One of the many themes that has emerged from the financial crisis is a gap of understanding and empahy between different groups involved in restoring health to the financial system and the wider economy.
The current inquiry by parliament’s Treasury Select Committee once again illustrates his point. MPs of all political persuasions appear mystified by the explanation of the role that the credit rating agencies play in business and the way that they interact with the financial markets and the corporate sector. The role of the rating agencies was patiently and carefully explained by both John Grout, the ACT’s policy and echnical director, and Malcolm Cooper, National Grid’s global treasury director and former ACT president.
It will be interesting to see if the MPs’ initial views are altered by the evidence they gather from the ACT and others, but it is not only UK politicians who matter. More rtinently, pressure is mounting to persuade European legislators not to enact further regulation in this area, rules which would further curtail the power of the rating gencies while at the same time inflicting damage to the working of the financial markets. And it’s not only rating agencies that remain under close scrutiny and
suspicion – so do banks. One view that has continued to shift over the years since the start of the credit crisis is the perception of the role of the banks in the wider economy.
The inability of banks to lend in the volume and locations desired was met at first with something approaching disbelief by government and by business. Guided by thei reasurers, big businesses have got on with it, working with the banks where possible and sourcing funds elsewhere, notably from the bond and the US private placement markets.
Smaller businesses are also looking to find workarounds to the traditional forms of bank lending and overdrafts.
Both the credit easing plan and the host of ideas proposed in the Breedon Report show that there are ideas to find ways around the sluggish flow of credit to the rea economy.
The treasury profession has a pivotal role in this effort to redefine and reshape the wider credit environment. This is illustrated by James Douglas, current ACT president, who was on the Breedon working party, and the further investigation the ACT is being sked to carry out in developing a UK private placement offering.
The ACT Annual onference in Liverpool is an opportunity to talk through the issues: treasurers are the gateway between the financial economy and the real economy. With heir understanding and expertise they can talk both the language of business and the anguage of finance.
Looking back at the topics and conversation at previous ACT Annual Conferences it is lear that treasurers have a pivotal and continuing role to play in closing the gap.
PETER WILLIAMS
EDITOR