The Financial Services Authority (FSA) provoked a mixed response last month with its sudden clampdown on the practice of short-selling.
After a very successful awards process culminating in a celebration dinner in early 2008, The Treasurer is once again running its annual Deals of the Year Awards.
With the credit crunch showing no sign of diminishing and an economic slowdown seemingly taking hold, audit committees are putting risk management at the top of their agendas.
The main three credit rating agencies, Standard & Poor’s, Moody’s and Fitch, have agreed with US regulators a new regime to improve the way in which they assess risk.
How should treasurers be helping their organisations cope with fuel and commodity price volatility?
The treasurer’s remit has expanded in recent years to include areas such as pensions risk management as well as commodity and fuel price risk management. Although historically for companies commodity price exposures may have been relatively small compared with foreign exchange or interest rate exposures, the volatility of commodity prices can be breathtaking.
It is difficult to avoid all the doom and gloom about the losses and write-downs from the credit crunch, the impact on the financial systems across the globe and the consequent feed through into economic activity and personal hardships.
That said, though, the optimist in me searches out the silver lining in today’s clouds. Perhaps we should reflect on some of the positives. The shocks to the financial world have shaken us all – treasurers, bankers, regulators, whoever – out of whatever ruts we were in and given us a spur to re-examine what we are doing, reconsider our strategies and the risks.
This is no bad thing to be doing from time to time, but it is a shame if it takes a disaster to force this on us.
The International Accounting Standards Board has started the formal process of considering the possibilities for reducing complexity in IAS 39. Its discussion paper sets out thoughts on the way financial instruments are measured and some ideas for simplifying hedge accounting. However, behind the openness to change, the board remains firmly wedded to the long-term aim of extending the application of fair values.
The Pension Protection Fund set up shop in 2005 to protect the pensions of defined benefit pension scheme members whose employers become insolvent and leave a scheme with inadequate assets to meet its liabilities. The PPF is financed by levies paid by employers that continue to sponsor defined benefit schemes. Every year since then, the PPF has published a consultation document, followed by a final ‘determination’ that sets how it will calculate the levy for the forthcoming year.
As summer arrived, Thomas Cook, a leader of the European travel market, was making sure its finances were in place for the holiday season. Seven years out of the Eurobond market
was regarded as long enough by German electronics and technology company Siemens, which stormed back on to the scene with a threetranche e3.4bn fundraising. Britain’s biggest ever rights issue, more than twice that of the previous record set by BT, was successfully got away, with Royal Bank of Scotland receiving acceptances equivalent to 95.1% of its shares in issue.
The treasurer’s job at a major insurer involves a range of duties, not the least of which is knowing which way the wind is blowing, Sean Anderson of Kiln tells Graham Buck.
In July 2007, GlaxoSmithKline announced a £12bn share buyback programme, to be completed over a two-year period. This was to be financed with debt and consequently alter the capital structure of the company. At the time, Glaxo was rated Aa2/AA and was one of the few AA corporates worldwide.
There are arguments, more vociferous in the last 12 months, that to guarantee debt market access, the higher the rating the better. But pragmatically speaking, anything rated A or better should be assured of good access in all but the very worst markets.
On the first anniversary of what has been dubbed the biggest shock to the financial system since the 1930s, even the government appears to be losing faith in its assertion that Britain is well placed to withstand the impact of the credit crunch.
While some investors have been invigorated by the rich pickings and abundant opportunities created by the credit crunch, many lenders, companies and consumers are suffocating. But there is money in distressed debt. For treasurers, the advice is to keep the dialogue open with the lender as the predator might just turn out to be a saviour after all.
Deteriorating standards in lending up to mid-2007, particularly in the US, inevitably led to issues arising from the credit crunch, including bonuses and payments for failure, bank capital and base rate. This has had repercussions for the financial world which has been affected by rising complexity in increasingly interconnected markets. Unfortunately, greater transparency is not necessarily the answer: disclosure only works if you understand it.
The members of well-funded pension schemes adopting an liability-driven investment strategy presumably benefit from the increased certainty of receiving their pensions, but does the sponsor? And, what about the Pension Protection Fund, both now and when it changes its levy calculation rules? Financial models exist for answering these questions but are not well known. The second part of this feature looks at stochastic deflator models.
The Bank of England’s agreement earlier this year to provide UK banks with £50bn in liquidity has been described as peanuts in comparison with the size of the market. The way forward is to establish good central banking practice that manages to reconcile low-ratio banking with safety.
Centralisation has been a major theme in the field of treasury and foreign exchange risk management over the past decade. The main structural impact on treasury organisations of this trend is clear: foreign exchange trading activity is transferred from individual business units to a group treasury organisation or regional treasury centre.
The ACT website has been redesigned as a valuable treasury resource, with a search function on the directory of members providing a powerful tool. The key issue is searchability and the website offers an effective database with the ability to tag content and provide useful links related to the context of the page being viewed.
To make the most of the new site, members will need to update their user profiles to identify areas of interest and expertise and to include a CPD log for recording their professional development.
While treasurers may think their job has got harder over the past 12 months, they should perhaps spare a thought for someone in an even worse position: their boss, the overworked and overstressed finance director.
A new survey suggests that the role of the chief financial officer (CFO) – a term which encompasses heads of finance and finance directors – has expanded so greatly that there is a conflict between the many demands made of it. This conflict has implications for CFOs, their companies and those who report to them, including, of course, group treasurers.
April 2008 was the last sitting on the old MCT syllabus: 60% of candidates achieved the MCT and are eligible to become full members of the ACT. It was also the first sitting on the new MCT Advanced Diploma syllabus. A small group of candidates was eligible to complete under the new syllabus, and three were successful across all the assessment components for this qualification; two of the three gained distinctions.
