the chief financial officer (CFO) and the boardroom more often, and providing a value add service,” she said. “If they can ensure that the operational and traditional cash management duties are ticking along nicely (and are automated) then this becomes easier. The move towards this model of treasury is clear.”