Supply chain finance

On 20 July the ACT published a working group report on supply chain finance – a copy of which along with the press release can be found at www.treasurers.org/scf. In our view investment grade companies can play as big a part as banks in improving liquidity for SME’s, as we said:

 Companies with good credit standing can play a significant role in improving liquidity for their supply chain by facilitating buyer driven receivables programmes that their suppliers can participate in. We are very pleased to see banks that have in the past not participated in supplier driven SCF structures starting to fund buyer driven programmes. The SCF market would benefit from a co-ordinated industry focus on increased transparency and standardisation and we are calling for all parties involved to take this project forward. 

The two key benefits of BDRPs that are attractive to lenders are that:

We were pleased to see that the Government’s Green Paper on finance for business – Financing a private sector recovery referred to the ACT-chaired working group report and discussed the potential wider benefits of supply chain finance as a source of finance for midcaps and SMEs. We hope to work with BIS to promote a better awareness of buyer driven receivables programmes.

Covenants and "spooked" issuers.

Last month I flagged the move by investors to impose standard covenants on investment grade bond issues. Whilst we are not opposed to standardisation (indeed a good thing) there needs to be a balance in wording to reflect the issuers’ credit standing and the concerns that the investors are trying to rectify. The proposed set of standard covenants – did not in our view strike this balance as set out in the FT article and subsequent exchange of letters.

On 21 July the FT reported that weak bond covenants are spooking investors. I am sure that there may be a case to improve covenants to deal with specific concerns but this is still no reason to impose a blanket one size fits all set of covenants! Inappropriate mandatory covenants will spook issuers.

Since last month’s update we know the ABI has received comments on the proposals – some positive and some not. In addition, one market participant told us that it was generally accepted that the standard covenants were aimed at "cross-over" rather than investment grade companies – if that’s the case why didn’t the ABI say so? The ABI has undertaken to engage with us and meeting are planned after the summer holidays - so watch this space!

Coalition policy

Last week Vince Cable addressed a City of London audience and the new government’s agenda with regard to the banks started to become clearer. In his remarks Vince Cable did not address competition within the banking sector, but when I asked him about this, he agreed that it was an issue. Vince Cable also noted that we were seeing new entrants into the banking market but said nothing about a wider review. Lucky banks. He did say that M&A activity was a key discipline of a market economy but that he thought there was scope to throw some sand into the wheels.

He also referred to the "QE experiment" which had "puffed up asset values without generating growth" – debate still to come! Bank bonuses – warning to banks that this is a very sensitive issue for the public – so one assumes from his comments that if there is public outcry the politicians will respond?

Qualifications enrolment deadline

The ACT’s examinations in April 2011 may seem a long way ahead, but for those of you considering enrolling on AMCT or one of the individual certificates, the deadline is 15 September (unless you are studying for or have completed CertITM or CertITM-PF, in which case the booking deadline is extended to 15 December 2010).

Please submit your applications in good time to make sure of your place on these courses.

Middle East Conference update

The ACT Middle East Annual Conference is being held on 13 October in Dubai. We would like to thank lead sponsors RBS and track sponsors Al Hilal and SunGard for their support. This will be the flagship event for ACT activity in the region and the programme gives an insight into treasury strategy and practice across the GCC with speakers from Qatar Gas, Al Muhaidib, Saudi Aramco, KIPCO and DP World. We are honoured to have H.E Sultan Bin Nasser Al Suwaidi, Governor of the Central Bank of the UAE giving a keynote address. The day before the conference we will be running a workshop examining some of the key challenges for treasury. The conference will be followed by an evening dinner where the winners of ACT Middle East treasury awards will be announced.

EACT survey on borrowing conditions

We were disappointed to have had a poor response from ACT members following mention of this survey last month. Response numbers from other national treasury associations in Europe have been significantly higher despite our larger membership base – please complete the survey to ensure UK has ongoing input into Europe.

By Stuart Siddall