By Ted Howard
The December issue of iTreasurer begins with observations from NeuGroup founder Joseph Neu’s trip to Asia for a regional roundtable and NeuGroup’s Asia treasury peer group meetings. The region is becoming the veritable epicenter of digitalization transformation. Mr. Neu writes that multinationals need to continue to tap into what makes China, and Asia in general, so special in terms of rapid economic development that has benefited so many. “This is why being in the region and seeing these transformational forces at work can be so energizing,” he says.
In the December issue’s “Anticipated Exposures” stories, we look at what treasurers should consider if they’re thinking of using municipal bonds for the company portfolio; the robust pace at which US corporates are buying back their debt; why cov-lite leveraged loans aren’t a threat yet; and a CFTC white paper, which will serve as a road map for proposals to relax swap rules.
Next is a story about banking trade groups lobbying the US Treasury in hopes it will delay a new accounting standard that changes how banks calculate loan-loss reserves. Banks say more analysis is needed given the standard’s potentially detrimental impact on bank lending.
This month’s NeuGroup peer group summary is from the Foreign Exchange Managers’ Peer Group’s September meeting. Members at the meeting discussed projects and priorities and delved into perennial challenges such as when to use options to hedge FX exposures and the benefits of hedging FX portfolios holistically. Members also discussed using a VaR-based framework from sponsor Standard Chartered.
Next are stories about the Secured Overnight Financing Rate (SOFR), which is supposed to take the place of the London Interbank Offered Rate or Libor once it begins to fade (or is diminished in use), as well as about fallbacks, which are mechanisms that will be put in place to allow for a smooth transition if and when current Libor ceases publication. The Alternative Reference Rates Committee (ARRC) recently closed its comment period for so-called fallbacks for syndicated loans and floating-rate notes. The proposals were issued in late September, and since then the ARRC has announced plans to propose term rates for its Libor replacement, which upon reaching fruition will provide a third fallback option.
In terms of SOFR itself, the introduction of the replacement benchmark has so far offered little of practical relevance to corporates and others using the floating-rate debt markets as a source of financing, although there are recent indications of progress in that direction.
Finally, yes, technology makes treasuries run smoothly, but don’t forget the people involved, they make treasury run smoothly, too. According to NeuGroup meeting feedback, treasury culture is a surprisingly potent factor when it comes to making treasury more effective and efficient. This means the people on the team matter, whether it’s a team of two or 200. The Peter Drucker maxim that “Culture eats strategy for breakfast” is alive and kicking in successful treasury departments.