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Treasury Strategy & Transformation
Published  6 MIN READ

Head2Head: Lost in Translation

by Bruce Meuli, Global Transaction Services Advisory executive, and Jonathon Traer-Clark, Head of Strategy, Global Transaction Services, Bank of America Merrill Lynch

Jonathon Traer-ClarkJTC  Bruce – although we may not always agree, we do share some common ground including a birthday. More relevant though, is that we have both worked in a corporate and a bank across a range of treasury and finance roles. In my current role at Bank of America Merrill Lynch, I often mentally step across into my former corporate treasurer role, as I find the ability to compare and contrast experiences and priorities from both sides invaluable.

Bruce MeuliBM I agree – the roles share many common issues but the priorities and challenges also differ substantially at times. Let’s take an initial common point: the challenges associated with disparate systems, poor data quality and analytical ability. Although the problems are similar, the motivation and drivers are not. Specifically, the bank treasurer has to invest in systems and reporting capabilities that comply with regulations such as the Basel Committee on Banking Supervision (Basel III) requirements. Therefore, real-time reporting capabilities and the data and information systems required to support compliance are the priority. Conversely, corporate information technology investments are often driven by a desire to improve operational capability in pursuit of risk and operational excellence.

JTC True, but equally, you could argue that regulation drives a corporate’s desire to improve. Remember too that they face their own direct regulatory requirements. Let’s look at the primary functions or role of a bank vs a corporate treasurer. Funding, balance sheet management, FX, interest rate and liquidity management, capital allocation and cash management are all common functional objectives but there are significant differences in the actual processes. Take funding: a key investment area for bank treasurers has been the development of funds transfer pricing models to incorporate the full cost of liquidity, risk, term and balance sheet commitments. This differs significantly, in both complexity and magnitude, from a corporate funding model.

BM Yes, but in certain respects – in the area of equity and market debt as opposed to capital allocation – there are similarities. If you include the corporates with an in-house banking structure and/or an internal finance entity, then parts of the corporate treasurer’s role begin to resemble that of a bank. Add to that intercompany funding requirements and transparent transfer pricing mechanisms, and more similarities with bank treasury processes emerge.