The financial crisis has brought efforts to standardise the credit default swap (CDS) market to a head, after the launch last month by Intercontinental Exchange of a USbased clearing facility, according to analysis group Datamonitor. The launch has forced regulators on this side of the Atlantic to intervene in an effort to set up a European equivalent, as the industry has failed to agree a centralised platform.
The worldwide number of users of mobile banking and related services is forecast to grow from 20 million in 2008 to 913 million in 2014, according to a study.
Despite sustaining major losses on many of their investments, sovereign wealth funds (SWFs) still registered an 18% increase in the value of assets under their management in 2008 to $3.9 trillion, according to a report from International Financial Services London (IFSL).
A whirlwind four weeks of equity raisings has seen a dozen major companies in London tapping their shareholders to raise around £23bn. The landscape was dominated by the £12.5bn biggie from HSBC, the leading British bank apparently least scathed by the financial crisis.
The rights issue was also being used as a major refinancing tool as Wolseley attempted to reconstruct its balance sheet.
The bankers and brokers were busier than the average estate agent as three of London’s big property developers all tapped the market for funds.
HM Revenue and Customs has launched a consultation on the treaty clearance processes by which non-resident lenders can be paid interest by UK companies without withholding tax deducted.
The Bank of England’s asset purchase facility to provide companies with funding has started operation, initially buying investment grade sterling commercial paper. In the first three weeks of its operation, the Bank has built up a holding of £985m in corporate CP.
Guidance on the going concern basis for smaller companies has been published by the Financial Reporting Council. Assessing whether a company is still a going concern is a requirement under the financial reporting standard for smaller entities even though many can opt out of an audit.
At the talkingtreasury conference in london in February treasurers met to discuss the impact of the credit crisis, liquidity risk management, strategic risk management and the changing role of the treasury. Here three treasurers who were panellists that day offer their judgement on the issues involved.
What would governments give for a magic wand to sort out the current economic and financial crisis? In the absence of such a tool they have to rely on economic policy. But what should that economic policy be? The old joke about economists never being able to agree about anything seems as true today as it ever was, although perhaps not so funny at the moment.
The economic downturn and a catastrophic year for equity markets in 2008 have pushed the issue of pension fund deficits firmly back on the business pages. Figures from different sources vary, but most suggest that since the effects of the credit crunch started widening last autumn, pension funds have moved from a position of overall surplus to one of deep deficit. The recession is the first major test of the new pensions framework introduced by the government in 2005.
The shortage of credit makes cash pooling a key tool for a business group. But unless the tax and legal implications are correctly appreciated and handled, a company may find itself embroiled in costly disputes with regulators and tax authorities, as Jörg Schwerdtfeger and Maxi Wilkowski explain.
The diminishing returns on cash investments over recent months have become a serious issue for individuals and corporates alike, following a spate of cuts in base rate by the Bank of England’s monetary policy committee. The first reduction, from 5.75% to 5.5%, came in December 2007, but the pace accelerated last autumn and six cuts between October and last month took the rate from 5% to an unprecedented 0.5%. As a result, returns have fallen close to zero, putting the issue of interest rate management high on the corporate agenda.
With so much regulation, standards and compliance in place, how can the financial markets disaster ever have happened? Yet given the size of the losses that will now have to be paid out of general taxation for decades to come, few people will argue against introducing more regulation. But more of the same is not the solution. Much of the present regime is simply not focused, relevant or effective. Too much pro forma regulation and compliance has created an inability to see the wood for the trees, and contributed to regulatory failure.
Thanks to changes made by US regulator the Securities and Exchange Commission (SEC) to the Securities Exchange Act of 1934 which came into effect late last year, non-US securityissuing corporates no longer need to apply for exemption from SEC filing and reporting requirements. In effect, if they fulfil a few basic conditions – such as posting their domestic financial reports on a website in English, and conducting at least 55% of the trading volume of their equities on a primary exchange in their home market – they are automatically exempted and so can establish unsponsored and sponsored level I American Depositary Receipt (ADR) programmes for their shares.
After last month’s first instalment in our coverage of debt facilities, we’ve now come to the really exciting bit: the documentation. There are a number of areas to keep your eye on to make sure you get a deal you can live with. The list given here is by no means exhaustive but it gives a flavour of the sort of issues you should be aware of.
At a conference held at the end of January the European Bank for Reconstruction and Development (EBRD) announced measures to mitigate the consequences of the liquidity crisis and its impact on trade finance. One of its key decisions was to increase the limits on its trade facilitation programme from €800m to €1.5bn. The EBRD also plans to increase the availability of facilities for foreign subsidiary banks in the EBRD region, and provide liquidity in the form of cash facilities to issuing banks, a move aimed at supporting intra-regional trade between EBRD countries.
Recession typically triggers an upsurge in corporate fraud. Since the late 1980s, accountancy firm KPMG has published an annual Fraud Barometer, which records the number of fraud cases before the UK courts where the amount involved exceeds £100,000. In 2008, it recorded more than £1.1bn of fraud, the second-highest total since its inception.
The opening session of the talkingtreasury conference looked at the impact of the credit crisis on corporate liquidity and funding, and was led by Gerry Bacon of Anthem Corporate Finance and former Vodafone group treasurer. Along with the ACT’s policy and technical team, he was heavily involved in the preparation of the ACT survey (Credit Crisis and Corporates: funding and beyond) and spent some time giving an overview of the report’s findings. This laid the foundations for a panel discussion involving corporates of considerably differing sizes and financial needs.
Surely there has never been a more challenging backdrop for an ACT annual conference. Treasurers have always valued the networking opportunities of meeting fellow treasurers and other vital contacts such as bankers, financiers and those who work with them in areas such as technology and recruitment. With so many huge challenges facing government, central banks and regulators as well as corporates, the annual conference is a valuable opportunity to spend some time away from the desk and reflect on the events of the last 18 months or so to try and chart a course for the months ahead.
As part of its commitment to the growth of knowledge and skills within the treasury profession, the ACT has developed its qualifications to ensure they are relevant, recognised and accessible globally. A key focus of the ACT’s education strategy has been to increase the flexibility and accessibility of its qualifications through the use of resource-based online learning to make them available to the wider international financial community.
With recession bearing down on every department in the organisation, treasurers are under immense pressure to come up with a clear strategy for ensuring they have the right treasury personnel in place. This has added urgency to the question of what qualities treasurers should be looking for when they recruit staff.
Formed 10 years ago by the union of two UK engineering conglomerates, Siebe and BTR, automation and controls group Invensys has been in and out of the FTSE 100 ever since. Promoted to the list of Britain’s 100 biggest companies again last September after a five-year absence, the company came close to collapse a few years ago after its purchase of Baan, a Dutch company that was once Europe’s second-largest software provider but which ultimately went bust.
