Treasury Management in France

As in the rest of Europe – and, indeed, the world – the role of the corporate treasurer in France is changing, says Emmanuel de Resseguier, Head of Global Transaction Banking France at Deutsche Bank

Within French corporates, how has the role of the treasurer changed over the past 12 to 18 months?

As is the case in all European jurisdictions, the role of the corporate treasurer in France has grown in importance in recent years. While this was a trend that was developing before the onset of the recent financial crisis – thanks to changing ideas regarding best practice in cash management and the increasing integration of this area with financial supply chain management – recent events have brought efficient liquidity management to the top of the agenda for many corporates.

The elevation of liquidity management to a boardroom-level issue in many organisations has resulted in a greater focus on the role of treasury and has made it imperative that the treasurer has comprehensive access to real-time information regarding all of a corporate’s transactions and cash positions. Access to this information ensures that internal sources of funding can be optimised and facilitates the unlocking of cash trapped in inefficient processes.

And how has the behaviour of treasurers changed since the crisis?

While some – especially larger – corporates already had cash pooling or similar centralised liquidity management structures in place, many others are now rushing to implement these models. And for those that may not have the geographic scope to justify such a structure, increasing visibility through using the latest electronic banking platforms can still yield significant benefits.

Indeed, a related area that has garnered a lot of attention in recent years has been the financial supply chain. There are two principal drivers behind this. First, many corporates have become increasingly aware of the importance of the ongoing financial health of their suppliers. Indeed, in some specialised industries the failure of a key supplier could be critical to the survival of corporates further up the production chain. Second, after many years of focusing on efficiencies in the physical supply chain, there has been a growing recognition of the benefits that are available through more actively managing relationships with suppliers. On the one hand this involves negotiation over payment terms and ensuring that key suppliers have enough breathing space in terms of working capital, but it also often involves the adoption of electronic platforms that can manage invoices and payments, as well as initiating financing opportunities.

How are developments in corporate-to-bank connectivity affecting the provision of cash management and treasury services?

This is currently a real issue for many French corporates. At Sibos 2008 it was estimated that over 90,000 French corporates would have to switch from ETEBAC (Echange Télématique Entre Banques et Clients) – the French corporate-to-bank reporting protocol – to either the ISO20022 SWIFT standard or the Electronic Banking Internet Standards (EBICS). In this respect, those banks that can quickly and efficiently support these changes will likely be the winners in this space.

In fact, the gradual spread of EBICS outside Germany, its original market, is an interesting development. With this protocol gradually being adopted in France and elsewhere, it is beginning to present a challenge to SWIFT, and some suggest it could be the future of corporate-to-bank and bank-to-bank communications.

Originally developed by the German banking community, EBICS is based on corporates registering each bank they want to use, and then the system functions through an exchange of keys. While EBICS is certainly viable and considerably cheaper than SWIFT, it is yet to be seen how much it will grow in popularity outside France and Germany. And, unsurprisingly given where the system was developed, Deutsche Bank can offer full EBICS connectivity as well as the more traditional SWIFTNet channels. Indeed, Deutsche Bank is committed to fully integrating the SWIFT channel with its offering. In this respect, Deutsche Bank and Syntesys, a leading SWIFTNet service bureau in Europe, have recently formed a non-exclusive partnership with the aim of promoting, expanding and maintaining SwiftNet solutions for corporate customers in Europe. This agreement will start initially in France and then will be rolled out to Switzerland and Germany.

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How is the roll-out of Single Euro Payments Area (SEPA) and the implementation of the Payments Services Directive (PSD) progressing in France?

Earlier in 2009, the French SEPA committee announced that the French banking community would not be fully ready for the SEPA Direct Debit (SDD) until November 2010. One of the principal reasons behind this delay has been discussions regarding interchange fees for the SDD. We at Deutsche Bank appreciate the fact that clarity has been provided by regulation 924/2009. In the interim period i.e., between now and November 2010, where France has a high interchange fee a number of scenarios are possible. One could be that corporates leverage arbitrary possibilities and open up accounts abroad to receive the lower cross-border interchange fees (8.8 cents rather than 12.2 currently in France).

The elevation of liquidity management to a boardroom-level issue in many organisations has resulted in a greater focus on the role of treasury.

What is clear, however, is that individual banks – both French and others – will be able to continue with their programmes as planned. Deutsche Bank’s Paris branch, for example, is already able to accept SDDs.

Preparedness is also an issue for many other banks across the Eurozone. The SDD is much more technically demanding than earlier stages in the SEPA project and it is unsurprising that some institutions will need more time to prepare. The European Payments Council (EPC) will provide transparency in this respect by publishing a list in Autumn 2010 of those banks that will be fully ready. This is no different from what occurred at the SEPA Credit Transfer stage of the roll-out back in January 2008 – with not all banks 100% ready at the outset.

One of the main challenges related to the introduction of the SEPA Direct Debit concerns the management of mandates, as the creditor is faced with new obligations with regards to organising and handling the mandate process.

To support its clients with these tasks, Deutsche Bank has developed a number of value added services around mandate handling. The core of the service is the creation of a creditor mandate database which holds all data relevant for the direct debit process and which provides ample information and reporting features to facilitate mandate administration for the users. In addition to file upload and manual entry functions, the service also optionally includes lockbox services, i.e., the scanning of paper mandates and access to images via the internet.  

The benefits of the service for corporates is that they have readily available, structured online access to all their mandate-related data with complete set-up and audit trails. The change process will be facilitated through manual and automated change and update processes. Moreover the lock-box services help avoid cumbersome and costly paper handling procedures for the company. Also, with the data contained in the mandate database, a variety of support functions in the processing of the direct debits can be offered by Deutsche Bank.

Despite any delays, the SDD and the PSD – related but distinct initiatives – will soon be a reality in France and across the rest of the Eurozone. One key innovation contained in the PSD is that it will open up the payment markets to new institutions (payment service providers such as telecommunication and IT companies) that will be able to compete directly with banks in this space. These firms will have the potential advantage of offering greater flexibility, but will be much smaller than many banks and may struggle to acquire the critical mass necessary to be successful players in the transaction space. And this new competition is not necessarily a bad thing for the banking community – many of these new entrants may seek to partner with existing players such as Deutsche Bank in order to gain access to the latest technology and payments infrastructure.