What’s on International Treasurer’s radar screen this week.
Following International Treasurer tradition of the last several years we will be writing our Annual Outlook piece for 2011, which will appear in the January 2011 issue.
Of course, a lot has happened in the last year or two and unfortunately much of it has a long tail, i.e., it’s spilling over into next year. By this we mainly mean regulation, although the state of the dollar, the survival of the euro and the global economy will also be a focus.
But regulation will likely be the main talking point. In the coming months a host of regulatory agencies – namely the CFTC and the SEC – are going to propose a number of rules with the usual comment periods. One area on which treasurers will be keenly focused is OTC derivatives, and whether companies will keep their end user exemption (see related stories here and here and here). There are also questions surrounding margin, and whether CFTC Chairman Gary Gensler really does believe he has the authority to impose margining on end-users (see related story here).
In any case, all the rule-making has to wrapped up by mid-July 2011, so it will be critical for corporations to monitor the proceedings and comment where and when necessary. With this in mind we will be calling on our extensive contacts in corporate finance to get their views and opinions on the regulatory environment and what impact it will have on corporate treasury in the coming year.
Corporate cash
Much has been made of the amounts of cash US corporations are holding (or hoarding, depending on your view) on the sideline. And now the Federal Reserve has put some numbers to it. According to a Fed study, US non-financial companies were holding $1.93tn in cash and other liquid assets at the end of September, up from $1.8tn at the end of June. Cash accounted for 7.4 percent of the companies’ total assets. This is the largest share since 1959.
Critical for US MNCs is that while not explicitly said (publicly, anyway), the US government reportedly is taking a dim view of the amounts, claiming corporations are “hoarding cash” and prolonging the recession. There are of course a number of reasons for companies holding cash. One is that much of cash, for tech companies particularly, is held overseas, awaiting the day when tax rates go down (see related stories here and here). Another reason is that with yields so low, there’s really no place to put.
However the year plays out, it will be an historic and interesting one.