This week’s International Treasurer’s editorial meeting brought up a number of issues that will be fleshed out in the coming weeks and months. These include a look at where companies will be allocating cash next year, Basel III impact on global banks in Asia, and European MMF regulation impact.
Basel III in Asia
While Asia banks won’t be able to avoid the coming deluge of regulations from Basel III to Dodd-Frank, the impact of these regs on local will be more limited. Instead it will be the big global banks that will face changes as regulations kick in. The theory is that the likes of Basel will change how banks operate globally. For instance, under Basel III, many national regulators plan on pushing their banks to form subsidiaries rather than branch structures which can limit a bank’s ability to utilize the strength of its global balance sheet in offering services, e.g., supply-chain finance offerings, etc. IT will take a look at the trend and see what banks are doing to meet these regulatory challenges.
European MMF Regulations
According to Fitch Ratings, European corporate treasurers are worried about deteriorating bank credit quality, global banking and coming European MMF regulation. In its recent survey of 90 delegates at its third annual cash management conference in London, a majority of respondents consider the variable net asset value (VNAV) vs. constant net asset value (CNAV issue) “as the most important matter in the proposed European MMF regulation” and said they would decrease their allocations to MMFs if they move to VNAV. IT will explore what companies are looking at (in the US, too) in terms of alternatives to MMFs.
Asset allocation
With rates at their lows and likely to stay there, treasurers haven’t changed their asset allocations too much in the past year or so, but they continuing to look for yield. This means continuing to reach further down below A-rated companies to BBBs, etc. The idea here is that it is better to have, say, a BBB industrial with good prospects vs. an A-rated bank saddled with unknown debt (risks) and dragging with them all sorts of regulatory baggage. Companies are also extending duration to pick up a bit more yield. IT will explore how companies will navigate the coming year in terms of where to put their cash.