February 09, 2012
The Euro Crisis Continued
Assessing the Challenges to Treasury
At their annual meeting in 2011, members of the Tech 20 explored, among other issues, how the European sovereign debt crisis and its impact on banks was affecting the global economy, financial markets and a wide range of tech treasurers’ activities.
1) Bank Impacts from Euro Crisis. The need to de-lever and alter businesses in response to new rules on risk will impact all banks in some way.
Key Takeaway: Not all banks will be equally frank in communicating the impact on your relationship — so, be frank in prompting them.
2) Responding to Round Two of the Crisis. Member responses largely followed on the lessons of the first round of the crisis, i.e., focusing more on counterparty risk.
Key Takeaway: Effectively managing the necessary exceptions to risk limits and other policy constraints is the key to success in a crisis.
3) Offshore RMB. USD liquidity shortages in Asia, along with concerns about the euro give the offshore RMB a unique window of opportunity to become more prominent.
Key Takeaway: Promoting international usage of RMB is part of a long-term plan that will not be shelved by interim setbacks.
4) Investing Offshore Cash. Interest in further diversification of cash investments is driving certain Tech20 members to invest more in non-USD assets.
Key Takeaway: Key European banks offer quality asset management with good local credit-risk analysis.
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