Regulation

Are we seeing the first 'green shoots' of banks entering the lending markets?

Under the terms of the asset protection scheme some UK banks are required to increase lending in the UK. In the case of RBS this requires the bank to lend £25bn between now and March 2010 with another £25bn in 2010/2011. The £25bn breaks down as to £9bn into the housing market, £3bn for SME’s and £13bn for medium to large companies. We also understand that some of the UK banks are offering to pick up facility commitments from foreign banks that want to go back home - this should help fill the hole that many companies should be worrying about and we urge companies to consider the benefits of these offers well ahead of facility maturity – I am sure that banks will take a reasonable approach to documentation and costs – if they don’t let us know.

We are all reading about reviews of various regulatory systems – banks, rating agencies, UK Combined Code. Perhaps this is reasonable given recent events but we don’t need more process.

Regulators are, like investors, in a privileged position in that they can discuss the strategies and business plans of a range of similar entities that are operating in the same markets. As a result, both regulators and shareholders do gather a great deal of data on relative performance and market share etc.

• They should listen to those who tell them some markets are just too competitive
• They should dig deeper when some companies/banks claim to be doing much better than others in the same space
• They should dig deeper when a few players seem to be cornering the market in specific areas

Shareholders can of course sell investments where they don’t like what they hear. Regulators cannot do the same but they can (and must) steer a bank back on to a safer route.

It is this analytical approach linked to clear steps to correct those that are out of line, together with international co-operation, that will lead to better regulation. The Larosière proposals for an international overview of systemic risk and Lord Turner’s recommendations for national and international action will be important parts of this.

We read that FASB wants to review the basis for valuing financial instruments – a recent article mentions the use of computer models. I accept that “mark to market” can be difficult when there is no real market and a common sense approach may need to be adopted. However, to rely on another suite of computer models that few dare to question would be a big mistake – isn’t that how we got into the current banking mess?

The two successful candidates from our recent Council elections are Martyn Smith FCT, Director of Tax and Treasury, Dyson Ltd and Yann Umbricht AMCT, Partner, PricewaterhouseCoopers LLP.

In addition to those elected, Council may also co-opt up to two individuals to serve for one year. In order to reflect our current membership and increase the representation from the financial services sector, Council agreed to co-opt Peter Goshawk FCT, Head of Global Markets – UK, Bank of Ireland and Richard Dakin AMCT, Managing Director, Major Corporates and International Corporate Banking, Lloyds Bank plc for the twelve months commencing 1 May 2009.

We are extremely grateful to both Malcolm Cooper, Immediate Past President and Group Tax & Treasury Director of National Grid and Alan Dick, S&N UK who retire from Council at the end of April.

I’ve also recently attended my first ACT Advisory Board meeting which provided a stimulating, thoughtful and challenging forum for us. At the meeting we were delighted to welcome Andrew Shilston, Finance Director of Rolls-Royce plc to the Board.

We have held some stunning talkingtreasury events in London and Moscow and a breakfast discussion in Abu Dhabi in the past month - plenty for treasurers to discuss on the role of the treasurer and how this has grown in profile within companies. It is key that we build on this and ensure treasury functions are fully integrated with operational activities.

We are coming up to the annual conference in April and this will once again be a great event and one that cannot be missed – with a whole range of topics that are key to successful operations in the future.

Looking further forward, I am pleased to inform you that Vince Cable, Liberal Democrat Shadow Chancellor of the Exchequer, has agreed to give the keynote speech at our Annual Dinner in November. Vince Cable has been outspoken but generally right about the banking crisis and some of the solutions – I am sure his view on the world will be fascinating!

By Stuart Siddall