1. finance

Issue 18 | 9 October 2014
Content
Working Capital: Treasury Wants a
Bigger Say
2
3
One out of four respondents to a EuroTreasurer survey aims for a
more prominent role
Treasury usually plays a significant role in managing working capital,
but it is rarely the driving force behind it. This is a key finding of a survey
conducted by EuroTreasurer and Deutsche Bank, which aimed to shine
light on the positions corporate treasurers assume in the working capital
strategy of their companies. Across Europe, 122 corporate treasurers were
polled, with over half of them being from large companies with turnovers
of more than €1 billion. A sizeable share of 20% said that treasury had
primary working capital responsibilities within their companies.
6
7
Technology Changes B2B Payments
Banks need to modernise their payment
infrastructures and cooperate with new players
Rumours: Misys for Sale
Private equity firm Vista Equity Partners is said to
want to sell its stake
Penalty Interest on Deposits
Institutions want to prevent treasurers from
parking large sums temporarily
Leader
Fitch: Corporate Debt to Set Post-Crisis
Record
EU corporates raise almost €600 billion of
debt in the first half of 2014
Financing Round-Up
Vitol, Volkswagen Financial Services, Adidas
and others raise fresh money
Software
2
Treasury Wants a Bigger Say
One out of four respondents to a survey aims
for a more prominent role in working capital
Cash Management
3
Technology Changes B2B Payments
Banks need to modernise their payment
infrastructures
People
5
Financing
4
Top Transaction
Financing spree: Spanish Abengoa syndicates
€1.4 billion loan
6
FCA Charges Ex-Morrisons Group
Treasurer
Paul Coyle faces up to seven years in prison
for insider trading
Saga CFO Announces Departure
After 14 years, Stuart Howard will leave at
the end of 2015; Jonathan Hill will take over
Job Openings
Glaxo Smith Kline, BP and Shell, among
others, are looking for candidates
Rumours: Misys for Sale
Private equity firm Vista Equity Partners is
said to want to sell its stake
Asset & Risk Management
7
Penalty Interest on Deposits
Institutions want to prevent treasurers from
parking large sums temporarily
China Starts Direct Euro-RMB Trading
For corporate treasurers, the move should
decrease conversion costs
Leader 2
Thinkstock
Issue 18 | 9 October 2014
Inventory is the area of working capital where treasurers do not have much to say. Payables and receivables, however, are often under treasury control.
Working Capital: Treasury Wants a Bigger Say
One out of four respondents to a EuroTreasurer survey aims for a more prominent role
T
reasury usually plays a significant role in
managing working capital, but it is rarely
the driving force behind it. This is a key
finding of a survey conducted by EuroTreasurer
and Deutsche Bank, which aimed to shine light
on the positions corporate treasurers assume in
the working capital strategy of their companies.
Across Europe, 122 corporate treasurers were
polled, with over half of them being from large
companies with turnovers of more than €1 billion.
A sizeable share of 20% of survey respondents
said that treasury had primary working capital responsibilities within their companies.
In many companies (40%), however, working
capital is a shared responsibility among finance
and other departments. This is hardly surprising
since working capital is comprised of three elements: payables, receivables and inventory. While
the first two areas are often under treasury control, inventory responsibilities cannot reside in finance – sales, procurement and production need
to be involved as well.
The lack of a clear, organised set-up can lead
to blurred lines of responsibility, which endangers
the efficiency and effectiveness of working capital programmes. Another weakness is the survey
respondents’ relatively low KPI usage: Only 53%
use working capital KPIs while 59% said they
have working capital programmes in place, meaning that at least 6% do not adequately track the
success of their projects.
The survey certainly provides evidence that
the programmes are less efficient than expected.
Expectations for future reductions in the cash
“The role of treasury in working capital is as
prominent as it should be at my company“ (in %)
Strongly disagree
2.5
Disagree
24.6
Neither agree nor disagree
27.1
Agree
Strongly agree
40.2
5.7
Source: FINANCE Research
conversion cycle (CCC), the most popular working
capital indicator, were better than actual results.
Furthermore, almost 20% of respondents believe
that the working capital set-up at their companies
is bad or even very bad. Although senior management would argue that existing working capital
practices do not need to conform to the ideas of
treasury, the result, nonetheless, points to shortcomings that could be improved.
Strengthening the role of treasurers could be one
possibility to raise satisfaction: Indeed, 27% of
respondents want treasury to play a more prominent role in working capital management (see
chart).
Looking into the future, more than half of
the respondents said that the largest improvements can be made on the receivables side. This
result is only logical because past experiences
show that these improvements can be achieved
fairly easily and quickly. Accelerating the invoicing
procedures is a typical approach that does not require difficult customer negotiations, as opposed
to payment term extensions on the payables side.
It does not entail a huge amount of interdepartmental coordination either.
Corporate treasurers should not neglect the
potential of the payables side. Supply chain finance programmes, such as reverse factoring,
are interesting working capital tools for several
companies, the survey’s case studies with airline Swiss, brewery SABMiller and brake system
manufacturer Knorr-Bremse show. In this area of
working capital management, treasury undoubtedly needs to take the lead – both in choosing
and implementing the right supply chain finance
tool.deb/sta
Cash Management 3
Issue 18 | 9 October 2014
News
Technology Changes B2B Payments
Honeywell sets up cash
management in Iraq
Banks need to modernise their payment infrastructures and cooperate with new players
Deutsche integrates
SWIFT MyStandards
Deutsche Bank will integrate
SWIFT MyStandards, a web
repository of standard specifications for payments, into
its Autobahn App Market.
According to Deutsche Bank,
this will allow clients to
access MyStandards easily
and make wider use of the
electronic financial services
accessible via the Autobahn
App Market.
E
lectronic and mobile payments are
on the rise, and they will no longer
be limited to private and retail customers, two recent global payment reports
find. Mobile payments are projected
to grow by 61% in 2015 while electronic payment growth is forecasted to
decelerate by 16% since more people
are using mobile devices to make payments. According to the report by BNY
Mellon, this will filter through to corporate clients as business leaders are
familiarising themselves with mobile
payments in their private lives. Several
electronic banking and TMS providers
already offer smartphone and tablet
payment initiation.
Besides using new channels, an
increasing number of corporates are
asking for 24/7 real-time payment
processing and information, the two reports claim. According to the report by
consultancy Capgemini and The Royal
Bank of Scotland, the UK, Sweden, Poland, the US, Mexico and Singapore
are forerunners of real-time payment
initiatives. The UK, for example, started
its Faster Payment Service in 2009:
Single payments of up to £100,000
can be sent in 24/7 and will be processed immediately. This, however, is
not the case for standing orders yet.
iStock
US manufacturer Honeywell
has chosen Standard Chartered for its trade and cash
management business in
Iraq. The bank will offer trade
finance guarantees through
its electronic Straight2Bank
platform and will provide a
credit line to open bank accounts for Honeywell’s central
Iraq legal entity and its Erbil
entity.
B2B payments go mobile as well.
Banks therefore need to modernise
their infrastructures to support realtime payments and other innovations
such as currency conversion as part
of their global payment services. The
reports warn them that if they are not
willing to do so, they may soon feel
the competition of new players in the
payment industry, e.g. telecom firms,
internet giants and start-ups. So far,
these providers often need to rely
on banks to process payments in the
background. However, the draft of the
new payment service directive (PSD2)
in Europe proposes opening up payments account information to third
parties for payment initiation. If this
becomes a reality, banks may lose an
important privilege.
BNY Mellon recommends that
banks increase their cooperation with
these new players. So far, they have
been reluctant to do so; therefore,
start-ups often work with credit card
companies, rather than with banks, to
increase their scopes. “Many banks
are conservative by nature,” Dominic
Broom from BNY Mellon explains.
Besides, “regulation has put pressure
on many banks’ resources, so there
may not always be the means to innovate.” Banks should identify markets
in which payers are willing to pay a
premium for the security of bank payments, he says. Being regulated has
several drawbacks, but reliability is a
big advantage, especially for corporate
customers.deb
ADVERTISEMENT
Because we manage your
payment flows perfectly.
Corporate Banking
Making your cash management a success factor
A lot of companies still have considerable potential to improve their competitiveness by optimising their national and international
payment transactions. Enhanced efficiency, greater clarity, lower costs – we have now developed a 5-point programme for cash
management optimisation to help you achieve all of this. For more information, visit www.commerzbank.com/cashmanagement
2014_05_12_FL_AZ_CashManagement_190x130_EuroTreasurer_Online_EN.indd 1
22.05.14 11:04
Financing 4
Issue 18 | 9 October 2014
News
Top Transaction
Bayer launches $7bn
jumbo bond
Financing spree: Abengoa syndicates €1.4 billion loan, also plans high-yield green bond
Bayer
Bayer HQ in Leverkusen, Germany
(1.5% coupon) and a variable
one ($400m) at 0.28% above
3mUSDL. Another $2bn will
pay a coupon of 2.375%
until 2019. The long-term
tranches are set to mature
in 2021 and 2024 and are
collectively worth $3.25bn
at 3% (seven years) and
3.375% (ten years) respectively. Bayer wants to fund
the $17bn acquisition of the
OTC business of Merck & Co.
Kering issues €500m
bond
French luxury group Kering
has issued a €500m bond set
to mature in seven years. The
yield is expected to be between 75 and 80 basis points
compared to mid-swap,
potentially causing a return of
up to 1.6%. The transaction
was backed by BNP Paribas
and Deutsche Bank, amongst
others.
Styrolution’s €1.05bn
loan rated B2
Frankfurt-based Styrolution
has issued a €1.05bn equivalent term loan. The rating
agency Moody’s rated the
transaction at B2. The styrene
supplier plans to use the
money to secure outstanding notes due in 2016 and
fund its €1.1bn of BASF’s
50% stake in its intermediate
parent company Styrolution
Holding.
S
panish technology company Abengoa has successfully refinanced
and syndicated €1.4 billion of its longterm corporate bank debt. The transaction was oversubscribed by 140% and
was led by 20 financial institutions –
among them, HSBC, Société Générale
and Banco Santander. The lenders also
acted as arrangers and book-runners.
The coupon of the issuance was not
announced publicly.
The loan is separated into two
tranches. Tranche A will be used to
amortise the existing syndicated loan,
which will be repaid in full, Abengoa says. Meanwhile, tranche B will
finance the company’s “promotion,
development and construction of concession projects”. These are usually
low risk, long-term assets in the Concentrated Solar Power (CSP), water,
wind, power transmission as well as in
­cogeneration sectors.
The early refinancing is a moneysaving move on Abengoa’s part. The
Seville-based company has already
reduced financial costs by 100bp in
Abengoa
German pharmaceutical giant
Bayer has launched a jumbo
bond worth $7bn via its US
subsidiary Bayer US Finance.
The bond is separated into six
tranches. The short option is
a two-year variable tranche
worth $500m with an interest
rate 0.25% above the threemonth USD-LIBOR (3mUSDL).
The mid-term bond includes
an $850m fixed rate portion
Abengoa’s tower plant on the Solucar platform
2014, with plans to reduce it by 125bp
by the end of 2015. Abengoa saves
€12 million per year this way. “We
always take a proactive approach to
our maturity management,” says an
Abengoa spokesperson. “We decided
to take advantage of a good opportu-
nity to extend maturities and improve
our financing costs,” she adds.
However, the financing splurge
is far from over. Abengoa announced
the issuance of its first green bond at
the end of September, which will be
worth €500 million. It will be used to
finance “eligible green projects”. The
bond was offered to traditional highyield investors and “socially responsible” investment buyers. The high-yield
green bond is the first of its kind in the
EU, according to Abengoa.
The technology company sees
a high level of interest in the capital
markets for green investments. The
current search for higher yields only
makes the instrument more attractive
to investors. The offering was closed
on 30 September. Abengoa did not
comment on how big the interest exactly was and whether the issuance
was oversubscribed.jae
Fitch: Corporate Debt to Set Post-Crisis Record
EU corporates raise almost €600 billion of debt in the first half of 2014
E
uropean corporates are on their
way to take on the most newly
acquired debt since 2007. Overall, EU
companies raised €595 billion of liabilities in the first half of 2014, the
rating agency Fitch says in a recent
report. In the second quarter alone,
EU corporates took on €360 billion of
additional debt. Supposedly, this was
the single highest quarter since the Q2
peak in 2007. That year, companies
made commitments worth more than
€1.4 trillion. The increased amount of
debt this year is due to a recovery in
bank lending, writes Fitch.
Loan volumes have been boosted
by a notable rise in M&A activity.
Among others corporates, German
pharmaceutical company Merck recently finished its biggest transaction
in the company’s history. Merck acquired laboratory equipment supplier
Sigma-Aldrich for €13 billion. The deal
was largely financed by a bridge loan.
However, borrowers are moving
farther and farther away from the
banking sector as a means of funding.
Therefore, EU companies have turned
to debt capital markets to replace
loans with other funding options.
In the first half of 2014, new bond
issuance accounted for 41% (€246
billion) of new funding. Although the
overall volume of additional financial
commitments was higher in 2007,
bonds only accounted for a puny 16%
of the total freshly acquired debt at
that time. The trend is especially noteworthy in the periphery of the eurozone, where bonds currently account
for 47% of new debt, up from 37%
in 2013.
The impact of bonds on total debt
is even greater. The loan instrument
accounts for 83% of the developedmarket debt of European corporates,
up from 70% in 2009. The reasons for
the discrepancy between share and
volume are that loans are typically not
fully drawn and that they do not necessarily show up on balance sheets.
Moreover, the EU has been hit by
a wave of early refinancings. The development has been caused by a momentary, gradual improvement of the
local economic conditions. Additionally, low long-term funding costs have
made bond markets more attractive to
European companies. After a lull at the
beginning of the year, EU corporates
are now apparently willing to tap the
bond market.jae
Financing Round-Up
+++ Swiss energy trader Vitol has signed syndicated revolving credit facilities
totaling $7.5bn +++ Volkswagen Financial Services has placed its 20th ABS
transaction in history at €1.071bn +++ German Adidas has emitted a Eurobond
worth €1bn in two tranches at 75bp and 105bp above mid-swap +++ Tag management company TagCommander has raised €6.5m in series B funding +++ UKlisted gold explorer Hummingbird Resources has successfully issued a $3m US
private placement +++ Moody’s has announced that it is launching Unpublished
Monitored Private Placement Ratings (UMPPR) across EMEA +++
People 5
Issue 18 | 9 October 2014
SI Re
Patrick Schumacher is the
new Finance
Director of
Swiss reinsurer Signal
Iduna Re. He
will be replacing Beat Landtwing, who is
set to retire after ten years
with the company. Schumacher will be responsible for
the department’s financial
accounting and IT. Previously,
he was in charge of financial
accounting and reporting at
reinsurer New Re.
Iain Torrens will join pay
television provider TalkTalk
Telecom Group as CFO.
Torrens is the former Group
Treasurer of electronic dealer
broker ICAP, where he later
took over as the Group Finance Director. A commencement date of his new position
has yet to be announced.
Torrens will succeed Steve
Makin, who leaves TalkTalk at
the end of the year.
Ola Hegesson is the new
CFO of Swedish Concordia
Maritime. In the future,
he will also part be of the
­management group and in
the insider register, the tanker
shipping company states. In
his previous stint, Hegesson
acted as Group CFO of Swedish ferry operator Stena Line.
He took over for Anna Forshamn, who left to be Head
of Pensions at Stena Group,
on 1 October.
Paul Coyle faces up to seven years in prison for insider trading
P
aul Coyle, former Group Treasurer
and Head of Tax at Morrison Supermarkets, has been charged with two
accounts of insider dealings, the British Financial Conduct Authority (FCA)
announced. Coyle now faces either a
fine or up to seven years in prison.
The FCA had previously arrested
Coyle in December 2013. At the time,
he was merely questioned about an
“investigation into insider dealing
and market abuse”. He was, however, not charged with the crime. This
has changed, the FCA confirmed last
week. The authority also verified rumours that the offences were related
to trading in Ocado Group shares between February and May 2013.
In May 2013, Morrison Supermarkets announced a partnership with
Ocado Group in order to improve
performance in the UK online grocery
market. However, from February that
year until the announcement, Ocado
shares more than doubled.
Morrisons appears to be unperturbed by the accusations. The supermarket chain said that it “is satisfied
with its governance and procedures
concerning the handling of market
Thinkstock
Alan Kinch has been appointed CFO of Williams
Grand Prix Holdings. He will
take over the position at
the beginning of December,
Williams announced. Kinch
will be responsible for all
operational and structural
finance and will also join
the Board of Directors. He
is coming from Vodafone
Group Enterprise, where he
has been Finance Director
since April 2013. Kinch will
be replacing Finance Director
Louise Evans, who is seeking
new challenges elsewhere.
FCA Charges Ex-Morrisons Group Treasurer
Morrison Supermarkets are struggling with increasing competition and bad news.
sensitive data in this case”. Morrisons
added that it “found that the company’s procedures had been properly
followed”. There were no other employees involved besides Coyle, and
the incident is considered the result of
an “individual acting alone”.
Morrison Supermarkets could
use some good news in the meantime. Similar to other UK supermarket
chains, the retailer is suffering more
and more under German competi-
tion; discounters Aldi and Lidl are taking away market shares from established UK retailers. Morrisons’ overall
turnover has decreased by almost
5% to £8.5 billion during the first
half of 2014. Profit before tax even
decreased by 30% to £239 million,
down from £344 million. Since the
FCA announcement to charge Coyle
with insider trading, Morrisons stocks
have plummeted yet again, suffering
an intermittent loss of 7%.jae
Saga CFO Announces Departure after 14 Years
Stuart Howard will leave at the end of 2015; Jonathan Hill will take over
S
tuart Howard (Photo),
CFO of Saga, has declared that he will step down
from his position at the end
of 2015. For the past 14
years, the 52-year-old has
been Finance Director of
insurance and holiday provider for British customers aged 50
and older. Howard is also the CFO of
Acromas Holding in 2007, the parent
company for the merger between Saga
and The Automobile Association.
As his replacement, Saga has appointed Jonathan Hill as Group CFO.
He will join them from the home
construction company Bovis Homes,
where he has been Group Finance
Director. Hill and Howard will work
closely together, states Saga, in order
to ensure an “orderly handover”.
Howard’s retirement announcement comes just months after Saga
Group’s official public offering (IPO) with which the
company raised €928 million, according to Bloomberg. Saga, which is partially
owned by private-equity investors, has been listed on
the FTSE 250 Index since
May. The IPO also appears to be the
reason for the departure as “Howard feels it is time to hand over to
someone who can take the business
forward in the next stage of its development as a listed company,” the
company announced.
Saga shares have been on a
downswing as of late. Originally listed
at 185 GBp, the value has been in
steady decline since the end of August, recently dropping down to 160
GBp, losing an additional 8% since
the presentation of the half-year results. This comes in contrast to a rather
Saga
News
strong performance during the first
half of the year. After deducting IPO
expenses (£50.8 million) and the oneoff cost of new debt (£22.9 million),
Saga still managed a profit before tax
of £32.8 million.jae
Job Openings
EACT: is looking for a Policy
Director in Brussels
BP: is looking for an Internal
Control Advisor in Budapest
Shell: is looking for a Team Head,
Risk Solutions in London and The
Hague
Glaxo Smith Kline: is looking
for a Manager, Global Treasury
Consultancy in Brentford, UK
Thomas Cook: is looking for a
Treasurer, UK in Peterborough
Software 6
Issue 18 | 9 October 2014
News
Rumours: Misys for Sale
L&Q introduces TMS
Private equity firm Vista is said to want to sell its stake
Soltra Edge improves
security
The Financial Services Information Sharing and Analysis
Centre and DTCC have joined
to form Soltra. The joint venture will design Soltra Edge, a
corporate cyber security solution that will “connect and
streamline the flow of threat
intelligence”, the companies
state. The security software
will be available in late 2014.
V
ista Equity Partners is reportedly ments in Misys by means of an initial
looking to sell financial software public offering. When EuroTreasurer
provider Misys. According to Reuters, asked for a statement regarding its
Vista has employed bankers to scout future, Misys declined to comment
for buyers who would be interested on the newspaper reports. This unin taking over the financial software certainty casts a shadow over Misys’
provider. If Vista
Fusion treasury
sells off Misys,
software suite rethe
two-yearleased earlier this
old acquisition
summer.
will come to an
Despite all
end. Rival comthe
speculapany Temenos,
tion surrounding
a Swiss-based
Vista’s reported
financial services
plans for Misys
software comto go public,
pany, pulled out Nadeem Syed, CEO of Misys
­American softof the race for a
ware company
merger with Misys in 2012, putting TIBCO Software Inc. recently anVista in the position to acquire the nounced that it will be acquired by
English banking software company for Vista. Vista purchased the business
$2 billion.
intelligence software company for
Additional news sources report $4.3 billion, and the transaction is exthat Vista may have other plans in pected to be completed by the end of
store for Misys. Financial Times re- this year. According to Reuters, Vista
ported that the US-based private eq- competed in a select circle of private
uity firm is looking to exit its invest- equity firms to buy TIBCO.jko
Misys
UK affordable housing provider L&Q has built Salmon
Treasurer, a TMS from Salmon
Software. “With a fast changing business model, it is vital
for us to manage and have
instant management information and visibility on our
banking, cash, treasury and
debt positions,” says Martin
Watts, Head of Treasury at
L&Q. Salmon Software is
available as both an on-site
and a cloud computing TMS.
EuroTreasurer
Publishing House
FRANKFURT BUSINESS MEDIA GmbH –
A member of the F.A.Z. publishing group
Frankenallee 95, 60327 Frankfurt/Main, Germany
HRB Nr. 53454
Registered in: Frankfurt/Main
Ust.-ID: DE218022242
Managing Directors
Bastian Frien, Dr. André Hülsbömer, Jürgen Kiehl
Publisher: Boris Karkowski
Editorial staff: Markus Dentz (editor, mad),
Steven Arons (sta), Desirée Backhaus (deb),
Jakob Eich (jae), Andreas Knoch (ank),
Antonia Kögler (ako), Josh Kongmany (jko)
Phone: +49 69 75 91-32 52
Fax:
+49 69 75 91-32 24
E-Mail:editorial@eurotreasurer.com
Advertisement responsibility: Dominik Heyer,
Deputy Head of Business Development & Sales
Phone: +49 6031 73 86-17 15
Fax:
+49 6031 73 86-20
E-Mail:dominik.heyer@frankfurt-bm.com
Senior Partners: Deutsche Bank AG, treasury
executives 53° GmbH
Subscription rates: free of charge
Frequency of publication:
bi-weekly (22 issues a year)
Layout
Daniela Seidel, FRANKFURT BUSNESS MEDIA GmbH
© by FRANKFURT BUSINESS MEDIA GmbH, 2014.
Disclaimer: All information in this publication is
provided with as much accuracy and caution as
possible and appropriate. However, all information is still provided “as is”, with no guarantee of
completeness, accuracy, timeliness or of the results
obtained from the use of this information, and
without warranty of any kind, express or implied,
including, but not limited to warranties of performance, merchantability and fitness for a particular
purpose.
In no event will “EuroTreasurer”, its editors,
photographers, related partners, agents or employees thereof be liable to you or anyone else for any
decision made or action taken in reliance on the
information in this publication or for any consequential, special or similar damages, even if advised of
the possibility.
ADVERTISEMENT
Issue 12
| 26 Jun
e 2014
mare:
Leader
st Night cy Deal
rer’s Wor
rren
A Treasu ace Bungles Cu llion, fires
Greenpe d charity loses €3.8mimings.
owne
ortco
world’s
World-ren mits treasury sh
e of the
s cost on
e, ad
employe
ne bad ha
n.
y deal go
A currenc arities €3.8 millio
t ch
foremos
People
Leader
tmare
ury
orst Nigh ns, admits treas
rer’s W
llio
A Treasu npeace loses mi
ee
le
Charity Gr s in futures bung
ng
shortcomi
t
agemen
Fees
Cash Man
ent Bank
Transpar electronic
Call for
for
initiative
German
e
s in Franc
ter
or
supp
g
Financin
Earn
’ Bosses
ases
easurers rs face pay decre
What Tr
ge
top mana
Europe’s
finds
ce billing
bank servi
Like reading
EuroTreasurer
on your iPad?
There’s an app for that!
Events
Soft ware
t
B rate cu
e Rate?
Negativ are can handle EC
ady for
TMS Re
their softw
confident
d
e
ve
bl
Vendors
impro
relia
g Too Un ecast data, need
recastin
o for
Cash Fo
ibility int
rs lack vis
ure
as
Tre
ion
collaborat
,
ro Bond with debut bond
with Eu
million
Debuts
s €850
Ryanair
line raise
air
et
dg
Irish bu
cing costs
cuts finan
ldschein lopments
oy Schu
deve
ing to Bu non-domestic
Borrow
ive
cts posit
LMA expe
nds
Up
dun
ce new bo
g Ro
Financin
Cream pla
d R& R Ice
Tesco an
ss
Risk & A
et Manag
ement
lt
of defau
light
in Spot
prospect
e Back
na faces
CDS Ar
s Argenti
ing mean
Court rul
e-magazine | App version
Apple, the Apple logo, and iPad are
trademarks of Apple Inc., registered in
the U.S. and other countries. App Store
is a service mark of Apple Inc.
Asset & Risk Management 7
Issue 18 | 9 October 2014
News
Penalty Interest on Deposits
S&P: Longer downturn
in Russia
Institutions want to prevent treasurers from parking large sums temporarily
New trading venue for
exotic options
Derivatives specialist SuperDerivatives has gone live
with a new electronic trading
platform for exotic foreignexchange options. The firm
plans to expand the types of
tradable asset classes from
just metals and FX to include
oil, equity derivatives, credit
and interest rates.
ESMA names products
for swaps clearing
ESMA has issued finalised
regulatory technical standards for IRS clearing through
central counterparties. According to the watchdog,
four swap classes are defined
in the clearing mandate,
including basis swaps and
fixed-to-floating swaps in
euros, pounds and US dollars
with maturities between one
month and 50 years. Nonfinancial counterparties will
have to comply by early 2018
if no additional hurdles or
delays come up.
France’s mid-market
under pressure
The business credit profile
for most French mid-market
companies has deteriorated
on the back of weakening
profit margins, S&P says. The
rating agency expects profit
margins to recover slowly.
Private placements and direct
lending activities will gain
importance for French midmarket firms.
C
orporate treasurers in the euro The loose monetary policy of the Euroarea are in danger of being pean Central Bank could be to blame
charged with penalty interest for for the banks’ paradigm shift. The ECB
short-term deposits. Relevant informa- charges commercial banks a penalty
tion from various businesses has come interest rate of 0.2% if they park
to light in the past few days. Accord- money at the central bank instead of
ing to reports, some banks
have threatened E.ON and
Lufthansa, members of the
German blue chip index
DAX, with negative interest
rates on short-term bank
deposits.
According to German
airline Lufthansa, negative interest rates for sight
deposits have been an- Short-term investments could be expensive for treasurers.
nounced, but no banks have
realised this so far. Energy giant E.ON offering loans to businesses in order
has confirmed this as well. “Until to stimulate the economy.
now, we were able to avoid negative
Some banks have adopted the
interest rates by choosing other bank- ECB’s policy and are charging their
ing partners, stretching maturities or own corporate clientele penalty interchanging to other means of invest- est. They want to prevent treasurers
ment forms,” an E.ON spokesperson from parking large sums of money for
said.
only for a short time because banks
are barely able to yield a return. EuroTreasurer recently surveyed various
banks and discovered that so far, institutes behave quite differently when
it comes to negative interest rate collection. A lot of banks do not want
to discuss the topic. Some
banks raise penalty interest in individual cases, and
others do not, but they do
not foreclose it in the future. Some banks, however,
firmly reject such a move.
Head of the German
UniCredit affiliate HypoVereinsbank Theodor Weimer
warned the industry to pass
the ECB’s penalty interest on to businesses and consumers.
“If we allow this, the economy falls
apart,” Weimer was quoted as saying.
Weimer excluded such an approach
for his own institute. “No matter who
comes to us: He will not be punished
because he gives us money,” Weimer
said.ank
Thinkstock
The international sanctions
and countersanctions are
further weakening the Russian economy, which was
already slowing before the
crisis erupted, S&P warns.
Restricted market access and
increased costs of financing,
as well as the heightened
uncertainty, are weighing on
investment. At the same time,
depreciation of the ruble is
pushing up inflation. The rating agency expects a longer
downturn.
China Starts Direct Trading in Euro and RMB
For corporate treasurers, the move should decrease conversion costs
C
orporate treasurers have been
able to trade directly between the
Chinese renminbi and the euro since
the end of September. With this move,
the euro has become the sixth currency that can be directly converted
into renminbi in mainland China. Up
until this point, this was only the case
for the US dollar, the Australian dollar, the New Zealand dollar, the British
pound and the Japanese yen.
According to the China Foreign
Exchange Trade System (CFETS), the
interbank trading and foreign exchange division of China’s central
bank, People’s Bank of China (PBoC),
direct currency trading aims to promote bilateral trade and investment
between China and the EU and to
facilitate the use of the two currencies. So far, commercial transactions
between the two major economic areas are predominantly carried out in
US dollars.
For corporate treasurers, the move
means that conversion costs are expected to decline. With direct currency
trading between renminbi and euro,
the detour via the US dollar can be
avoided in the future. “China’s announcement is no big surprise. Specifically, after the direct trade between
the British pound and the renminbi
was announced in June. Nevertheless,
the move should provide for a greater
use of the still highly regulated Chinese currency in payment services,”
says the treasurer of an automotive
supplier operating in China.
French and German businesses
are expected to benefit the most.
They are the leaders in renminbi use
among countries outside of greater
China, according to a July report by
HSBC (based on a survey of 1,304
businesses in 11 major economies
that have ties with mainland China).
Exactly 26% of French corporates and
23% of German companies were using the currency to settle trade, the
highest proportions apart from mainland China, Hong Kong and Taiwan.
According to information from the
PBoC, the exchange rate will be settled
once a day, from which then trading
will take place. So called market makers are commissioned to detect market
prices and to provide liquidity. It is the
same system the PBoC has adopted
to calculate the US dollar exchange
rate. HSBC said separately that it has
received regulatory approval to be one
of the first market makers when trading begins in China’s domestic market.
There were perceptible reactions
in the foreign exchange market after
the announcement: The Chinese currency appreciated noticeably in the direct aftermath of the message – both
against the euro and the US dollar.
“But we do not see a quantum leap
for the global currency trading yet,”
said a foreign exchange dealer. The US
dollar-renminbi will remain the dominant currency pair in international
mercantile trading. In addition, capital movements will be subject to strict
control even after the introduction of
direct trade. Swift reported that the
payment volume in yuan has doubled
in the past two years. ank