Straws in the wind

There is something in the air. Frankly, we’ve had enough.

The atmosphere is now thick with Saharan dust as the winds of change heat up Europe. Camels' loads have been lightened as minute particles of dust and straw now rain down upon us everywhere. Newton’s Third Law, “for every action there is an equal and opposite reaction”, is proven yet again.

So what’s the bother? Trade, industrial effort and jobs. We are in danger of being choked by an ever increasing regulatory burden. Fortunately, society does offer opportunity to influence politicians, regulators and legislators before law is enacted, however, it is rare to experience a virtuous circle - politicians, regulators and legislators who have real business experience; want to learn; be informed; and dare I even suggest it rarer still, actively seeking out good continuing professional development opportunities for themselves to make better law in the future.

It is further depressing if those legitimate democratic avenues are blocked. I urge you to read Richard Raeburn’s (Chair EACT) latest blog. The EACT has filed a formal complaint to the European Ombudsman about the failure of ESMA to ensure that senior corporate treasurers are represented on the Securities and Markets Stakeholder Group (SMSG). We have tried to achieve this since 2010 to no avail. But why?

As many of us know, treasurers are now regulated. Our businesses are now responsible for reporting our derivative transactions (but no one has adequately explained why it is systemically important information), which we undertake to manage financial risks arising out of our normal trading activities to a “competent national authority”. Evidently we are told this will give greater market transparency and ensure that we avoid the last global financial crisis should we ever go back in time. A somewhat intriguing prospect particularly when you consider it didn't cause it last time around.

On a purely practical level - and let’s face it - treasurers are practical business professionals. Our representation may have avoided the debacle we experienced over EMIR implementation.

Here's a few of the issues:

• Critical guidance on UTI was issued by ESMA on the evening of the critical EMIR reporting deadline - it was certainly a “unique” way to ensure an orderly implementation.
• The lack of harmonisation of the definition of derivatives that are subject to EMIR, let alone global consistency - frankly quite bizarre that we’re looking at this after the event.
• A 90 day lead time from approving the first trade repositories to the first reporting of trades leading to poor market readiness and honest, practical and experienced corporate treasurers asking serious questions about the varying penalties and jail time across Europe. No doubt someone modelled it and thought it would take a month’s work and then gave a couple of extra months just to be safe. Naive in the extreme.

But of course, it is not just a European issue. We now see that the CFTC are saying they can’t understand the corresponding data they’ve received from the market (join the ACT LinkedIn group to find out more).

Of course, if treasurers ruled the world, life would be different!

I hope to see you all in Glasgow and I won’t take “no” for an answer…but then again, our opening keynote speaker Rt Hon Alistair Darling MP might beg to differ!

All the best.