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German Treasuries Face up to the Crisis

by Robin Page, Chief Executive, Treasury Management International

The title of the article from Barclays Global Investors in this Supplement -’Weathering the Storm’ - is an indication of the attitudes of treasuries not only in Germany but throughout Europe. As Dr. Ralph Solveen, the departmental head of Economic and Commodity Research at Commerzbank, reminds us in his leading article, Germany’s ‘really fat years’ are over, at least for a time, and the strong euro has weakened the price competitiveness of German and European products in the global market. But this storm can be weathered - and the articles that follow demonstrate how German firms are coping.

‘Cash is King’ is a well-known treasury maxim and Thomas A. Woelk, Vice President of BlackRock, provider of global investment management, risk management, and advisory services, describes how in the aftermath of last year’s crisis investors ‘have rediscovered the importance of security and liquidity’ and are seeking a safe haven for their cash. He identifies the various forms of money market funds and the benefits and risks of each. Jonathan Curry and James Finch of Barclays Global Investors, in the above-mentioned article, also discuss solutions to the problems, post credit crunch, facing those of their clients who have large cash balances to manage. And they detect one positive outcome in particular: the development of a ‘closer, more open relationship between investment managers and their clients’, forming the basis for more successful and safer cash management.

Banking relationships have also come under renewed scrutiny in recent months, and are the focus of an annual survey by treasury consultants Schwabe Ley & Greiner. SLG partner Georg Ehrhart provides a summary of the firm’s 2008 survey of corporates with sales between €50m and 10bn. The results demonstrate the importance that companies put on transparency, competence and price in their banking relationships and highlights the fact that banks still have “scope for providing even better deals” for their corporate clients. Internal auditing is another area where many lessons are to be learnt from the crisis. Thomas Schräder and Birger Wriedt of PricewaterhouseCoopers Düsseldorf point out one of these: that treasury risks were not adequately valued. They give a balanced summary of the reasons why internal auditing should be ‘increasingly concerned’ with treasury issues and emphasise that it must also keep with treasury’s growing needs.

Treasury priorities

Finally, articles concerning three major German corporates show us some of their priorities in these difficult times. Thomas Mairer of Porsche notes some securitisation lessons to be learnt from the US sub-prime disaster, and describes the impact on the refinancing sources sought by Porsche, a family-owned business, as it reduced its dependence on banks and structured the liability side of the balance sheet in terms of duration. SWIFT implementation is currently high on the agenda of many treasuries, and Claus Wild, a project manager with Würth, talks to TMI about his firm’s successful implementation of SWIFT and the new demands by SEPA.