EuroFinance Miami takes on the economy plus treasury and business growth (and risk). June 17, 2013
big themes at EuroFinance’s 17th annual conference on International
Cash, Treasury and Risk Management were the state of the global and US
economy, how treasury can participate in and contribute to their
companies’ business growth and the principal risks facing business today
and in the near future. The conference “streams” were dedicated to
familiar topics like risk management, cash and liquidity, technology,
and Latin America.
A quick look at what’s on International Treasurer’s radar screen this week.
With The NeuGroup meeting season in full swing, our editorial meeting was filled with issues we will be tracking. The first is the continuing proliferation of capital controls, including to Eurozone countries like Cyprus (what happens when a restricted currency is worth more offshore than onshore?). March 28, 2013
Regulator looks to bring large foreign banks to heel with host of new proposals. December 04, 2012
his role as top cop to rein in banks Federal Reserve Governor Daniel
Tarullo has proposed new rules for how foreign banks operate within the
US. These banks need to behave in accordance with US regulations and
rules are needed to blunt any risks they pose to US financial stability,
Gov. Tarullo said in a recent speech.
Having sidestepped major legal fallout after Lehman, E&Y now stands accused; corporates should take note (and cry a little).
th the spectacular collapse of Lehman Brothers in 2008 and a scathing bankruptcy examiner’s report in March 2010, Ernst & Young likely knew it would be the target of legal action sooner or later. Today is later. A little more than two years after the Lehman debacle, the largest bankruptcy in US history, New York Attorney General Andrew Cuomo filed suit against the auditor, claiming it allowed and encouraged fraudulent accounting practices. December 21, 2010
October 05, 2010
Having won exemptions from central clearing for their derivatives trades, corporates don’t seem to be well versed in the terms and conditions that must be met to remain exempt. October 05, 2010
Data collection and sharing could be a stumbling block as a transatlantic army of regulators harmonize derivatives reform rules.
First, there was the enormous Dodd-Frank and now new rules on swaps from Europe. So far it looks like the two sets of regulations are very similar in their treatment of derivatives (particularly as they relate to corporate exemptions), with a few minor differences here and there. Regulators on both sides of the Atlantic seem confident the two sets of rules will mesh. Still, one of the bigger issues is how all the data will be collected, shared and stored. September 17, 2010
By Joseph Neu
For some markets, the situation a year after the collapse of Lehman Brothers is roughly the same as it was prior to it. A week before the collapse, for example USD/EUR was 1.427 and 12 months later it was around 1.429. The financial press, similarly, is talking up the return of business as usual in financial markets. However, this does not mean the one-year anniversary of an event that ushered in the worst of the financial crisis has not had an impact—far from it. September 16, 2009
Treasurers’ (and market/Congressional) view of the relevance of the credit rating agencies has plummeted substantially as triple-A ratings proved hollow. Once again, as in Enron days, the market spreads were more telling than the agencies’ models on assessing the risk embedded in SIVs and other structures.
But that does not mean credit ratings will disappear: (1) they drive the “inclusion of companies in indices and thus the investment strategies (by policy) of various institutional buyers,” according to Allen Cutler, managing director with Lehman Brothers; and (2) investors still see them as a pre requisite, in particular for new or infrequent issues.
“The rating agencies are under tremendous pressure,” said the SVP and treasurer of one large MNC. But the markets, meanwhile, have not been pricing new debt deals based on the agencies; calls. This company, in the Bs, was able to issue debt and the cost was not rating-driven but market-driven.
That said, to give agencies their due, several treasurers noted Moody’s in particular has come a long way in providing transparency into its ratings, even when it diverges. November 14, 2007
Had the summer ended merely hot, then the role of treasury in managing the meltdown effect on polar ice would have made more sense; however, the unexpected late-summer global credit October 22, 2007
markets meltdown—not melting ice—gave the impression that EuroFinance’s 16th International Conference on Cash and Treasury Management got off on something of the wrong foot. As The Economist’s Executive Editor Daniel Franklin, who followed the opening session on climate change with a preview of the magazine’s “World in 2008” economic outlook report noted, perhaps the wrong “CC” had been the lead.
On October 2, the Federal Reserve Bank of New York announced that it will stop its long-term practice of publishing a daily 10:00am and noon FX “fixing” rate at the end of 2008.
According to the NY Fed (FRB) website, there’s simply no need for this additional benchmark: “There are many alternative, market-based sources for these rates” (for more, see www.ny.frb.org).
The October announcement caught people by surprise: while not irreplaceable, the imminent disappearance of this independent reference rate was not welcome news. I like the idea of using the 10am fixing. I would hate for that to disappear,” noted one FX manager. October 22, 2007
Most corporate finance functions have buttoned up controls on seemingly everything to ensure compliance with SOX and related regulations. However, not all corporates may be aware of the extent to which the regs that govern their banking and trading partners also affects them, e.g., new rules governing global trade and related finance (including rules curbing money-laundering and terrorist financing).
Because these rules change constantly, reflecting shifting international political environments, treasury should stay current and include international trade finance regulatory risks in any effort to revisit ERM or internal control procedures. September 24, 2007
With Libor rates spiking (one month USD Libor pierced 5.80 percent at one point vs. 5.59 a month ago), corporate treasurers may be either dreading or looking forward to repricing “risk” on Libor-linked liabilities and assets.
However, should such short-term rate spikes (which may be temporary) also affect internal polices on setting rates for intercompany liquidity management, e.g., rates on short-term interco loans, in-house bank (IHB) arrangements and cash pools? Most are linked to Libor, but how quickly should treasury be obliged to adjust them, and to what extent? For example, should a month-end rate be good enough for the prior month’s September 24, 2007
transactions, or even the next month’s? Alternatively, would an average be better suited?
Open-account trading has become increasingly popular, now capturing about 80 percent of trading activities. More exotic supply-chain finance structures have generated more buzz. However, letters of credit (L/Cs) still form the foundation for risk mitigation in trade financing globally. When the ability to receive payment is a concern, L/Cs are still a highly viable means to ensure payment.
Starting July 1, the UCP 600 (which replaces the current UCP 500), will clarify the rules governing L/C transactions. Implicit in this revision is also the expectation that by making the rules clearer, and expediting letter of credit processing, the UCP 600 will also make L/Cs more attractive as a trade risk-mitigation tool.
Generally speaking, the new rules are leaner, cleaner and more applicable to today’s global trade transactions. They address language, documentary and marketplace evolution in the banking, insurance and transportation industries. However, to take advantage of the benefits of the UCP 600, L/C users and their banks must revise all documentation, applications and policies to comply with the new changes. July 02, 2007
The SEC announced that it will be taking another look at 10b-5-1 plans in the wake of the Qwest insider-trading case. No one yet expects an overhaul of the safe-harbor rule which allowed companies and officers to set up “auto-pilot” buyback programs; however, closer scrutiny will affect treasurers who often oversee or have input into 10b5-1s for senior execs as well as for their company.
The 10b5-1s were set up under a 2000 SEC provision designed to allow companies and managements to avoid being unwittingly tripped up by insider-trading rules.
Once the plans are established, they are entirely hands off until they are terminated. Until the Qwest case, the focus on any potential abuse of 10b5-1s was on their termination date. Now, the SEC is looking at whether plans can be established with insider knowledge. May 02, 2007
Ever since the Sarbanes-Oxley Act pushed SAS 70 (Statement on Auditing Standards 70) to the forefront of the internal-control certification debate, there have been questions among auditors and their corporate clients about its usefulness and when (and whether) a SAS 70 is required.
The usefulness of SAS 70s remains debatable, but three trends are making them a more contentious issue for treasury practitioners:
1) Auditors’ hunger for documentation. The prevailing mood in the audit world is such that auditors are grasping for any shred of evidence that gives them comfort in their own audit conclusions, and provides a paper trail to support them in case the PCAOB comes calling.
As a result, audit firms are requiring more documentation across the board, and a document that’s signed by another auditor permits them to check another item off their auditing checklist.
“Truly, a SAS 70 is typically an auditor-to-auditor communication,” said Michael Leary, director of treasury and compliance services at JPMorgan Fund Services. “Since the dawning of SOX, it has morphed a little bit and treasurers are starting to utilize it more.”
According to Tom Ellis, national director of Business Advisory Services at Grant Thornton, the SAS 70 allows an independent auditor to not only evaluate the control requirement but also produce a report that’s standardized, allowing other auditors to rely on the document. ”Over time,” he said, “[the SAS 70] has taken on larger proportions.”
Other auditors basically use the SAS 70s to reduce the amount of independent testing they have to do for each client. Said Mr. Leary: “They can rely on another auditor’s work so that each
auditor doesn’t have to come in and do transaction testing.”
2) Treasury’s outsourcing efforts. Because treasury accounting has been going through a particularly difficult period, or re-interpretations, treasury has been looking to outsource a lot of the number-crunching and valuation work to outside experts.
Running regression analyses and marking to market complex derivatives and securities portfolios simply outstrips the capability of many corporate treasury and accounting systems. Thus treasurers have been turning to banks and system providers to help fill the gap.
“Be careful,” cautioned the director of treasury at a large MNC: “Your auditors will require you to show that the bank has provided you with a SAS 70 before those calculations and data can be used to produce financial reports.”
3) Banks’ reluctance to pay the bill. Because it’s often unclear whether SAS 70s are a must or exactly what level of comfort they provide, banks and other service providers have become a lot less eager to provide them free of charge.
The cash manager at a global consumer-products company recently lamented his inability to get his banks to offer up a SAS 70. “We use web-based [applications] almost exclusively, and we have found it difficult to obtain a SAS 70 from most of our banks to reassure us that they have adequate controls around these electronic banking systems. Only one was able to provide a SAS 70.”
To comply, very often SAS 70s and like “certifications” are baked into contracts ahead of time. But the headache of having to May 02, 2007
Every day brings more news of the legal consequences of backdating practices. While legal and reputational risks lie outside treasury’s control, backdating may have a direct effect on liquidity—treasury’s bread and butter.
While legal and reputational risks lie outside treasury’s control, backdating may have a direct effect on liquidity—treasury’s bread and butter. February 27, 2007