Mending a broken market

So, 2009 has started off in a fairly turbulent way despite our wishes for a quieter time. The UK authorities have announced further action to support the banks. The extent of this additional and massive support indicates that the problems within some of the banks were much worse than was apparent in the autumn.

Clearly we support the initiatives to enable the banks to provide the service that is stated on the tin - to lend again. The markets need to see evidence that what was broken is now mended. We continue to emphasise the need for international co-ordination of these actions and for international co-ordination of the financial regulatory framework going forward.

To this end we welcome the launch of the International Centre for Financial Regulation - a newly created international research institute, founded co-operatively between the private and public sector to promote research, training and thought-leadership on financial regulation.

We have seen figures quoted for debt renewal for the FTSE 350 of some £29bn in 2009. Taken from the maturities of publicly announced debt, this is a gross figure, ignoring cash that may be held by companies, that some companies may have refinanced in bond markets or otherwise and that some facilities will not be needed as companies “cash conserve”, defer expansions and have positive cash flows from earnings. Nevertheless, many FTSE 350 companies will need to extend some of their facilities in 2009 and later and if credit markets are not available investment decisions, at best, will be affected adversely. The banks need to be able to play a key role in the provision of credit facilities but we also want to see greater use made of private placement markets alongside public bond markets. In addition, will we see the return of invoice discounting facilities and even the eligible acceptances market? The latter possibly providing real flexibility to the banks in terms of liquidity management.

Last month I mentioned the ACT survey that Gerry Bacon, Deputy President, and John Grout, Policy & Technical Director, are conducting with some of our members. The survey is well advanced and some of the issues arising are concerning. We do need your comments – these will be used in our survey without attribution. Please contact Martin O’Donovan if you would like to take part. We will be publishing the results of the survey in February and through ongoing discussions provide an update at the ACT Annual Conference in April.

In the last 10 days we have held two very successful events – talkingtreasury in Dubai and our 5th annual cash management conference in London. These events were well attended demonstrating the appetite for a forum to discuss treasury issues in the Middle East and the very topical nature of cash management in these difficult times. We heard that companies that have not invested in appropriate cash forecasting systems – a craft that needs plenty of care and attention - will find life much tougher than it was in the good times.

The next talkingtreasury forum, exclusively for corporate treasurers, will be held in London for the first time on 25 February followed by Moscow on 5 March.

To help you work your way through the current financial challenges, we have two courses coming up that will provide practical and immediate benefits. The five-day Understanding Corporate Treasury training course provides an intensive introduction to treasury, bringing those new to the profession rapidly up to speed. At the other end of the scale, the MCT Advanced Diploma develops the strategic skills vital to business success. Over the next 12 months it will broaden and deepen the knowledge and experience of those on the course, making it a valuable investment both for the participant and the employer.

I should like to congratulate Mervyn Davies on his appointment as Trade Minister. Mervyn is a great supporter of the ACT and has already played a key role in advising the Government on a range of issues.

By Stuart Siddall