Trésorier/Treasurer magazine - n°82 - July/Aug./Sept. 2013 - (Page 86)

The Financial Risk Observatory By Hugues Pirotte, FinMetrics SA gOOD NEWS FOR THE TREASURy FUNCTION Following some lessons learned during the financial crisis, some institutions and several regulatory authorities are clearly foreseeing the function of the Treasurer in financial institutions to be revamped and relocated. Until now, the typical characteristics of the treasurer function in major banking institutions are/were potentially a mix of, among others: LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE — N°82 — juLy / Aug. / sept. 2013 l Reliance on short-term funding. Location of the function on or close to the trading desks. Its activities are a by-product of upstream operations or «sales». The banking treasurer passes his/her own transactions and is mainly seen as a support function based on shortterm sourcing needs stemming from the front activities. Moreover, the sensitivity of the treasurer to the more fundamental and global needs is alienated to the day-today activity of the front. 86 l Absence from the strategic governance of the bank, and from the process of the risk policy definition. The highlighted situation above isolates the treasurer from his/ her expected mission: ALM. This means also that he/she is not considered as part of the strategic oversight. The risk policy doesn’t really rely or integrate the long-term financing strategy and doesn’t involve the treasurer. Unavailability of a system capable to monitor the flow of funds and the current resulting balance sheet equilibrium. With the crisis, it has been particularly amazing to realise that many banks were incapable of having a streamlined way to have an exhaustive scrutiny of cash management and funding needs, to provide concrete forecasts and a more factual map of the balance sheet equilibrium of the bank through time. See for example http://on.ft.com/ZW37sc for a discussion on this topic. As we keep advocating for many years now, it is not only about having a complex system capable of pivoting any data dimension of your organisation. It is about having dedicated dashboards that provide relevant data specific to each metier, to spend less time gathering data and more time using it for financial decision-making. As from the end of 2009, the life of the banking treasurer has already got more complicated or, let’s put it more positively, more in phase with the expected managerial contributions of the treasurer : rush to diversify the sources of financing, stronger regulation coming forward such as requirements at the entity level and the consideration of counterparty risks of intra-group operations at the same level as for extra-group operations. Clearly, the banking crisis has sharply put back liquidity and balance l sheet management at the centre of the picture. And globally, this is one more element of the following question... why should a bank be assessed differently than any other corporate firm? Without blaming anybody in particular, it is impressive to see how far we have been diverted from good corporate financial practices when assessing banks and their exposures. We have allowed banks to live with a debtequity ratio of 23-30, liquidity was for free as if the subsidized WACC was a real market one, we sourced liquidity without discriminating between public and wholesale money, we grew bank sizes using debt in negation of sustainable growth, easy to assess, we continue(d) to see ROE as the only objective, and risk management was repeatedly seen as a separate to-be-suffered function and probably representing just risk measurement. But we have been continuously taught that financial institutions should be considered apart. And with that, the treasurer function was atrophied. Why should we dare about funding when liquidity is there outside to be grasped and there are always some institutions flooded with it? Well, because it might simply stop to circulate one day... Dear treasurer, now is your time...show them! Hugues Pirotte, FinMetrics SA The News corner... l l l l Smart beta: there is a trend about designing special indices and benchmarks with varying properties, instead of using the traditional value-weighted indices. Read more on http://on.ft.com/KTUHfI. The new Global Financial Stability Report (April 2013) is out. Check it out at IMF.org, section «Publications». Interesting discussions on the relevance of CDS prices, the sustainability of corporate debt in Europe, and European banks deleveraging plans. Interesting source to assess the forthcoming months for corporate financing. On IFRS.org, you will find the 2012 Annual report. It traces the evolution of the IFRS Foundation so far and the changes to come. Informative about the key challenges as identified by the various bodies of the foundation. Find out about another defence for the treasurer to have a global view in a financial organization: eba. europa.eu, publications, search for «Opinion of the EBA on Good Practices for ETF Risk Management». http://on.ft.com/KTUHfI http://on.ft.com/ZW37sc http://www.IMF.org http://www.IFRS.org http://www.eba.europa.eu http://www.eba.europa.eu

Table des matières de la publication Trésorier/Treasurer magazine - n°82 - July/Aug./Sept. 2013

Couverture
EDITORIAL
SOMMAIRE
FINANCIAL HIGHLIGHTS
INTERVIEW - Mr Jacques Lafitte, AVISA
FOCUS
FORUM OF ADVERTISERS
CORPORATE FINANCE
15 MINUTES WITH - Robert Franck - Directeur associé VISCONTI
NEWS
The Financial Risk Observatory

Trésorier/Treasurer magazine - n°82 - July/Aug./Sept. 2013