JV listing rules under fire
Revised listing rules introduced this summer are putting quoted companies at a disadvantage to their non-quoted peers, treasurers claim.
Well-known treasurers are taking advantage of the market conditions to broker deals that are enough to turn their peers green with envy at the moment.
Is hybrid capital the flavour of the month for European corporates or is it here to stay?
Market participants from corporate treasury, banks, central banks and technology providers gave polarised views and heated debate on such diverse topics as Continuous Linked Settlements (CLS), eFX, straight-through processing (STP) and IAS 39 Financial Instruments: Recognition and Measurement. For an event which has historically focused on the eFX debate, it was interesting to note that one of the issues which may be on the minds of many treasurers is the ongoing debate about single versus multi-bank trading systems.
UK GDP growth is set to disappoint over the next few years as there are no plans by the government to increase spending as a share of GDP. The onus is on the corporate sector to boost the UK economy but it appears unwilling to spend its cash mountain and move back into so-called financial deficit. House prices are expected to tread water and cut in base rates will stave off a marked deterioration, not provide a kick-start to recovery in house prices. A strong housing market and a substantial easing of fiscal policy can largely explain the ‘dynamic’ UK economy of recent years.
Treasurers need to carefully consider what limits to set to avoid concentrating counterparty risk in one place.Sarbanes-Oxley provides a framework on materiality of losses that can be extended to counterparty exposures. Management of exposures can be made more efficient by structuring documentation to match treasury operations. Treasurers need to think the impossible – what does happen in a doomsday scenario?
If an organisation can find its optimal balance sheet structure then it can maximise its returns to shareholders. The ideal balance sheet structure will typically depend on whether a company is growing organically or in an acquisition phase. Having decided on the amount of debt a company can manage, the treasurer has to decide whether to borrow short or long, whether to fix or float. A company that achieves lower cost of debt today must realise that the trade-off could be more volatility in the long term. Issuing hybrid capital could suggest the corporate is weak in the same way that the City has traditionally viewed rights issues as a shoring up of the balance sheet.
Many Budget provisions were concerned with anti-avoidance and although some provisions have been revised treasurers need to be wary of unintended consequences. Despite extensive consultation the tax law is still failing to cope satisfactorily with common situations. Treasurers need to think seriously about the need to have access to tax expertise at all times.
It is clear there is significant disagreement about the definition of corporate governance (CG) and what it seeks to achieve. Reforms have tended to focus on narrow areas of CG rather than improving the entire mechanism. Recent CG reforms have drawn attention away from pressing strategic and managerial issues. Corporate behaviour problems will continue to occur and treasurers can expect their CG burden to increase.
Economic exposure has a greater impact on the majority of corporates than transaction exposure. Treasurers must co-operate with managers working in various functions in the business to identify economic exposures. Financial instruments although highly effective do not cure the ongoing threat. There is increasing realisation that businesses need to collect more information about their transaction and operating exposures.
Simplicity in all areas of the business – including the treasury function – has been the watchword as Tesco has expanded overseas. The company runs a centralised treasury operation using an electronic cash management system to mitigate counterparty risk. The group hedges its balance sheet to avoid both currency volatility and avoid surprises from its international operations.
Shared service centres (SSCs) are an established trend within FTSE 100 companies and increasingly among the FTSE 250. Technology has advanced so that implementing an SSC should not prove too tortuous. Impact on treasurers include a single source of constant data and the ability to handle an array of banks through one point of contact. SSCs are maturing rapidly and treasurers should be able to benefit, provided they are involved in the process.
Ute Wolf, Head of Finance Management of Metro Group, the world’s third biggest international trading and retailing company, has just returned from a holiday in Budapest where, for her, Hungary’s beauty was tinged with subtle regret that the signs of negligence from the communist era remain.
Treasury Management Systems have been around for years but that doesn’t mean that they are either well understood or used correctly. A TMS, and therefore a Treasury Management Solution, is affected by internal company operations and by external market factors. Regulatory issues have increased the requirement for a robust reporting environment, including the TMS which contributes financial data to the company’s general ledger. The treasury IT market is becoming more complex and the choice and implementation of a technology management solution is becoming more difficult.
Italian governments have embarked on a fullscale deregulation and privatisation of the banking sector which has led to a wave of consolidation and a renaissance. The Italian government is under pressure from the European Commission to abandon its policy of vetoing foreign bank takeovers. An overhaul of the clearing and payment system has seen this move in line with European best practice.
Peter De Craene talks to Vito Umberto Vavalli and Gianfranco Tabasso about straight-through processing the Italian way.
The Polish banking system has undergone a radical overhaul through both privatisation and consolidation. The high proportion of foreign ownership has caused a backlash against the perceived predominance of foreign banks. Payment habits are increasingly Westernised with credit transfers now the dominant payment instrument. The presence of international banks and multinationals is helping to foster a culture of cash and treasury management, but there are legal uncertainties.
EC seeks to protect beneficial owners
The European Commission is considering whether measures are required to strengthen the rights of the ‘ultimate investor’, or beneficial owners as we would describe them in the UK, where shares are held across borders or via intermediaries.
Like every wrinkly in the land, I was saddened to hear of the death of Richard Whiteley. His jackets and ties were in bad taste, and his puns were appalling, but he was a genial television host. I will miss him.
Bas Meijer has plenty on his plate. The Dutchman is the Treasurer and Cash Manager for Connexxion Holding NV. Connexxion is a large transport company based in Holland operating a fleet of 2,500 buses and 3,000 taxis.
