This month the ACT hosts the International Group of Treasury Associations (IGTA) annual meeting in London and we have much to talk about. This year’s IGTA meeting is themed around Preparing Treasurers for Change.
Of course, for corporate treasurers much has changed since last year’s IGTA meeting in Washington. We’ve all got our ‘regulator score cards and pencils at the ready’ to see how the G20 Pittsburgh legacy has worked through to commercial and industrial companies in practice.
So, what have treasurers been spending their time on during 2014?
Well, derivative trade reporting has had a terrific focus, although as non-financial corporates we still can’t understand why - and regulators also seem puzzled as they seem to place differing importance on the issue and solve the exam question in a different way. Encouragingly, it does now seem universally accepted that derivative use by real economy businesses to manage their underlying granular business risks is both sensible and welcome. After all, they are not of systemic importance from a financial stability point of view as, in aggregate, globally such derivative use accounts for only about 10% of total derivative trades. Business risk management by professional users in non-financial corporates, neither contributed to nor precipitated the global financial crisis.
Looking at the derivative reporting score card over the past year, it appears as though the US corporate treasurers seem to be the winners compared to their European counterparts. Whilst they have managed to outsource derivative trade reporting to swap dealers under Dodd Frank and avoid inter-affiliate swap reporting, their European counterparts under EMIR have not. Indeed, not only are we having to report the trades - as well as the bank counterparty - we are also having to report intergroup derivatives and increasingly having to spend precious corporate resources building the IT systems to do so, to ridiculously short deadlines.
Of course, treasurers know there are many ways to solve a problem, it’s just we didn’t expect the G20 regulatory response to throw up so many. Last month I gave evidence to the House of Lords EU Economic and Financial Affairs Sub-Committee and raised a number of these issues affecting real economy businesses. They seemed surprised that our voice is not being heard earlier enough in the regulatory process. This is a constant challenge and one which the EACT, the ACT and our sister treasury associations have been working very hard at since the financial crisis. However, at times we are hampered. The EACT have made a complaint to the EU Ombudsman regarding representation on the main ESMA stakeholder group.
The complaint is in the system. In fact, it was filed seven months ago, but it looks like we will have to wait another year for an outcome. The irony is not lost on me. That’s longer than some corporate derivative trades.
In our opinion, at times the practical voice of the real economy has hitherto seemed to be a cautionary whisper in the wind tunnel of required financial sector reform. We are, of course, strengthening our ability to make our voice heard by recruiting a Policy Director at EACT level and additionally, the ACT is also searching to fill a senior vacancy in our excellent policy and technical team.
Both are excellent roles, and both are vital. Please do take some time to consider whether you may have the required qualities for either post.
Whilst we will be welcoming IGTA delegates to London, we will also be shortly thereafter following G20 developments in Brisbane. With global growth still fragile we will continue to press for a business-reasoned, proportionate and co-ordinated regulatory response to the global financial crisis.
Basically, ‘Keep Calm and Carry on’.
