How Treasurers Can Cope with the Regulatory Avalanche
“We are facing too many regulations as the same time and we need to lobby regulators via industry groupings to make sure our voice is heard in Brussels,” said François Masquelier, head of treasury and corporate finance at RTL Group in Luxembourg.
Speaking at the EuroFinance conference in Budapest, Hungary, Masquelier complained that “47 regulations have so far been initiated” since the Pittsburgh G20 meeting back in 2009 fired the starting gun for the raft of post-crash regulations now hitting banks and their corporate treasury clients. “It’s too many,” he said, citing the US Foreign Account Tax Compliance Act (FATCA) supranational tax stipulations, the coming Basel III capital adequacy and collateral regime and a revived Financial Transaction Tax (FTT) in Europe as concerns. “It will come back. The French are pushing for the FTT.”
The base erosion and profit shifting (BEPS) tax stipulations in Europe are another concern. “It’s an OECD project,” explained Masquelier, “which apparently the US won’t be adopting [since it has FATCA] but European treasuries and finance will be affected by it.”
BEPS could be the next “killer reg” but only about 10% of the treasury audience said they’d heard of it.
Christophe Widart, operational manager in Nexans’ central treasury in Belgium, and a fellow regulatory panel member at EuroFinance, was also wearied by the raft of regulations, commenting, “I do not understand why the European Market Infrastructure Regulation (EMIR) and US Dodd-Frank rules don’t align. I have to report twice [due to regional differences]. It’s nonsense.”
“Over the last two years I’ve spent 20% of my time on regulation,” continued Widart. “With lots of time dedicated to understanding new regulations, how they’ll impact us, and then selecting the appropriate organisational and/or technology response to ensure alignment, efficiency and compliance.”
Despite the regulatory burden, there is an upside however, with both Widart and Masquelier urging treasurers to use regulatory compliance as an opportunity, where possible, in order to get IT and project funding and implement long-desired efficiency improvements.
In regard to SEPA, Widart said that it was a real burden in that if you didn’t comply you couldn’t process your payment flows but there was an opportunity here as well. “For instance, you could leverage SEPA to deliver a payments factory,” he said, with all its associated centralised treasury and efficiency benefits.
EMIR could work the same way in providing an opportunity to use a compliance burden as a way to release technology or investment dollars from the business, added Masquelier, but he was still unhappy with the lack of trans-Atlantic alignment and understanding of how this particular regulation will impact treasurers trading FX and other instruments, such as derivatives, as part of a hedging procedure.
All the more reason to make sure the treasury voice is heard in the EU capital of Brussels and at regulatory bodies around the world.