By Ted Howard
We start the February issue of iTreasurer by noting that virtual accounts mean different things to different people. Some treasurers are all for them while others remain a little leery. But nonetheless the versatile tools have been bubbling up and onto NeuGroup peer group meeting agendas over the last couple of meeting cycles as the push to streamline processing and centralize global operations takes hold.
“Customers often oversimplify the value of virtual accounts, thinking they only speed up the way in which one can … open an account under the same entity,” one banker says. “But they offer much more.”
In February’s “Anticipated Exposures,” we discuss how most banks, despite the passage of regulatory relief measures by Congress, aren’t optimistic about their overall regulatory burden in the coming two years. Meanwhile, things have become a lot easier for foreign affiliates providing loans and/or credit support to US-based headquarters and other US entities, because the IRS’s Section 956 has been defanged in a sense. Before the Tax Cuts and Jobs Act passed in 2017, the IRS’s Section 956 aimed to prevent US companies from directly or indirectly bringing the untaxed income of an overseas affiliate back to the US—so-called deemed dividends— without triggering US tax. While the law stayed on the books, it now exempts dividends. Finally, in treasury tech M&A news, treasury management system provider Kyriba announced in late January that it had acquired currency risk management software provider FiREapps.
Next, NeuGroup founder Joseph Neu discusses “the folly of racing to embrace complex finance technology that’s hailed as a game-changer” but ends up not living up to the hype. As an example, he cites a McKinsey white paper whose writers talk about the lack of progress blockchain solutions are making in the area of alternative payment solutions.
This month’s iTreasurer features two peer group summaries from NeuGroup’s two meetings in Asia: the Asia Treasury Managers’ Peer Group, or AsiaTPG, and the AsiaCFOs’ Peer Group.
At the AsiaTPG meeting, sponsored by HSBC and held in Singapore, members focused on treasury talent in the region and how to develop and train the most proficient people in response to digitalization. Meanwhile, at AsiaCFOs, which met in Shanghai and was sponsored by Deutsche Bank, the sentiment was that “winter was coming,” meaning that the long-feared hard landing for China’s economy might be imminent, due partly to US-China trade tensions. At the time, though, business growth for the majority of member companies was not yet slowing. This underscores the major tension for multinational corporations (MNCs) operating in China: how to prepare for a downturn without missing growth opportunities if the downturn fails to materialize.
Finally, Ted Howard and contributor John Hintze discuss Fitch Ratings’ development of new scores indicating the impact of environmental, social and governance (ESG) factors on corporates’ credit ratings. Fitch acknowledges that ESG risks’ impact on credit ratings is generally low—less than 3%—but says that whatever impact arises could end up being disproportionately larger.