Evolution and Revolution for the Treasurer’s Role in Europe
Q (gtnews): The UK’s current economic performance might have room for improvement, but currently along with that of the US it compares favourably with many of the world’s other major economies. How would you rate the performance of the outgoing coalition government since it took office in 2010?
A (Peter Matza, ACT):
We know our members have continuing concerns over global political and economic uncertainty, over the impacts of financial services regulation on non-financial corporates and continuing conduct issues in financial services and markets.
The ACT presumably has a number of issues that it would like the new administration to tackle. Which would you rank as the top three and why are they important?
In the regulatory space, we would very much like regulators in developed markets – across the European Union (EU), with the US – to work consistently and coherently so that non-financial corporates do not suffer further unreasonable impacts on their activities in hedging, accounting and similar.
The ACT has close links with the European Association of Corporate Treasurers (EACT) and many common objectives. However, are there also key differences between the priorities of treasurers in the UK – which has become very much a services-based economy – and those, say, of Germany, where manufacturing is still a major contributor?
Corporate treasury is a fungible discipline in that its skills and competencies can be applied across all organisational activity. In that sense a treasurer of a services business has as much reliance on payments systems, capital markets and corporate governance as a treasurer of a manufacturing business. The impacts on financial services providers of the waves of regulation already implemented and those yet to be felt affect all treasurers everywhere. We work closely with our colleagues in the EACT on relevant issues affecting the EU.
The UK’s continuing membership of the European Union (EU) has been a major issue in recent years. Does the ACT believe that it is vital for Britain to remain part of Europe and what feedback to you receive from members?
More than 2,000 of the ACT’s members and students are based outside the UK, so we take a comprehensive view of the business and financial issues that affect all our members, students and the wider treasury community – not just those from a UK perspective.
This year’s ACT conference is titled ‘The Age of Treasury – Evolution or Revolution?’ Two questions; firstly, what led to this being chosen as the topic for 2015. Secondly, would it be fair to say that the pre-2008 period was evolution and since the financial crisis it has changed to revolution?
The profile of corporate treasurers and treasury has substantially changed since the financial crisis. Our own research says that treasurers are now having more exposure than ever to their boards and those boards are accepting more and more of the advice and guidance offered by treasurers. Individually, treasurers have widened their scope of responsibilities and applied their skills to an increasing range of financial and business challenges. So, both revolution and evolution.
This year’s conference agenda also includes a keynote address by NATO’s former deputy supreme allied commander, Sir Richard Shirreff, entitled ‘Geo-Political Risk: Europe’s Periphery in Flames’. Are there fears that developments such as escalating sanctions against Russia could undermine any economic recovery in Europe?
Like everybody else, treasurers keep an eye on what’s happening in the world.
Other recent developments in Europe have been the virtual elimination of inflation and the increasing prospect of deflation, extremely low interest rates and the European Central Bank (ECB) embarking on quantitative easing (QE). Do you expect these to be widely discussed this year and is there a feeling that each will be than a short-term phenomenon?
Whether each of these is independent is a moot point. The job of a treasurer is not to predict the outcomes of markets, regulators or legislators; rather the professional, qualified treasurer should offer alternatives to his board depending on that organisation’s risk appetite, financial and business strategy and available resources.
There’s no doubt these and other factors affecting business and economic life will be discussed and debated all around the conference and the networking – that’s why this is the largest association run treasury conference in Europe.
At last year’s ACT conference, a keynote session was by the head of one of the UK’s big banks on how it had cleaned up its act. Yet the past year has been marked by big fines imposed on many of Europe’s major banks and further evidence of bad practices. How have ACT’s members reacted and are many seeking to reduce their dependence on banks?
The ACT believes broadly that functioning financial systems are essential for business growth and prosperity. To that end our view is that firstly, open, liquid, transparent and honest markets are in the interests of all companies involved in those markets in any way and of society at large. Secondly, it is important that market infrastructure, payment systems, etc. take account of corporate client needs as well as financial service industry convenience.
Investment grade corporates have of course made considerable use of the capital markets – debt and equity – over the past few years. The ACT has been involved in efforts on an EU and UK level to encourage the growth of private placements markets similar to the US. However, corporates still require the services that the banking industry provides to foster growth and economic development
Further afield, the ACT Middle East is a fast-growing body. Are the concerns of members in this region similar to those of treasurers in Europe, or are there major differences?
As the only treasury body in the Middle East, with more than 4,400 people in the network, the ACT Middle East is the network for treasury, risk and finance professionals committed to the development and sharing of treasury knowledge and expertise across the Middle East. The ACT Middle East was established to support and nurture the development of the treasury profession across the Gulf.
Treasurers in the region share the concerns of their colleagues in more developed markets against their own backdrop of regional economies, which have particular concerns in respect of developing treasury as a fully understood discipline
Lastly, looking into your crystal ball are there any emerging issues that could be heading the agenda at the ACT conference 2020?
It’s hard to say whether regulation will still be on treasurers’ agendas but in my view, I would say that the impact of technology, dramatic changes in financial services and the development of the treasury profession will be on the agenda!