Among European treasurers, access to credit remains their biggest “treasury nightmare.”
Despite a global tilt toward recovery, many European treasurers remain very concerned that banks will shut off their credit facilities, according to a EuroFinance survey. This has prompted them to look to third-party providers for a wide-range of products usually provided by their relationship banks, including supply chain, lending and FX products.
EuroFinance said thirty-six percent of the 224 corporates surveyed were worried that their bank “would not give them adequate credit facilities” and indicated that this was their “biggest treasury nightmare.”
The global conference and research provider said one of the reasons for treasurers’ concerns was that banks were being more (or too?) aggressive in tying credit availability to the other fee-based products they offer. Ironically, EuroFinance said the European treasurers’ second biggest fear was counterparty risk, which actually may be the reason treasurers are turning away from many banks in the first place. In early September the Financial Times reported that a number of European companies have been shying away from some European banks (mainly in Germany and Spain) due to a percieved high risk of failure (see related story here).
These concerns follow the summer stress tests by European regulators of 91 banks in 20 European countries. Those tests were widely ridiculed as being too lenient. The tests revealed that the banks could face a total of $730bn in potential losses in a deteriorating economic and financial environment. Only seven banks flunked the tests, having come up short by almost a combined 4.5bn in capital.
Another reason for treasury fearing a cut-off in credit was the coming Basel III regulation, the capital and requirements of which could cause banks to be more conservative in their lending. This is a concern on both sides of the Atlantic, although regulators in the US and EU have said most banks, despite the problem balance sheets, have enough capital for business-as-usual (as long as there are no excessive risks).