A brief look at what’s on International Treasurer’s radar screen this week.
This week’s International Treasurer’s editorial meeting focused mainly on the agendas of upcoming NeuGroup peer group meetings. This is appropriate given the NeuGroup’s busy meeting season will get underway in September. Also included for further review was the scandal-plagued Libor rate.
Topics for upcoming meetings.
E&CTPG
- Productively interfacing with the business units: How can treasury specifically support the business units?
- Practicalities of monitoring and managing financial counterparty risk.
- Managing through the eurozone debt crisis– Europe continues to be a hotbed of challenges with a number of potential scenarios that could play out.
- Update on the banking sector, debt capital markets and project finance?
AT30
- In-house banks.
- Regulatory review.
- Bank counterparty management.
- Managing the eurozone crisis.
Global Cash & Banking Group
- Global treasury headcount; a discussion/comparison on headcount and resources.
- Discuss use of impact on bank credit revolver group vs. other highly rated credit counterparties – are you leaving your bank group for higher rated counterparties?
- ISDA credit support agreements (CSA) – managing counterparty risk with recent downgrades of the banks.
- FBAR updates and mandatory reporting requirements. Does this include only bank signers or does it also require reporting of anyone who has access to an account (i.e., like those who have daily online access for Treasury, AP or GL)?
- Update on Basel III and Dodd-Frank implementation timelines and how treasury is likely to be affected.
- Cash forecasting: what types of cash forecasting models are used? Do you forecast at a country level, global only? How do you integrate it into your overall liquidity planning?
Libor implications. Ever since the UK regulator Financial Services Authority (FSA) fined Barclays 290 million pounds for its crooked London Interbank Offered Rate (Libor) fixing (which also apparently is linked to other banks), the scandal has exploded with fingers pointing in all directions. The rate fixing appeared to have been common practice among many banks as far back as 2005. At a CNBC conference Wednesday, Treasury Secretary Timothy Geithner acknowledged that the Fed was aware of the scandal early on.
“We acted very early in response to concerns that the processes that set [the Libor] rate was impaired and flawed and vulnerable to misrepresentation,” Mr. Geithner said, speaking at the CNBC Institutional Investor Delivering Alpha Conference in New York.
We’re going to take a look at what it might mean for treasury in the long-term; whether it will have any impact at all.
Libor replacement?
In Congressional testimony Wednesday, Federal Reserve Chairman Ben S. Bernanke suggested that a number of market rates could replace Libor as a benchmark for lending rates, including a “switch to a market-based indicator.” He said other possibilities include “repo rates, the OIS index, even potentially Treasury bill rates.” The repo rate suggestion could have the best future as there has been some discussion that the recently launched GCF Repo Index could replace Libor.
Compiled by the Depository Trust and Clearing Corporation (DTCC), the index is the weighted average of interest rates paid in general collateral finance repos by banks. It’s a benchmark based on actual calculations rather than reported estimates: all GCF trades are based on real transactions, centrally cleared and collateralized by US treasuries, agencies and mortgage backed securities.