Published: October 01, 2014
Attracting 1,100 treasury professionals, AFTE’s annual conference takes place on 18-19 November 2014 at the Palais Brongniart, Paris. As in previous years, the conference is the flagship event for the treasury community in France, with an impressive line-up of speakers and 55 partner organisations, including leading banks, fund managers and technology vendors. Ahead of the event, Helen Sanders, Editor, talks to Philippe Messager, President of AFTE, about some of the conference themes, and wider treasury priorities in France.
The themes of this year’s event are Internationalisation and Innovation, which together sum up the priorities, challenges and opportunities of the corporate treasury community today. With negligible growth in traditional markets such as the Eurozone, companies of all sizes are exploring new regions in their pursuit of growth, and therefore need to explore new approaches to managing cash and liquidity, financing, foreign exchange, market and credit risk. On the first day of the conference, for example, we have sessions on emerging markets, and specific workshops on Africa and China.
In this fast-changing environment, treasurers are constantly challenging themselves – and their partner banks and vendors – to find better ways of managing the demands of internationalisation. This is a major reason why treasurers attend the conference: to share, discuss and discover ways to improve operational and financial efficiency and control. Innovation is therefore a theme closely linked to internationalisation. This does not simply involve finding new gadgets or techniques: it is about the constant search for ways to do things better, using existing tools and leveraging partner relationships more effectively. Innovation is not simply a ‘nice to have’, it is essential to keep up with, let alone surpass, the competition. For example, treasurers are working with partners to find ways to improve processes and integrate them more closely to enhance working capital. Meanwhile, they are exploring the debt markets to identify suitable funding solutions given market conditions and the needs of the business.
One thing that has become very apparent to me since becoming President of AFTE, in addition to my role at EDF, is that it is very difficult to generalise on how regulations will impact on the corporate treasury community, as every company’s experience is different. Looking at Basel III, for example, the issues for treasurers will differ depending on their financing needs, cash management practices, relationships with rating agencies, access to the capital markets, commodity requirements and so on.
However, an issue that has united treasurers of large multinationals in particular is EMIR (European Market Infrastructure Regulation) reporting. Treasurers have spent a great deal of time defining and refining processes to support EMIR reporting, often with significant cost and resource implications. Now that the compliance deadline (12 February 2014) has passed, an event that in itself was accompanied by a fair amount of chaos, it will take time to ensure that banks and corporates have a consistent view and set of processes for submitting data, such as unique trade identifiers, on which there has been little official guidance.
Many treasurers that I have spoken to feel that while the financial crisis was not created by them, the regulatory requirements have become far more onerous as a result, without offering any greater value to them, such as reducing systemic risk or preventing a future crisis. Furthermore, treasurers are more aware than most that finance is a global business, so regulations that seek to strengthen market resilience in one region are of limited value unless they are matched with similar conditions across all regions.
Corporate treasurers and bankers alike spent a great deal of time and resources on SEPA migration, a highly challenging undertaking at every level, from achieving compliance within an individual organisation through to pan-European agreement on formats and instrument definition. AFTE has been proactive in representing French treasurers’ interests throughout the SEPA decision-making and implementation process. Today, migration has largely been completed and few if any organisations experienced serious difficulties on the February 2014 end date or on 1 August, the extended deadline that was allowed in some countries. SEPA is therefore now ‘business as usual’ and no longer a key issue for treasurers.[[[PAGE]]]
However, although SEPA migration has been completed, a harmonised payments landscape in Europe creates a framework for innovation to increase automation and digitation of payments and cash management, such as mobile payments. On the second day of the conference, we have sessions on the digital treasury and innovations in B2C payments and collections, which have a different complexion in a SEPA environment.
Given the ongoing economic crisis in the Eurozone, particularly in France, one of the most significant issues for the corporate community, with the exception of the largest multinationals, is financing, specifically bank financing. Despite high levels of market and bank liquidity, this is not reflected in corporate lending, particularly for small and medium-sized enterprises (SMEs) that are finding it very difficult to secure financing.
AFTE is in discussions with the French authorities to find solutions that will open up more financing opportunities, such as expanding the commercial paper (CP) market to smaller issuers. While potentially desirable for both issuers and investors, this move would have a variety of implications such as credit ratings and back-up facilities. At the same time, it is inconceivable that all corporations that need access to financing could be funded directly from the market, so ultimately there will always be a need for banks to provide financing. Therefore, the corporate-bank relationship will remain critical, both for balance sheet lending, and also to facilitate working capital optimisation and alternative financing such as factoring, sale of receivables, reverse factoring and securitisation.
In reality, Europe, and particularly France, is in a Catch 22 situation. Given the combination of the crisis, Basel III requirements and banks’ internal organisation, in which risk departments are at the forefront of lending decisions, SMEs will continue to struggle to access financing. This will inhibit growth and lead to further economic decline, squeezing lending conditions even further. Banks and authorities need to act confidently and decisively to avoid this negative cycle, boosting lending and kick-starting the economy.
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