A look at what’s on International Treasurer’s radar screen this week.
Several topics emerged from International Treasurer’s editorial meeting this week, including several that have been in the news lately. These included most prominently the for pushback that the Volcker Rule is getting and also new rules on money market funds that could spell the end of the asset class. Also, al look at SWIFT in Latin America.
Volcker pushback.
Foreign regulators are raising a fuss over proposed trading restrictions included in the Volcker Rule. The rule bans banks from proprietary trading and would also restrict US banks from buying and selling non-US sovereign bonds on behalf of clients – or at least make it more difficult to do. US Treasuries are exempt from the rule. So far there have been complaints from Japan, the UK and Canada; and the European Commission is also reportedly reaching out to the US treasury to get more detail and presumably, protest the measures.
But even an exemption is no guarantee that the rule will not be disruptive to markets. Some worry that a consequence of the legislation will be banks withdrawing from market-making and thus cause a reduction in liquidity in sovereign markets. This would in turn result in greater volatility and make it more difficult, riskier and costlier for countries like Japan, Canada or the UK to issue and distribute their debt.
SWIFT in Latin America.
The NeuGroup’s Latin American Treasurers’ Peer Group (LATMPG) met recently and one topic that emerged was one that comes up often – SWIFT. At this juncture, aside from Africa, Latin America is one of the last frontiers when it comes to SWIFT implementation. So we’ll take a look how SWIFT readiness is now becoming a priority for companies doing business in LatAm.
Also a topic at the LATMPG was Argentina. Some members of the group are concerned that the country is beginning to “smell like Venezuela.” This means tighter controls by the ministry of finance on how companies manage their finances. The ministry is trying to keep tabs on money flowing out of the country, which is happening at a rapid pace. Some companies have even received calls from the ministry inquiring about recent applications to convert pesos to dollars.
Goodbye MMFs?
There have been worries that regulators were trying to end money market funds as they are known but no one could ever confirm it (see related story here). Well, it appears as though the SEC has now played its hand on what plans it has for the MMF industry. The agency just announced it plans to unveil a two-part strategy to help stabilize the industry. But the proposals are already meeting stiff resistance and according to the Wall Street Journal, could spark internal tensions at the SEC itself.
One of the more controversial proposals would only allow investors to get about 95 percent of their money back immediately if they wanted to sell all their holdings. The remaining 5 percent would be returned to them after 30 days. This would almost certainly end the industry as no corporate treasurer would put the company’s money anywhere where it couldn’t be immediately redeemed. The rules might also go against company investment policy.
The SEC also is considering proposals that could require funds to boost their capital by charging fees.