More Challenges for Banks Thinking Global

By Joseph Neu

Bank relationship trends continue to be a hot topic in recent forums for treasury professionals. The focus of discussion seems to fall into three major areas: 1) the little-understood consequences of global banking regulations; 2) the increasing tension between local and global banking partnerships; and 3) treasury practitioners’ increasing impatience with banks’ internal sales drivers. All these trends affect the top global banks the most.

Treasury Management: SWIFT Rolling Out BPO More Aggressively

A new process could provide corporates and banks more flexibility in trade finance.

SWIFT is aggressively rolling out a new form of trade payment called the Bank Payment Obligation (BPO). The new process could be a big help to banks, according to Tessa Teo, global account director, ASEAN for SWIFT.

Banking Relations: It's a Borrower's Market

Volume of leveraged loan repricings skyrockets.

The “borrower’s market” phenomenon has passed a new milestone, with leveraged loan repricings hitting a record volume so far this year. Some of the repricings have had low or no fees attached, meaning borrowers were able to call up lenders and demand a lower rate.

Global Banking: Survey: In Cash Management Services, the Big Get Bigger

A new survey reveals that despite indications some companies are using both global and local banks, global banks are still dominant.

Just as luck favors the bold, in global banking, regulations favor the big and bold. According to a new survey from financial consultancy J&W Associates “neither the continuing financial crisis nor the increasing cost of compliance with new regulations” has stemmed the dominance of global network banks in the area of worldwide cash management.

Developing Issues: IHB Growth; Shareholder Activism; Bank Structures Abroad

A few topics on International Treasurer’s radar screen this week.

Several topics up for further review came out of this week’s International Treasurer editorial meeting, including companies using multiple in-house banks, share-holder activism and bank structures abroad.

Regulatory Watch: Banks Make Covering New Reg Risks a Top Priority

But the costs of expanding budgets will prompt higher pricing for bank services.

New risks created by Dodd-Frank will have banks more focused on compliance in 2013, expanding budgets. This will likely increase costs for corporations.

Regulatory Watch: Basel III Will Prompt More Players to Enter Trade Finance

As banks concentrate on capital, others will step in to fill the void when it comes to trade finance.

It’s a certainty that new regulations will raise the cost of doing business worldwide. And according to consultancy Greenwich Associates, a big driver of cost increases in trade finance will be Basel III. The good news is that although new capital rules have caused many banks to step back from offerings (read, European banks), other banks and non-banks are stepping in to fill the void.

Regulatory Watch: Big Data a Challenge for Regulators, Too

CFTC Commissioner Scott O’Malia says regulators remain undermanned when it comes to data.

The buzz phrase “Big Data” is everywhere. It’s certainly been on the leading edge of many a marketing pitch to corporations over at least the last 18 months. But perhaps where vendors should really be focusing their Big Date solutions marketing is at the federal government.

Managing Liquidity with Innovative New Products

By Geralyn Frances

JP Morgan comes up with some creative answers to treasury’s changing and challenging investment environment. 

While cash managers are busy handling their companies’ surge in cash balances, changes triggered by regulatory reform and a host of other external factors could be threatening their liquidity. With this in mind, one bank has used this as motivation to create innovative products in response to treasurers’ search for liquidity solutions to counter the challenges these changes bring about. Flexibility, automation and global reach have resulted in some smart answers to these threats.

The Future of Local Expertise and Strong Global Infrastructure

By Joseph Neu

Out of the jockeying taking place amongst transaction banks in the global “top-five” list comes a buzz phrase that accurately sums up what guides global transaction bank relationships, apart from the credit relationship, and the challenges ahead for them. Credit for calling attention to this buzz phrase goes to JP Morgan Treasury Services, which used it in a recent write-up on liquidity management best practice:

Developing Issues: Where’s the Money? MNCs Move Out the Curve; More Options Use to Come?

A snapshot of what’s on International Treasurer’s radar screen this week.  

This week’s International Treasurer editorial meeting yielded several topics that we will explore in the coming weeks. These included a look at where the money is going now that TAG (transaction account guarantee) program has ended. Also up for further review is the growing trend of companies moving further out the yield curve; also, at look at how companies are increasingly considering using options.

Banking Relations: Despite Uncertainty Banks Still Want Corporate Customers

There may still be lots of regulatory uncertainty surrounding banks, but they still want to lend.

Despite all of the regulatory uncertainty, banks are eager to lend and provide services. And while they’re being more selective, treasurers themselves should make sure the relationship works, too.

Banking Relations: Bank Results Highlight Borrowers’ Growing Power

Net interest margins are narrowing across the board as banks search for yield.

Banks have scaled back some of their lender-friendly loan structures like Libor floors and extra covenants. And borrowers soon could get even better deals from lenders. That’s the conclusion some analysts have drawn from the narrowing of net interest margin (NIM) at several of the biggest US lenders, disclosed in their fourth-quarter financials.

Accounting and Regulation: OCC Says Banks Continue Loosening Lending Standards

The search for higher profits could lead banks to take inappropriate levels of risk.

US banks may be ignoring history in their search for yield. According to the Office of the Comptroller of the Currency, standards for leveraged loans have weakened over the past 18 months and yields on high-risk assets are at record lows and risk continuing to rise. These practices are similar to those seen in the years just before the 2008 financial crisis.

Bank of America Merrill Lynch Makes LatAm a Priority

By Anuja Pande Joshi

Latin America has become an international strategic priority for Bank of America Merrill Lynch, which is offering end-to-end business banking in the region. 

With much of the globe still struggling to regain its footing following the devastating economic crisis that began in 2008, it’s difficult to find many bright spots or areas of growth. But there remain a few, most notably parts of Asia and Latin America. These are regions where businesses are rushing to help keep their balance sheets healthy. But they can’t do it alone. In order to be successful they need bank partners with the right tools and reach. In Latin America, Bank of America Merrill Lynch (BofAML) is increasingly becoming the go-to bank for businesses both local and international.

Recalibrating Bank Relationship Management to the New Equilibrium

By Joseph Neu

Over the next several years, corporate treasurers should expect to witness fundamental changes in the banking sector as banks seek to reorient their activities to account for new regulatory requirements and a dynamic global business landscape. In response, bank relationship management needs to be recalibrated from its current focus on near-term counterparty risk.

Banking Relations: EU Banks Fall Short Meeting Basel III Requirements

Europe's bank regulator says Europe’s banks have far to go in meeting capital requirements; lending to be crimped?

The European Banking Authority (EBA) said Thursday that if Basel III had been in force at the end of December 2011, Europe’s biggest 44 banks would have been about 199bn euros ($256bn) short in meeting their target of holding quality assets that are 7 percent of total assets.

Banking Relations: IMF Study Suggests Smaller Impact of Bank Regs

Regulatory effect will not crimp lending rates as banks and others have claimed.

A new IMF study shows that financial reform will have only a “modest” impact on bank lending rates in the US, Europe, and Japan in the long term. This refutes banks’ claims that excessive capital requirements could put a damper on the ability of banks to lend and conduct other activities.

Bank Relations: US Banks Riskier Than International Peer Group

On par with Chile, South Korea … and the UK. 

The US banking system is riskier than its peer group on most measures, according to a new report by Standard & Poor’s. Despite the Eurozone banking sector’s sovereign debt and capital woes, and the uneven effects of global regulatory changes, other G20 economies – except the UK – have bank systems that rank as less risky, according to the S&P “Banking Industry Country Risk Assessment: US,” published earlier this month.

Capital Markets: Fitch Sees Continued Gloom for Europe Banking

New Fitch survey reveals more woe and possibly more LTRO ahead for Europe’s banks.

Investors remained worried about the outlook for Europe’s banks, suggesting the conditions will get worse before they get better, a Fitch survey reveals. And many respondents expect banks to need a repeat of the ECB's 1tn euro long-term refinancing operations (LTROs).