From across the pond...
13 June 2012
I recently attended the always excellent annual conference of the National Association of Corporate Treasurers (NACT) which is the premier organisation for US-based corporate treasurers and is a member of the International Group of Treasury Associations (IGTA). The NACT includes treasurers from international names such as Boeing and Colgate-Palmolive as well as from substantive but lesser known (at least to us) businesses such as the Zale Corporation. Much like the ACT, the NACT believes in facilitating the development of corporate treasury and representing its members to the outside world, especially US federal regulatory authorities.
Not surprisingly there are many areas of shared concern including the impact of the Eurozone crisis (and related currency issues), managing short-term cash investments, doing business in/with China, performance measurement and ERM tools. It is instructive though to see these issues through different eyes.
For reasons too numerous to go into here, it is apparent that many European banks have withdrawn from US lending and have reduced their overall US business footprint. By the same token, many US corporations have taken steps to move business of all types – cash management and investment, treasury (fx and rates) and so on – from European banks, whether from their branches in the US or from their operations in the EU (irrespective of the ins/outs of the Eurozone). The awareness of potential risks is high but like treasurers everywhere, they are grappling with contractual and jurisdictional issues of, say, currency redenomination.
Like the ACT and EACT, the NACT has lobbied strongly for corporate end-user exemptions in derivatives usage but they remain wary of what political polarity (and a US Presidential election) in Washington will do to a rule-creation process. More domestic concerns like the impact of the Volcker rule (on bank bond trading) also weigh heavily. In some cases, particularly for strong investment-grade credits, many of the negative impacts remain muted; less favoured credits may have to take what the market will offer!
The conclusion the treasurers at the conference reached is that they will need to use more option products, less bank credit and need to avoid managing cash to meet regulatory standards but trade their working capital harder. Now , where have we heard that before?
By Peter Matza