Should You Decentralise Your Funding Strategy?

When the previously global banks need support from their own central banks, the global strategy becomes local. They need to lend the money in the central bank’s country otherwise it does not make sense. We are starting to see this protectionism everywhere and it’s pure logic.

What does this mean for your funding strategy? If you have centralised your funding in the treasury at corporate headquarters, you will probably find yourself with fewer banks to borrow from. ‘Foreign’ banks leave you to take care of the needs of their home country. This may create a lack of banks to borrow from and a too high concentration factor, especially in many of the small countries in Europe.

A potential strategy I have started to discuss with treasurers is to decentralise funding. For example, if you have your headquarters in a European country and large operations in the US, divide the funding between the two. In this way, you can tap both regions for capital. We need to embrace protectionism and make it work in our favour.

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