BankingCorporate to Bank RelationshipsInterview: Dealing with regulatory pressures

Interview: Dealing with regulatory pressures

The Global Treasurer spoke to Tom Gregory, Manager of Treasury Management Sales at TD Bank to discuss regulatory pressures treasurers are feeling and how they can overcome them.

Earlier this month, TD Bank and Strategic Treasurer released their 2019 Treasury Perspectives Survey. The poll of 340 corporate treasurers, treasury professionals and corporate bankers, primarily from North America and Europe, highlighted some interesting trends. Most notably, the survey found that rising interest rates are the primary concern (56 percent) for corporate respondents doing business in North America, followed by gridlock in D.C. (38 percent) and an increasingly complex regulatory environment (34 percent).

The Global Treasurer spoke to Tom Gregory, Manager of Treasury Management Sales at TD Bank to discuss the regulatory pressures and how treasurers can overcome them.

From a treasury practitioner’s perspective, what are the main regulations that are causing headaches and sleepless nights?

“Respondents to the survey were talking a lot about KYC and money laundering requirements. Ensuring that you are remitting payment to a legitimate receiver. I think when you look at the KYC requirements, some of this is where the treasury practitioners are the ripple effect victim of what banks need to do to satisfy banking regulators. I think the treasury practitioners are saying, we’re already understaffed here – this is clear if you look at some of the other findings of the overall survey – and to some extent, we’re admitting that we’re not getting to some critical functions in our business. But yet, we’re subject to a lot of things that are regulatory compliance in nature, and that has an impact on us.

“I particularly think that a superintendent of regulatory compliance belongs in the treasurer’s office”

“While there have been some very public examples of reductions in regulations, there has been a much larger tidal wave that has been in place in corporate America and banking for several years now. And, while we can point to a regulation here, or regulation there, that either may be softening, or even going away, the broader picture hasn’t really changed that much.

“Being a treasurer is a very responsible job. I particularly think that a superintendent of regulatory compliance belongs in the treasurer’s office. I think some of the advice we’re saying is, if you don’t already have this as a clearly defined duty for someone or a group of people to take on as a function, you’re probably at regulatory risk.”

While corporate treasury clearly has a role to play, should the banks to be taking a little bit more of the onus off of treasury?

“Absolutely. At TD Bank we’re genetically coded to be thinking about the customer experience. We compete in an industry where many of our peers are looking to prove themselves to be customer-centric, service-oriented organizations. For treasury to say. ‘Oh well, this is what is imposed on banks, this is the consequence on me, and we’re just going to have to live with it,’ is simply not good enough. That’s why at TD we’re looking all the time at how we make process improvements to ensure not only that we are in 100% compliance with regulatory requirements, but that we are always looking for ways to alleviate the burden on our customers. This could be ensuring we have the processes in place so that customers do something once and subsequent times are automated.

“When a corporate customer, for example, has been with the bank for many years, and are adding a new transactional service, the risk that a bank is taking with that customer is logically different than the risk the bank is taking with a brand new customer. Can we apply a different approach to the enhanced due diligence that goes along with ensuring that if a regular regulator were to look at the records, they would see that we looked at the appropriateness of this particular use of a service, we looked at the volumes and the throughput, and, and here’s a record of those things? This way, perhaps we don’t have to burden the customer by asking them for a lot of information that, frankly, we already have, because of the due diligence we’ve done on on other component parts of the relationship. So that might be a simple way of easing the pressure on treasury practitioners.”

Does technology have a role to play here?

“It sure does. Customers like to have the power in their hands to service themselves. So, things like online account administration, technology tools, to help them help themselves, and, perhaps not be burdened with either filling out forms or working with us to fill out forms. It all falls into the customer experience.

“When you think about servicing customers, it’s usually around what happens when they incur a problem, or the bank incurs a problem? How do we solve the problems in a timely fashion? How responsive are we? This is all part of that customer overall customer experience. What do you need us for? Do you need us not only for the products and services to work the way we’re expecting them to work, but to minimize the degree to which the treasurer is helping a bank satisfy its regulatory duties? It’s the same customer service conversation.”

What impact do you think open banking will have on the regulation problem?

“I happen to think that it will bring about additional regulation. How much of that will impact the end user versus the bank? It’s anybody’s guess. But I think that with all of what’s going on in this new phase of technology, whether it’s distributed ledger technologies or APIs, open banking and so on, I think that it is top of mind how the deployment of these things gets done without an appropriate controlled environment? I think a lot of people want regulators to be central to any new development.”

Given what you’ve said, and taking on board all the findings from the survey, if you could give corporate treasury some key advice, what would it be?

“From my standpoint, I’m in the treasury management business. I think that treasurers should choose banking partners, that they have the most degree of confidence in, and embrace them as collaboration partners. I’m not necessarily talking about sources of capital and credit. I’m thinking more about how can the treasury function move its business forward and increase productivity in transformational ways?

“Corporate treasurers are all professionals. They’re being inundated with so much information that many of them can’t really make sense of what is available to them right now, versus something that they’re attracted to but which they’re not going to be able to really use to their benefit several years from now.

“Treasurers are saying that their businesses, especially in the area of treasury management, don’t have enough people to do the work”

“For example, the real time payment system in the U.S. is just now getting started. It’s really not a universal payment system yet. But there are other things that treasury practitioners can be using to dramatically improve productivity in their organizations. The survey bears this out. The respondents are excited about technology, they’re excited about that the possibilities of technology, they say that their organizations are spending, but the organizations don’t appear to be spending much on financial management activities. The treasurer’s office is an overhead.

“A trend that we’ve been able to to really hone in on is this idea that the treasurers are saying that their businesses, especially in the area of treasury management, don’t have enough people to do the work and they don’t have nearly the automation tools that they think they need. Crucially, they’d much rather automate than add staff. But, guess what, they’re not doing either one of those things.

“One school of thought on this says, ‘Well, you’re an overhead, so if we’re going to invest in software technology, it’s going to be in our core business, or it’s going to be in something mission critical, like cyber security’. We have this ERP system we got from SAP or from PeopleSoft and sometimes many of the modules aren’t even being used to the fullest. In order to use one of the modules, it needs a project and the project and it has to get on the roadmap, which consumes overhead and corporate resources.”

How can banks help moving forward?

“The banks can really help treasury practitioners understand what’s available today, what’s going to be available two, three and four years from now and help develop things like a payment strategy and automation strategy, a productivity strategy. It’s not necessarily the banker sell what the banker has to sell as much as it is the banker being at the center of all this activity and sharing knowledge. All of the fintechs out there that we’re worrying about disintermediating us, actually realize that their path to customers is through the banks. And the banks are realizing that the fact we have been the trusted advisor really counts for something with our corporate practitioners.

“Now, more than ever, the continuum of information technology tools is expanding. It isn’t just moving in one direction, it’s expanding. Things that were being used very effectively 20 years ago, aren’t getting shut down because there are new things coming along. It’s just an expansion of the continuum. And in my business, the banking industry, just like with the regulatory conversation, we impose on our customers, the need to adapt to any number of different payment systems. These systems all come with their own channels and access points and bodies of law and rules.

“The banks are now really trying to normalize all that from the standpoint of the corporate user and have them be able to work in a world where they don’t really don’t have to change a whole lot in their back office, if this vendor is going to get paid according to these trade terms in this payment channel. And that one was a different set of attributes and another one with yet another set of attributes. There are solutions now that can really simplify that for financial executives and really create what I think is transformational productivity.”

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