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.
While many still think the banking sector is characterised by legacy systems and lack of innovation, this could not be further from the truth. 2018 marks the year when a multitude of external factors will shake up the industry once and for all and reinvent the way people bank. Inevitably, this presents a threat, but also an opportunity.
There has been an uptick of treasurers inquiring about interest rate risk management in recent months as interest rates in the US and UK have started to show a rise in momentum, said Chatham Financial at the annual Bellin treasury conference.
The global economy has seen about eight years of growth, but we are starting to see the end of this which is triggering some volatility in global markets, Stefan Bielmeier, DZ Bank, argued in his keynote speech at the Bellin annual 1TC conference. Other speakers discussed blockchain, cyber crime and netting.
A series of governments are now very worried about the idea of bitcoin and these currencies because customers would be able to make sustainable ongoing transactions and payments without having to ever introduce the use of a typical financial model or banking system. To combat this potential threat, several countries including major central banks like the Bank of England and the Bank of Israel will be launching their own version of a cryptocurrency. This could bring big advantages to customers.