Trésorier/Treasurer magazine - N°91 - Oct/Nov/Dec 2015 - (Page 64)

NEWS LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°91 - OCT / NOV / DEC 2015 - Treasurers must better manage their bank relationship under Basel III 64 Seven years ago, regulators thought that Basel 3 could be the response (or at least part of it) to the Global Financial Crisis (GFC). The ability of banks to survive a strong financial crisis without government assistance was the key question. Basel III will definitely impact banks but also indirectly corporates. The aim is to strengthen banks' capital adequacy and their reliance to the now famous liquidity risk. Basel III will push banks to prioritize what should be the business core activities against available resources. The banks should improve their performances by increasing operational efficiency while consuming the less capital possible. This exercise for banks having global activities will be extremely complex to optimize the balance sheet mix under Basel III. The capital alchemy will become a nightmare for banks and the search for capital use efficiency the name of the game. It means that in future it will be considerably complex for corporates to have one single global bank across the world. These Basel III rules explain why banks are restructuring their activities (e.g. Deutsche Bank, RBS, HSBC, etc...) in order to maximize their balance sheet and capital use. It means that treasurers will have to cautiously select their banks regionally rather than globally. The bank relationship management will become more complex under the new Basel provisions. As banks will be under pressure to generate customer returns they will be looking for more than ever ancillary businesses and operations with high(er) profitability. Some banks could be tempted to reduce credit facilities, to increase bank charges and to possibly stop cash-pooling structures. All what have been set up over last years could suddenly become unsearched and even prohibited by bank management. It could completely change the bank relationship and force treasurers to select bankers based on the activities they can/want to deliver. The number of bank relationships should significantly increase over years, after years of reduction of number of bank partners. However, this change will not be initiated by treasurers but as a direct consequence of Basel III. The client selection will become a complex process within banks. With which clients do the bank wants to work. The expected consumption of the capital will be the key selection factor. Banks will be more than ever before very demanding for high profitability side businesses and even classic (in the past dumped) businesses and credits will become better priced and therefore more expensive. In this new regulatory environment, corporates will have t better manager their bank relationships. It is an opportunity for treasurers to re-address and revisit their bank partnerships on a holistic basis. The bank relationship policy will necessitate a real long term strategy. More partners means more work, more meetings and more time dedicated to bank relationship management. The estimate value of the wallet and the proper allocation will be critical if treasurers want to preserve their partnership overtime. The relationships will have to be analysed on a consolidation basis to make sure corporates have the full picture of the business they give to banks. The treasurers will need tools to assess business spreading and how it is allocated. The difficulty resides in the need for getting all the information on every type of bank cost, across the world. Without a full consolidated picture, who could claim to be able to ensure proper allocation of side businesses to banks? The satisfaction of banks has never been that important in the past. These days, it will be a key criterion to focus on. "No satisfaction (in terms of returns), no sustainable relationship", will be the motto. This assessment can be done via a classic usual bank score card and with simple metrics to quantify charges paid all-in. Tomorrow the treasurer will have to precisely know the all-in fees paid and systems like the one proposed by TWIST (i.e. Bank Service Billing system / BSB) will be essential. Therefore, the "Know Your Bank" (KYB) and precise assessment of businesses given to banks would become the key element in order to properly manage your bank relationship. The future of bank relationship won't be easier and would undoubtedly require more monitoring from treasury side. Be prepared to manage it closer and to diversify your sources of funding adequately. François Masquelier Chairman of ATEL

Table of Contents for the Digital Edition of Trésorier/Treasurer magazine - N°91 - Oct/Nov/Dec 2015

Table of contents
INTERVIEW Ben Poole Editorial Services
To What Extent Should Treasurers’ Activities be further centralized?
Capital Markets Union (CMU)
Upsurge in fraud
CEO impersonation
Using analytics to cope with uncertainty and volatility for treasury
IFRS 9 : Nécessite d’une reorganisation bancaire majeure
Taux zéro : de nouvelles stratégies pour un nouveau monde
Investing surplus cash in repos
Warranty & indemnity insurance
Making the switch from Excel to a Treasury System
Corporate treasury in the digital age
Fini le casse-tête des paiements internationaux pour les entreprises !
Bank Independent Cash Pooling
Gérer l’offre de retraites : un choix complexe pour l’entreprise

Trésorier/Treasurer magazine - N°91 - Oct/Nov/Dec 2015