What is Policy and Technical up to?

The ACT policy & technical team works on influencing evolving regulation and standards and keeping members informed on developments. As well as our confidential policy work with regulators and legislators and other activity in pushing forward corporate treasury, we respond to a wide range of public consultations that are relevant to treasurers.

As well as looking for helpful regulatory changes, we seek to avoid changes which take away useful provisions or catch legitimate treasury activity in yet more regulation or, worse, prevent it altogether.

Some of the current issue and consultations are explained below. As always, we welcome everyone’s views on these and other topics to help inform our responses. Our approach to policy is in our manifesto at http://www.treasurers.org/technical/manifesto.

European Commission

In order to speed up the transition from legacy payments systems for Euros to the new SEPA system the Commission is proposing a new payments regulation that will set an end date for the old systems 12 months and 24 months from the date of the regulation for credit transfers and direct debits respectively. It will mandate the use of BIC and IBAN in all Euro payments within the EU and for files of bulk payments users will be responsible for giving instructions to their bank using financial services messaging standard ISO 20022 XML.

The Commission has issued a consultation review of MiFID the Markets in Financial Instruments Directive. In particular this considers the extension of the transparency rules that apply to shares into new markets such as bonds and even OTC derivatives. This could mandate pre and post trading price and trading data. Another section looks at new rules around underwriting and placing and the conduct of business around allotment processes.

Prompted to an extent by the Sovereign debt crisis earlier in 2010 the European Commission has been consulting on credit rating agencies CRAs. There is a concern over mechanistic reliance on external ratings by market participants and in regulation, and over lack of competition in ratings. The ACT has submitted a response providing extensive background to the importance of rating agencies, the nature of their business and their relationship with the markets. We raise concerns that many of the ideas presented by the Commission would hinder rather than promote competition.

International Accounting Standards Board

The IASB has been consulting on its new Exposure Draft on accounting for leases, in essence bringing operating leases on balance sheet rather like finance leases. The ACT has made a response broadly supportive of that key principle.

The IASB has in December 2010 published its long awaited Exposure Draft on hedge accounting.

There are to be significant changes in the criteria to achieve hedge accounting and these seem to be hugely helpful in resolving many of the widely felt difficulties in IAS 39. The ACT would welcome any feedback and reactions prior to the IASB’s own deadline for responses of 9th March 2011.

The IASB has recently issued a non-binding Practice statement on the management commentary.

The UK Financial Reporting Council

During December 2010 and January 2010 sections of the FRC have been busy releasing some interesting material, much of it having a link to treasury in the sense of looking at risks, strategies and capital management. The specific papers or consultations are;

• Effective Company stewardship: Enhancing to Company Reporting and Audit
• Review of management approaches to risk (and to the Turnbull guidelines)
• ASB study: Financial capital management disclosures

By Policy and Technical