Companies have been hearing from banks for several years that the pain of new financial regulation is coming. Well, that pain has arrived.
Members of the NeuGroup’s Assistant Treasurers’ Group of Thirty (AT30) will soon hear Bank of America Merrill Lynch’s (BAML) views on how this pain – from Dodd-Frank to Basel III to money-market reform – will have an impact the bank and ultimately them.
For MMF reform particularly, treasurers have been struggling with the lack of viable options for placing cash deposits, which has been compounded by companies generating increasing amounts of cash. The problem is further exacerbated in Europe where cash often grows or is pooled and interest rates are negative. The group wants to know how long the bank believes these issues, particularly low/negative interest rates, will continue.
The Cash Conundrum
There is also a domino effect in place. With cash earning nothing, companies are faced with more pressure to return it to shareholders unless there is a compelling strategic reason not to. And we are certainly seeing a banner year for M&A deals, which presumably puts that cash to good use. Apart from acquisitions or strategic capital expenditures, companies need to make good use of their cash assets. Consequently, members are very interested in discussing how much cash should be kept on the balance sheet. Is there a good model for determining the answer to that question?
Bank, What Is My Value?
Another domino is that regulations are not only impacting companies operationally, but also how banks view and value them as customers. Many members are eager to learn how banks are measuring client value, such as profitability by product or service used. One member noted the conundrum that some bank products are low value to the bank but very high value to the client. Corporates want to understand how they can expect to be viewed and treated in the future based on the relationship they have and how they might need to shuffle (or increase) business to the banks they prefer most.
I’m Outta Here – Maybe
And speaking of shuffling business, BAML notes that it is seeing a lot of interest in the notion of bank inter-operability. SWIFT has been pushing the idea of having connectivity that is bank agnostic and can be switched very quickly because of common protocols. The actual ease of this ability has proven to be a bit more mythical in reality. However, new innovations are supposedly making it more feasible. So, if you and your bank have a falling out, packing your bags should be more like a tote than a moving van.
The NeuGroup’s AT30 will have its next meeting at the end of September, when the group will be hosted by founding member Bechtel in San Francisco. The meeting will be sponsored by Bank of America Merrill Lynch (BAML). For more information, contact Bryan Richardson at [email protected].