Editorial Agenda 2017
Can Africa realise its potential? The continent has long promised to become a more important engine of global economic growth, but too often the promise has not been fully realised. In recent times there have been a number of positive developments; these include the rapid growth of mobile money service providers such as M-Pesa to reach the unbanked; steady growth despite lower oil prices denting the performance of key economies; strong demographics with a young and growing labour force; and growing investment in infrastructure. This focus considers the outlook for the continent and both its established and emerging economies.
Correspondent banking: feisty or flagging? As many of the global players in the banking sector scale back their activities, correspondent banking – where services are provided by a bank in one country on behalf of a financial institution in another – should be poised for a period of strong growth. However, a recent report by the International Monetary Fund (IMF) found that correspondent banking relationships were actually in decline as many banks retrench and review their business lines, with regulatory concerns in areas such as anti- money laundering (AML) also a factor. How marked is this trend and can it be reversed?
PSD2: the clock is ticking: If they have not already begun their preparations for the introduction of the Payment Services Directive, aka PSD2, European banks will need to make it a priority task this year. The regulation, regarded as one of the most disruptive in the financial services sector, will begin to make an impact in January 2018 and aims at giving greater access to competitor banks and third party payment service providers. This focus looks at how PSD2 is likely to transform the banking landscape and asks whether the current players are ready for the fundamental changes.
Focus on Latin America: Overall economic growth across the region has stalled as recession in Argentina, Brazil and Ecuador, coupled with a deepening crisis in Venezuela, undermines the stronger performance of economies such as Mexico, Paraguay and Uruguay. This focus examines the prospects for key Latin American economies in 2017 and whether new leaders in Argentina and Brazil can turn around their performance. How are corporate treasury departments coping in this challenging environment and how deep is the impact caused by volatility in key currencies such as the Brazilian real and the Mexican peso?
The trapped cash challenge: For companies with overseas operations, the problem of accessing money earned outside of its home country is nothing new. Foreign exchange controls, capital requirements, taxation and regulation all contribute to the challenge of trapped cash-although the situation is somewhat different in the US where many companies deliberately opt against repatriating cash made abroad because of the country’s relatively high corporate tax rate. As more companies look to new markets to offset sluggish growth at home, will the problem of trapped cash deepen and what are the most effective strategies for dealing with it?
A greener agenda for treasury: Treasury departments have for many years been urged to go paperless as their main contribution to their green economy, but a growing number have more ambitious plans. As the business case for sustainability and ethical policies grows, many treasurers are recognising that adopting a comprehensive green agenda doesn’t have to involve expense and can have substantial benefits for their organisation. These range from using renewable energy sources to fair treatment of suppliers. This focus examines the green initiatives being pursued by treasury departments.
What next for Germany? Europe’s biggest economy is reinforcing its role as the major powerhouse within the European Union (EU) following the UK’s decision to exit. However, some warning lights are flashing: German exports to a number of key markets such as China are flagging; many companies have had to reduce prices to maintain demand and return on capital has deteriorated for a number of major German corporates. Added to this was the sharp fall in sharp price experienced by Deutsche Bank and other major financial institutions in 2016. Ahead of the federal elections later this year, how are the country’s corporate treasurers responding to the tougher business environment – and is chancellor Angela Merkel on course for a fourth term in office?
Towards a cashless society: As the volume of cash payments steadily declines in many leading economies, the prospect of the cashless society within the next decade is becoming very real. Australia, for example, could be cashless as early as 2022 as individuals and business increasingly use smartphones and other alternatives to make payments. This focus explores the benefits to corporate treasury of dispensing with any reliance on cash, but also looks at the challenges this presents to businesses and the potential drawbacks, such as invasion of privacy.
Panda, dim sum and masala bonds: In a continuing low interest rate environment, Chinese and Indian issuers have tapped the international investment market by developing bonds issued outside their country but denominated in the local currency. Pandas, dim sums and masala bonds are among those that have been developed and issued in recent years. This focus looks at the characteristics of each type of bond, who the issuers have been, the potential for further growth and whether the concept has taken hold in the world’s other major emerging markets.
Treasury and geopolitical risk: Global political and economic threats have steadily moved onto treasury departments’ radar in recent years. The trend appeared to accelerate in 2016 thanks to Brexit, a particularly fractious election campaign for the US presidency and the continuing instability caused by the refugee crisis. Are financial professionals prepared for the resulting political tensions and the threat posed to global business. How much of a voice do they have in the lobby groups that defend the interests of business? What assistance and services are available to treasurers who want to mitigate the impact of geopolitical risk?
In-house banks – a good fit for your company? in-house banks (IHBs) have grown steadily in popularity and are being used by many multinational corporations with operations outside their home country. They were given a further boost in Europe in 2014 with the launch of the single euro payments area (SEPA) and the standardisation of EU payment formats. IHBs give treasury teams greater control and oversight of the business, while also offering cost savings. However, this focus also looks at the potential pitfalls and asks whether some companies fully consider how and why the IHB is to operate before going ahead with implementation.
Coping with currency volatility: Fears of a ‘currency war’ caused by major economies allowing their currency to depreciate and gain competitive advantage had eased somewhat before the Brexit decision last June. However, the pound’s sharp fall against the US dollar and the euro in the second half of 2016 reignited concerns, while uncertainty over the outcome of the US presidential election caused major fluctuations in the value of the Mexican peso. FiREapps reports that currency crises have been a regular event of the past two years and this focus examines the hedging strategies available to corporations vulnerable to the impact of currency volatility.
Focus on the Middle East: The global implementation of the Basel III capital adequacy regime might be making banks safer, but what are its other effects – including those possibly not envisaged when the new rules were being compiled? This focus looks at how banks have been responding to the new environment and the impact on others, ranging from hedge funds to money managers. Has the fresh capitalisation needed by many banks in order to meet Basel III’s requirements been readily available? How much has the new regime affected the cost of doing business?
Robotics on the rise: Robotics and artificial intelligence is already radically changing sectors of the financial services industry such as wealth and investment management, as robo advisors replace traditional consultants. A similar transformation is underway in many other sectors, which could either free up many of their employees from routine tasks so they can focus on more value-added work or, alternatively, mean they no longer have a job. This focus looks at both the potential risks and benefits of robotics and also asks what the implications are for corporate treasury departments.
SEPA and its successors: More than two years on since the launch of the single euro payments area (SEPA), it’s time to assess how cross-border payments in the Eurozone have been transformed. Has SEPA proved a success and have predictions that the benefits would not be commensurate with the cost of preparation been borne out? Has SEPA provided a template for the development of cross-border payment schemes in other parts of the world? The focus will also look at other payment initiatives, including the global payments innovation (gpi) scheme introduced by SWIFT at the end of 2015.
Brexit one year later: Twelve months after the British electorate voted for the UK to terminate its membership of the European Union (EU), we look at how the historic decision has changed the business landscape – both for corporate treasury departments directly affected by Brexit and those in continental Europe that are also impacted. Has the resulting depreciation of sterling proved a benefit for UK corporates or have there been more resulting headache than help? How have treasury departments amended their hedging and other risk reduction policies?
The fight against fraud: Guarding against fraudsters – particularly those working from the inside – is a continuing challenge for companies, although security systems are often still too lax in many of them. However, even where corporates have stepped up their game the threat may not have gone away. As criminals become ever more sophisticated, so detecting and eliminating fraud becomes tougher. This focus looks at the measures that businesses can take to mitigate against losses from fraud and how they can respond when they do fall victim.
The growth of Islamic finance: In late 2016, it was announced that gold had become an acceptable investment in Islamic finance for the first time as Shariah-compliant rules for trading in the precious metal were agreed. Gold now joins equities, real estate, Islamic bonds (sukuk) and takaful (insurance) as vehicles approved for Islamic finance. At the same time, many banks and financial institutions beyond the Middle East have adopted the basic principles of Shariah, which include greater transparency, enhanced risk mitigation and profit-sharing. This focus examines the growth of Islamic finance in recent years and considers what other classes of investment might be added to the list of those deemed to be acceptable.
Trade deals, trade tariffs and trade finance: Two major events in 2016, the election of an avowedly protectionist president in the US and the UK vote to exit the European Union (EU), promise to fundamentally alter trading relationships between countries. The ‘America first’ rhetoric of president Trump puts the future of the Trans-Pacific Partnership (TPP) in doubt and he also pledged to renegotiate the North America Free Trade Agreement (NAFTA), while at the same time expressing enthusiasm for a trade deal with the UK. This focus will look at how trading relationships have altered over the past year and offer forecasts on what the future is likely to bring. In addition, it will look at how the growing trade finance industry has been affected.
POBO and COBO: gaining traction: Payments-on-behalf (POBO) and collections-on-behalf (COBO) structures were given a boost once the single euro payments area (SEPA) finally became a reality in 2014. They also increasingly make sense as international payment formats steadily become more standardised. However, alongside the various benefits of POBO and COBO are challenges that must be taken into consideration by companies. Each of these is examined in this focus, which looks as how POBO/COBO projects can be successfully implemented once the vital support and buy-in from management has been secured.
Cross-border payments: After a prolonged gestation period, the single euro payments area (SEPA) finally became a reality in 2014. This focus looks at developments in cross-border payments now being made in the SEPA era and how the payments landscape could further develop in the years ahead, now that real-time payments are finally starting to gain traction in the US. Will SEPA be used as a template for cross-border initiatives in other regions of the world, or will these need to be radically different?
Please note: The above editorial calendar is subject to change.
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