ETPG Chair & Treasury Blog
European Treasurers' Peer Group is chaired by
Magnus Lind, founder and Managing Partner of
NFS - Experts in Treasury, a global treasury consultancy. He is also part of the
Editorial Board of the Journal of Corporate Treasury Management.
Prior to setting up NFS in 1992, Lind was head of trading and large corporate accounts at Swedbank after being treasurer at ESAB and sales manager and trader at Den Norske Bank. He has a Master of Science degree from Chalmers University of Technology, Sweden.
Below are the latest posts from his
corporate treasury blog, many of them directly related to or derived from these treasury peer groups.
Hold Your Breath
(Fri, 18 May 2012, by Magnus Lind)
 |
| Hear, See, Speak No Evil |
It's a peculiar feeling when we are going into our peer group meetings in London next week.
- There are very limited, if any, bank funding from European banks available to the corporate sector
- The corporate sector are, to a large extent, reluctant depositing excess cash with European banks
- Cash is taken out from crisis ridden European countries, which continuously increase in numbers
- EUR is not a preferred cash holding (maybe the Swiss National Bank is the only taker of EUR?)
- The large European corporates have focused investments and operations to regions outside of Europe (read Asia) for decades, leaving fairly limited exposure and risk to Europe
- European companies serving local markets are stuck in a situation of decreased availability of funding, and decreased demand
Everyone is severely concerned and it feels we are holding our breath. Let's hope for the best that everyone realizes what we are risking and carefully, carefully we therefore steer us out of here to safer waters. This is a great opportunity to unite Europe into a progressive and prosperous era, which the EU was meant to lay the platform for. Fingers crossed and feel
no fear!
From the treasury blog post
Hold Your Breath.
Treasury Update from Middle East
(Mon, 14 May 2012, by Magnus Lind)
Brendan Boucher, Group Treasurer at
Petrofac, and other peers kindly provide this update on the current challenges in the Middle East.
- In a nutshell Middle East faces the same overall economic concerns as everywhere in different degrees with Europe's sovereign challenges, the US improving slowly from a very low point and the world's reliance on emerging market growth
- Impact from commodity prices and specifically on oil prices
- Investments and M&A activity extraordinary low
- Low predictability; Exchange rates volatility and difficulties looking forward to interest rates beyond 2014
- Future ability to hedge exposure and the cost of this under BASEL III and the availability of hedging facilities from banks
- Funding is another key issue with the ever growing need to diversify and shift from bank lending to capital markets. Banks are retrenching from balance sheet commitments and decrease the number of clients. This forces corporates into strong cash positions
From the treasury blog post
Treasury Update from Middle East.
TARGET2 Dilemma
(Fri, 11 May 2012, by Magnus Lind)
What makes Sinn's conclusion really worrying is that it was Helmut Schlesinger, former Bundesbank president, pointing out the problem for him. There seems to be no realistic alternative than to save the EUR.
From the treasury blog post
TARGET2 Dilemma.
Treasury Networking
(Tue, 08 May 2012, by Magnus Lind)
We're just finalizing a three weeks tour in Europe drawing our conclusions:
The corporate credit crunch and the new regulation is putting a wet, cold blanket over corporate activity. France is an exception with
the state taking on corporate risk. Surely pragmatic and also creating a system which imposes the state to provide corporate banking services. Good in the short run. Hardly an optimal solution for the long term with the state taking on too much risk.
Everywhere there are Association of Corporate Treasurers struggling hard to provide evidence to the regulators and the EU commission of the adverse effects of all new regulation. Shockingly their voices are mostly overlooked and disregarded leading to that they start to become demotivated. The ACTs have done a terrific job in defining and communicating the problems and the way the corporates are treated is disrespectful and disappointing unfortunately proving the cynics right in
following the money.
It seems t
he awful truth is that the more regulation the more bureaucracies, so sending letters of concerns is just keeping the system going. We might instead need disruptive change.
Few corporates believe they should expose themselves to financial leverage since the financial risk is very high. They are therefore
hoarding more and more cash for every month since regulation is forcing all banks away from corporates. Please consider taking Treasury Strategies Cash Survey Q2
here.
The corporates are adjusting to the new conditions and focus on the growth markets with much more favorable corporate conditions. The competitiveness of Europe continue to fade at the same time as the EU commission speaks about growth initiatives and promoting entrepreneurship. Maybe the time is due acting as they speak?
Financial risk management is becoming an issue of concern for several reasons:
- High probability of significant volatility in periods because of the large global financial imbalances and with Europe being the center of the storm
- Difficulty to forecast market movements increasing the need to hedge
- New regulation decreasing the possibilities to hedge
This means that corporates are full with financial risk they previously hedged in the banking system. Before we had the financial system as a distributor of risk, now the banks are degenerated to become cheap ATMs for the public sector. The banks are in turn backed by an increasingly fragile central banking system completely relying on a fiat currency regime. The central banks balance sheets are much too big already and with poor quality. This may be something for the loathed US rating agencies to point out if they dare? This leads to a EUR system under extreme pressure and there are reasons to question if fiscal discipline and realistic growth programs can be implemented in time to ease the pressure.
Bureaucracy is so firmly rooted in Europe's DNA it has become the purpose rather than the means. And now it is struggling to take even more resources. Together with the political elite it just do not seem to understand the necessity of acting in a way to promote corporate activity. This just have to change. We need to keep and expand the corporate base in Europe. For this
we require much better understanding of the conditions corporates require to develop and grow, to generate taxes and employment. Parts of the European leadership has a long way to go understanding basic economics. The key question is where is the driver to increase this understanding?
From the treasury blog post
Treasury Networking.
No Credit Crunch in France
(Mon, 07 May 2012, by Magnus Lind)
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| Emmanuel Rapin at Rhodia |
I've had a great talk with
Emmanuel Rapin, Group Treasurer at
Rhodia (acquired by Solvay) about the state of treasury in France. He told me about how
the French very pragmatically had solved the problems created by Basel III. Basically Sarkozy did not allow the negative credit effects instead he found a solution to the corporate credit crunch. He appointed Gérard Rameix as facilitator for credit. Any company facing problems with getting credit despite having affairs in order could raise it with his office, who in turn would raise the question to the credit institution.
Rameix made sure no one wanted to mess with him, so the credit crunch in France has been avoided. In parallel France activated a state funded bank -
OSEO - to give guarantees and loans to SME catering for the loss of bank funding. As a consequence
the corporate sector does not experience a credit crunch but of course they find the cost of credit increasing.
 |
France provides a protective shield
to the corporate sector from
the Basel III credit crunch |
I believe France has acted very responsibly and has proven its reliance on the corporate sector for its welfare when regulation has forced the state to take the role of the banks. Does that make sense? Should that be in the role of the state and what risks do this impose?
In Europe regulation is about to create a system where ECB funds the banks, the banks fund the sovereigns and the state funds the corporates. Because a corporate credit crunch would create a slump in state tax revenue. One may ask how that system provides financial stability? However when regulation pushes the banks out from the corporate sector someone has to step in.
Thanks Emmanuel for sharing.
From the treasury blog post
No Credit Crunch in France.