March 11, 2011
Uncertainty Continues to Weigh
Too Many Unknowns for Treasury
When members of the Treasurers’ Group of Thirty met in the fall of 2010, continued market uncertainty as well as the uncertainty over coming regulatory changes weighed heavily. Topics discussed included:
1) Bank, insurer and broker relationship drivers. New regulatory demands on a host of financial partnerships is altering the management landscape.
Key Takeaway: Understanding the profitability of treasury’s wallet will require frank dialogue with banks about their funds transfer pricing.
2) Use of proceeds. Shareholders share general uncertainty as to how they want firms to deploy cash.
Key Takeaway: When pressed, shareholders are showing a greater inclination for dividends.
3) Doing business in China. Success in China means aligning your interests with China’s leadership.
Key Takeaway: Business initiatives that serve China’s aspirations to be a player in major human endeavors will stand the best chance for success.
4) Corporate hedging. New regulations mean hedging will become more expensive.
Key Takeaway: Look for dealer spreads to increasingly reflect the new economics.
5) Derivatives Regulation. Corporates will have to wait for rulemakers to weigh in before knowing the effects of exemptions, margining.
Key Takeaway: Other than seeking to influence the outcomes, corporate treasurers cannot fashion their response actions until they get a better sense of where the rulemakers will end up.
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