EuroFinance report 2: The next financial crisis

Authorities have addressed the fallout from the global financial crisis of eight years ago with a raft of measures, ranging from Dodd-Frank to consumer protection laws. Yet treasurers are often cynical, fearing that apparent progress might only be illusory, according Daniel Blumen, partner at the Treasury Alliance Group.

Blumen was speaking at a morning presentation on key ‘tipping points’ for treasury on day one of EuroFinance’s international treasury and cash management conference in Vienna. He suggested that the past few years have provided much valuable experience in how to deal with crises, but Basel III and other regulation haven’t necessarily eliminated the potential for a further major crisis.

What could be the trigger next time around? The huge expansion in the number of payment systems in recent years could be one as it hasn’t been accompanied by a corresponding increase on settlement systems. While real-time gross settlement systems are generally in good shape, the same can’t be said of older, established systems.

A future liquidity crunch, a crisis of trust set off by social media and problems emanating from the lack of transparency common to non-traditional sources of finance are other possible future developments. In response, Blumen suggested, there are three prudent steps that corporate treasurers can take.

“Firstly, develop a payments strategy and make sure that it identifies any weak links; secondly make sure that you thoroughly review any new technologies being deployed,” he recommended. “Thirdly, remember that moderation is a virtue celebrated in all cultures – so don’t move in too hard or too fast!”

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Dominic Mac

Tags: EuroFinance