OTC derivatives, bank regulation, non-bank lending: join the debate at the Annual Conference

The ACT Annual Conference in Manchester is now less than a month away (27-28 April). This is the biggest treasury conference and exhibition in the UK and members should not miss this key event in the treasury professional's calendar.

If you cannot attend please nominate someone from your team to join us; both you and your colleagues will benefit. We provide resources for continuing professional development throughout the year but this is the most efficient opportunity to consolidate CPD, as well as catch up with peers and product and service provision - all within two days. If you have yet to register, please go to www.treasurers.org/annualconference.

There will be no shortage of issues to debate. We think we have helped EACT win concessions to exempt non-financial companies from being forced to trade all derivatives via central clearing houses but there is real concern that capital weightings under Basle III could be penal. This could be a massive blow to funding flexibility! On bank regulation, the Treasury Select Committee has joined the fray – saying what the ACT has been saying for some time – that we need radical changes in bank regulation. If we can use a set of varied tools to avoid big banks causing financial meltdown, so be it. But if we are not confident that these tools can be effective, then we may need to consider break up of the very biggest banks, a last resort perhaps but should not be ruled out. Non-bank lending, as you can see below, is a huge area and one where major companies can help their supply chain with a buyer driven receivables program and loads more.

There were some interesting references in the Budget book:

"The Government confirms in Budget 2010 that the Asset Purchase Facility will remain in place in financial year 2010-11."

On the subject of non-bank lending channels (paragraphs 3.44 – 3.48), it is clear that the Government is committed to "encourage market led solutions" and three areas of focus were highlighted:

Corporate awareness of lending channels

 There is evidence that companies are often unaware of the full range of financing channels and how best to access them. The Department for Business, Innovation and Skills (BIS) will lead work across government to increase awareness of the diverse sources of finance available, working with companies, Business Link, the Association of Corporate Treasurers (ACT), and the industry. 

The Policy & Technical team (led by John Grout and Martin O’Donovan) have been in over-drive mode working with the authorities to improve financing channels and the ACT will continue to support these important initiatives.

Corporate bond market

 In line with its objective of improving financial market efficiency, the Government will seek to support the work of the industry, including the ACT, the International Capital Market Association (ICMA) and the Association of British Insurers (ABI), to improve bond market access for more issuers including by encouraging better adaptation and standardisation of bond documentation, and encouraging better market information flows." 

Again the Policy & Technical team have been heavily involved. Standardisation and better market information are sound goals but, given the subtlety of covenant wording and some companies’ preference for confidentiality, moving from where we are today to the more open world may not be pain free. However, we will work with stakeholders to move this along and suggest ways in which bond markets can be more accessible.

Private placement market

 The market for private placements in the UK is small although investors have been active participants in the large US market...” The Government will seek to work with parties, including M&G, Standard Life Investments, Aviva Investors and others, to help with the development of a sterling private placement market... 

You can be sure that the ACT will work with these and others to encourage a wider market place in the UK.

In March we launched the Certificate in Financial Fundamentals for Business (CertFin). This is the natural online evolution of the stage 1 foundation papers for non accountants who wish to qualify as AMCT. The new, leaner, CertFin syllabus is designed to arm those students who have had limited prior exposure to finance with a framework of core knowledge and the underlying financial understanding that underpins corporate treasury. The last exam for the existing stage 1 foundation papers will be October 2010. Enrolments are open for the first CertFin course which will start this coming October and examine in April 2011.

By Stuart Siddall