SEPACorporate StrategyPayments International 2015, Day 1: Treasurers Want Better Banks

Payments International 2015, Day 1: Treasurers Want Better Banks

The corporate panel session, entitled
‘What Do We Want From Our Banking Partners?’
at the Payments International 2015 trade show comprised of Kostas Evangelidis, senior manager for global treasury at PwC and Bhavesh Shivshanker, the senior treasury analyst at Russia’s natural gas giant Gazprom.

“Bank relationships still matter,” stated Shivshanker. After the 2008 crash, when bank and counterparty risk was to the fore for treasurers, having a stable and reliable bank was crucial and “that shouldn’t be forgotten.”

That view was echoed by the panel of treasurers at the trade show, as businesses adjust to a new regulatory environment where Basel III and other post-crash rules are changing the capital and collateral requirements for banks. This will ultimately impact how banks treat treasurers, with large multinational corporations (MNCs) being prioritised while smaller firms risk being ignored and forced to look to the capital markets for future funding. A certain amount of cherry-picking is inevitable. While some smaller corporates may be able to look to the capital markets for alternative funding, it is good to have other bank options if you’re large enough.

“For sure, we want a competitive environment and you must constantly monitor your bank relationship to ensure you’re still getting a competitive payment processing price and an overall good service, but that isn’t the only thing that matters,” said PwC’s Evangelidis. “You want a bank relationship that lasts through good times and bad.”

It’s a viewpoint shared at Gazprom. “If you are looking to do a refinancing for instance, you will need a good bank partner and a good relationship,” commented Shivshanker.

Room for Improvement

That doesn’t mean to say that corporates shouldn’t push for better service, however. Another panel member, James Lockyer of the UK Association of Corporate Treasurers (ACT), argued that corporates have a right to look to banks for assistance with handling cyberrisks to the financial supply chain and participation in immediate payment near real-time payment processing infrastructures. The latter could deliver better reconciliation, accounts payable (A/P) and receivable (A/R) capabilities to corporates.

Immediate payments was certainly a hot topic at this year’s show, as more infrastructures steadily roll out and the US and eurozone explore options to join the UK, Denmark, Singapore and others already offering same-day payment settlement.

Treasuries also have a right to expect banks to be ready for regulations such as SEPA, continued Lockyer. Not all banks – or indeed countries – were ready with standardised XML ISO 20022 messaging capabilities when the eurozone countries finally migrated to SEPA last August.

There are also cross-border tax issues in the Eurozone, preventing the promised virtual single bank account capability across Europe. Other impediments to the promised harmonisation also still remain. This effectively necessitates a ‘SEPA 2.0’ process to ensure full harmonisation is delivered post-migration and also in time for when non-euro countries, such as the UK and Denmark, join in 2016.

Regulation Grumbles

The lack of the promised full SEPA harmonisation benefits during the August 2014 migration was a continual gripe of treasurers at this year’s show, alongside how other European payment regulations such as the EU’s payment services directive (PSD) II might affect the market.

PSD II should theoretically open up the payments markets to more competition as payment service providers (PSPs) are given more licence. This could potentially offer treasurers alternative payment models, particularly as the correspondent banking model wanes under the impact of sanctions fines and the drive to cut operational costs at banks as the cost of capital goes up.

“Intra-day hasn’t got an interest value at the moment though,” said Evangelidis, as the panel’s discussion turned to Basel III, regulation and real-time infrastructures. “That might change, and then the intra-day discussions that are going on here at this show might move up the treasury agenda.”

A suggestion for panel moderator, Ruth Wandhofer, who heads regulatory and market strategy at Citi, to possibly consider, in terms of offering incentives to treasurers under the emerging ‘new normal’ regulatory regime.

From the floor, Telecom Italia’s treasurer, Massimo Battistella, joined in the Q&A element of the treasury panel at the show. Battistella, who also heads the Italian treasurers’ association, added that pre-funding was a hot topic in the context of real-time payments infrastructures – the UK’s Faster Payment Service (FPS) for instance is moving towards it to reduce credit risk concerns. However, real-time payments is still “too retail bank and consumer-focused at the moment to be of immediate interest to treasurers,” he said.

That situation may change – as Evangelidis suggested now that the US and eurozone are in the exploratory stages of introducing such systems – but for now it seems like fair comment.

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