What's Neu - News from the The NeuGroup Network of Peer Groups

Blog entry
By aorwick, June 07, 2018
Here’s some of what you missed at the ATLG 2018 H1 Meeting in Summit, N.J. 
 
Move Over, Libor. On April 3, the Federal Reserve Bank of New York began publishing the new Secured Overnight Financing Rate (SOFR), and in early May the CME launched SOFR futures. Now SOFR’s fate depends largely on the market’s willingness to accept the Libor substitute. 
 
• Takeaway: Futures indicate SOFR’s future. Liquidity in the CME’s one-month and three-month SOFR futures has been light, but watch for growth. Trading in them will enable the development of curves to price other derivatives.
 
• Takeaway: Corporate impact is now. Half of ATLG survey respondents said their companies have Libor-based debt and derivatives extending past 2021. That’s the target date for SOFR adoption, and pricing Libor-based products may become difficult. 
 
The New Tax Puzzle. Pushed by the need for tax revenue, congressional Republicans’ new tax law retains elements of worldwide taxation, although it does eliminate the “stranded cash” bugaboo. Section 956, which treats loans by foreign affiliates back to the US parent as taxable distributions unless strict conditions are met, was almost repealed but mysteriously reappeared in the bill at the eleventh hour, thus narrowing the exemption for returning overseas earnings tax-free. And the law’s new GILTI and BEAT provisions guaranty the US will collect taxes on at least some non-US earnings. The trick for corporate tax and treasury departments will be juggling those components. 
 
KPMG recommends treasury top three issues treasury should discuss with tax colleagues:
 
• To what extent is the company legally restrained or facing withholding taxes or other financial penalties in terms of bringing cash back, which costs can be controlled, and are there offsetting foreign tax credits?
 
• In which currencies is previously taxed income (PTI) denominated, and how much will it cost at any given time to bring it back in dollars?
 
• Is this the correct time to repatriate cash given specific FX rates, and is it better to monitor the currency markets opportunistically?
 
Bring It On, Bloomberg. Bloomberg terminals may be pervasive, but many ATLG members haven’t been using them to their full potential. Executives from meeting sponsor Bloomberg provided a high-level overview of the latest tools. New currency valuation tools can reveal counterintuitive intelligence—China’s renminbi is now overvalued from a historical perspective. Treasury executives can query their companies’ bank group in the traditional way to generate a median FX forecast, then gauge its likelihood by doing scenario analysis using Bloomberg’s FX Probability Calculator. 
 
• Takeaway: The euro’s many faces. It is important for corporate treasury to recognize that behind the front-page number there are multiple prices and levels of competitiveness that impact where to build a factory and other strategic decisions. 

Following are NeuGroup Founder Joseph Neu's key takeaways from the meeting:
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 

 

 
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Blog entry
By aorwick, June 06, 2018
With big data, treasurers can analyze a larger data-set across a larger number of years, giving a better view of cyclical trends and other important analysis. NeuGroup explores how you can integrate AI and big data to meet the unique needs of your treasury department.  
 
Connect with experts from C2FO and Microsoft as they review applications for treasury management leaders looking to take AI and big data to the next level – smartly, efficiently and safely.
 
AI Eats Big Data for Breakfast
June 27, 12 p.m. ET 
 
During this live event, you will:
 
• Understand how to simplify AI to create a compelling repository of information that can be used across your entire business
• Learn how to incorporate AI into existing processes to increase efficiency and complement your workforce; not replace it with a machine
• Discover what you should be focused on NOW to prepare for the wave of big data and AI
 
MEET THE EXPERTS 
 
Jordan Novak
Managing Director 
C2FO
 
John Young
Chief Data Officer
C2FO
 
Guru Kirthigavasan
Engineering Program Manager
Microsoft
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
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Blog entry
By thoward, June 04, 2018
ICE says it’s not giving up on Libor; also, insurance companies’ MMF options to shrink.
 
The London interbank offered rate, or Libor, has had a rough few years. Following news that banks were manipulating the benchmark submitting dodgy, non-market-based rates, trust in its validity dropped significantly. The Fed and others have entered to offer new benchmarks, most notably the recent introduction of the Secured Overnight Financing Rate.
 
But not so fast, says the IntercontinentalExchange (ICE), which in 2014 took over management of the rate from the British Bankers Association. Since its takeover ICE has sought to “strengthen confidence in Libor by developing a more thorough approach for bank submissions,” according to contributor John Hintze. “The benchmark still relies on submissions by a limited number of global banks, but they now follow a ‘waterfall’ methodology starting with submissions based on actual transactions, then transaction-based data, followed by the banks’ expert judgment. Will it stay relevant? Time will tell. Read more here.
 
Also this week, there’s an approaching deadline after which some prime institutional money market funds will not be able to used by insurance companies. Why? The funds invest in assets that don’t have the “full faith and credit” moniker of the US government. And this is against National Association of Insurance Commissioner rules. Companies have until July 1, 2018 to switch; if they decide stay in them they will have to pay risk-based capital charge. Read more here. 
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com. 
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Blog entry
By thoward, June 01, 2018
The June issue of iTreasurer offers a glimpse of the rapid digital transformation taking place in Asia and China in particular. We look at a new trend in pensions, plans to overhaul the CFTC and why banks need to make their cash management system more user-friendly. Also discussed are the new Libor replacement, SOFR, and how one company is augmenting ACH payments with technology and regional regulatory knowledge.
 
Transformation in Asia arguably is happening at a pace that few other places experience. Thus, it is a great place for companies seeking to keep pace with change globally to witness how and how fast things can move. "The digitalization of day-today human experiences taking place in China shows how the pace is advancing faster than most large corporates are used to and up their games to stay in business in China and, soon, almost anywhere," writes Joseph Neu in "Asia Transformation Drivers and Five Ideas for Regional Finance Leadership," on page 1.
 
Finance and treasury teams operating in the region need to help the businesses they support make this transition, which is often called a digital transformation. What many are doing is proactively asking to take the lead on global initiatives and make Asia the proof of concept for them.
 
In “Anticipated Exposures,” iTreasurer takes a brief look at the latest trend in pensions, a targeted approach known as defined ambition. These plans promise to be more sustainable than DB plans and offer better returns than 401(k)s. Also, money market fund investors are still waiting to hear what will become of reverse distribution for European MMFs, and we take a quick look at Ernst & Young’s view of the new tax reform.
 
On page 6, iTreasurer discusses recent comments from Commodity Futures Trading Commission (CFTC) Chairman J. Christopher Giancarlo, who is looking to bring more order to his agency. Gone are the days when the commission operated in calamity mode, popping out regulations like donut holes. Now he wants rule-making to get back to exploring rules’ impact and making rules easier to follow.
 
In this month’s peer group summary, we take a peek at what was discussed at NeuGroup Treasurers’ Group of Thirty (T30) meeting in March. On the agenda were a look at how tax reform’s lower rates, while attractive, add new complexities; a discussion of how blockchain is here to stay; and the unfolding possibilities of robotic process automation.
 
On page 11, iTreasurer discusses a new report from consultancy Aite that suggests banks need to upgrade to more user-friendly cash management systems. One reason is that cash management systems have been so overly customized by banks that they cannot be easily upgraded and thus haven’t been able to keep up with the tech advances.
 
In "Switch from Libor to SOFR Will Be Challenging" on page 12-13, we discuss the implications of moving from Libor to the new SOFR, or Secured Overnight Financing Rate. The switch should provide major benefits to corporates’ cash-management and funding efforts. But with the transition now taking its first steps, they should carefully monitor its progress.
 
Finally on page 14-15, we take a look at how payments firm Earthport uses ACH and a wide assortment of tools to make global payments move faster and more efficiently.
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.
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Blog entry
GDPR, iTreasurer
By thoward, May 29, 2018
GDPR is a new law that has companies around the world redoing their privacy policies among other data-related things.
 
Friday, May 25 was the first day of Europe’s General Data Protection Regulation. As many of you know, GDPR is the new patron saint of personal data in Europe and, as it turns out, the world. Have you noticed the umpteen “Updates to Our Privacy Policy” emails pouring into your inbox? About the only company not updating its privacy policy is Wikileaks (though ironically they do have a policy of sorts).
 
GDPR, agreed upon by the European Parliament and Council in April 2016, replaces an older version of the regs (Data Protection Directive 95/46/ec). It went live at midnight in Europe and so far it has lived up to expectations that it would become the “primary law regulating how companies protect EU citizens’ personal data.” However, like a contagion, it has spread all over the world. 
 
And companies are taking it very seriously. Several US media companies blocked EU users from their sites rather than run the risk of fines. And the rules will have massive implications for social media companies like Facebook and Google. 
 
One member of NeuGroup’s Internal Auditors’ Peer Group said last fall that his company – a tech giant with lots of data amassed over several decades – was dedicating as much money to GDPR as it was to innovation. In fact, if it seemed to the company’s CEO the effort was lacking, he would shut down innovation initiatives and dedicate all resources to GDPR. This company and others are serious about the new rules because the fines for noncompliance are serious. A company may be fined up to 20 million euros (US$23 million) or 4% of its revenue from the prior year, whichever is greater. 
 
Compliance might also prove pricey. Global US companies could struggle to find cost-effective and efficient ways to meet the new requirements; this would have big impact on how they do business in Europe, particularly as it relates to separating Europeans’ personal data from the rest of the world. According to Sinan Aral, management professor at MIT, it might even be impossible to comply. “What I’m hearing from inside … companies is that it is not efficient and in fact potentially not even possible to segregate consumers that are in Europe or sometimes in Europe, and then consumers that are outside of Europe,” he said in an interview with Knowledge@Wharton.
 
And so if you have questions as to whether GDPR applies to your company, the answer is likely yes. Therefore, "never send to know for whom the (GDPR) bell tolls; it tolls for thee."
 
In other news, it’s been a couple weeks since the new Libor replacement has been in place. At the end of their second week of trading, the CME Group’s new SOFR futures contracts had attracted an impressive array of market makers to support the derivatives. However, so far market participants’ interest in the contracts has been light. Read more here.
 
Also, tax experts are slowly getting their heads around the tax rules signed into law at the end of last year. The upshot? It ain’t pretty and warrants caution. That was Ernst & Young’s assessment of the the US tax overhaul. In a rundown of the reform given to members of NeuGroup’s Global Cash and Banking Group, E&Y said that the speed of the rules writing resulted in numerous errors and murky language. Republicans have tried to put together a technical corrections bill to deal with some of those errors, but Democrats—remembering how Republicans ignored a similar effort to tighten up the Affordable Care Act—have been uncooperative so far. Read more here.
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com. 
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Blog entry
By jneu, May 25, 2018
“Big A” analysts in treasury are hoping to free up resources from stress testing for regulatory purposes to focus also on banking business challenges like modelling depositor behavior. Modelling deposits and more will now go beyond betas – or the sensitivity to Fed rate changes—to look at myriad factors. It’s time for new playbooks!   
 
Members of the Bank Treasurers’ Peer Group met on May 9-11 in New York to discuss how bank regulatory reform is progressing, share experience with the latest rounds of stress testing and consider how reg reform will change them. They also considered the rate outlook and how to position themselves in terms of asset sensitivity and, most importantly, how to model deposits—looking beyond betas, or the sensitivity to Fed rate moves, to myriad factors. This represents the current focal point of shifting “big A” analytical resources, typically found in treasury, from focusing solely on stress testing, expected to become less onerous with new legislation and Trump prudential regulator appointments, to also look at banking business challenges like deposit acquisition and runoff mitigation.
 
Among the key takeaways: 
 
• Crapo bill expected to pass before Memorial Day. The Crapo bill, among other things, will move the line for SIFIs from $50B in total assets to $250B with an 18-month phaseout for banks between $100B and $250B. According to our opening dinner speaker, the legislation could have gone further, but the significance of moving the line is important, which was corroborated in our session the next day. 
 
This takeaway proved true, with Congress passing the bill Tuesday. Per the New York Times: (Congress Approves First Big Dodd-Frank Rollback): 
 
“A decade after the global financial crisis tipped the United States into a recession, Congress agreed on Tuesday to free thousands of small and medium-sized banks from strict rules that had been enacted as part of the 2010 Dodd-Frank law to prevent another meltdown.
 
In a rare demonstration of bipartisanship, the House voted 258-159 to approve a regulatory rollback that passed the Senate earlier this year, handing a significant victory to President Trump, who has promised to “do a big number on Dodd-Frank.”
 
Still, the end of stress testing is not at hand… 
 
• Don’t plan on shelving CCAR or DFAST next year. While some members below the $50B or $100B thresholds would love to shelve full stress-testing submissions as soon as next year, it is probably still wishful thinking to expect requirements to fall off so fast—but it is still possible. Stress testing will continue without regulatory fiat—this remains the consensus—but members want to be able to scale back documentation, model validation requirements and governance overkill. For example, what if models could be validated on a multiyear staggered basis? Also, could stress tests keep to the Fed variables or be even further refined to focus on the most useful in consideration of the expense and effectiveness of the others?

What will banks do as a result of less onerous stress testing?
 
• Opportunity to deploy analytical resources honed by stress testing. New deposit and other banking playbooks will be written using “big A” analytical capabilities typically found in treasury that have been honed by stress testing and the resources built up for them. Deposit modelling is just one element of this. What factors are driving deposit retention and acquisition apart from rate sensitivity, including marketing spend and customer persona?  Also, what might banks offer depositors to reduce runoff as rates rise? This is all a part of a deployment of predictive analytics to drive better decisions. 
 
• Deal with new competition. It is also timely to help community and regional banks better compete with larger banks, direct/internet banks and fintechs looking to home in on their business. Like everyone, banks need to make more time for digital transformation.
 
It’s the beginning of a new era for banks. 

Following are NeuGroup Founder Joseph Neu's key takeaways from the meeting:
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 

 

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Blog entry
By aorwick, May 24, 2018
Why are today's top treasuries incorporating algorithm trading in their FX programs? NeuGroup counts five reasons you should use FX algorithms right now.
 
Ted Howard, iTreasurer Managing Editor and NeuGroup Associate Director, recently sat down with Susan Gammage of Thomson Reuters to discuss the recent explosion in FX algos.
 
Click here to watch a replay of the live webinar. 
 
During this event, you will: 
• Understand how current liquidity models can impact the effectiveness of various algos
• Learn new ways to use algo trading to improve the effectiveness and overall costs of your current FX trading program
• Discover ways to use algos as part of your FX trading strategies to improve trading accuracy and execution speed
 
Watch the recording to explore all the ways FX algorithms can help you save on time, efficiency and costs. 
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
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Blog entry
By Anonymous, May 24, 2018
Many thanks to the members and attendees of the GCBG 2018 H1 Meeting last week in Leawood, Kansas. 
 
Forecasting Cashflow: Treasury’s Ongoing Challenge. One treasury operations manager described the company shifting to the SAP treasury management system (TMS) from Quantum, now a part of FIS. Still split between the systems, treasury is developing the analytical piece to better project cash inflows and outflows while creating a framework touching departments such as human resources and legal, to capture the unpredictable, one-off elements impacting cash.
 
• Takeaway: People Input is Key. “What really drives forecasts are the things we can’t forecast,” noted one member. Hence input from relevant executives around the company is essential. Another member described the Excel spreadsheet “with a lot of macros” that her treasury sends out to those officials, showing the cash forecasts relevant to them and asking them to adjust for the one-offs. Top-level management emphasizing the importance of that communication is essential, she said. Read more about cash forecasts here.  
 
New Tax Law Reneges on Territorial System, Imposes Global Tax. Republicans originally promoted a significantly lower corporate tax rate and a territorial tax system similar to virtually every other developed economy, where only domestic income is taxed. The new rate of 21% is among lowest worldwide. However, in the view of tax experts at Ernst & Young, the law institutes a hybrid system containing elements of a territorial system but requiring multinationals to pay at least some tax on overseas earnings. 
 
• Takeaway: No Rush. NeuGroup Peer Research shows 39% of responding members expect their companies to repatriate between $1 billion and $9 billion, with 6% more than that amount, and 11% between $500 million and $1 billion. But 34% don’t anticipate repatriated cash to be fully deployed until at least the latter part of this year, and another 20% well into next year. 
 
• Takeaway: Hybrid System Upends MNCs’ Financial Structures. No more trapped cash, but where will the cash go? And how will carefully planned financial structures change, to optimize tax exposures? The complex global intangible low-taxed income (GILTI) provision levies an effective 10.5% rate on certain foreign income, while the base erosion & anti-abuse tax (BEAT) imposes a minimum tax to limit deductibility of certain payments to foreign related entities. 
 
Data Science: A Cross Functional Endeavor. Data experts from C2FO, essentially a late-stage start-up whose business model relies heavily on recognizing data patterns, discussed its approach to applying data science. The combined processes comprise rule-based machine learning and logic-based artificial intelligence, defined respectively as computer programming that accesses data to drive outcomes from a set of signals and patterns, and the use of “intelligent machines” that work and react like real humans. 
 
• Takeaway: Communication, Communication, Communication. Constant communication and collaboration between treasury, IT, the business, and other relevant departments is essential to ensure the data solution meets users’ needs and the strategic goal, and avoids a resource-draining, finger-pointing. 
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
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Blog entry
By aorwick, May 23, 2018
Institutions like Deutsche Bank are interacting with fintech providers to bring new solutions to banking clients — including treasurers — to harness data, process payments and better meet the needs of customers in the new digital age.
 
Join this live webinar as Ted Howard, iTreasurer Managing Editor and NeuGroup Associate Director, sits down with a panel of experts from Deutsche Bank and Hyperwallet to discuss fintech trends and solutions for treasury. 
 
The Future of Fintech 
June 11, 1 p.m. ET 
 
During this live event, you will:
• Learn how leading institutions like Deutsche Bank are taking a community-based approach to solving client problems with fintechs to better meet the needs of customers in the digital age.
• Better understand the role of fintech in treasury transformation projects.
• Discover the ways in which banks and fintechs are serving their stakeholders by working together as collaborators
 
MEET THE EXPERTS 
 
David Watson
Managing Director - Head of Cash Management Americas and Global Head of Digital Cash Products 
Deutsche Bank
 
Alex Verbaeten 
Director, Head of US Technology and Fintech Industry, Cash Management Corporates, Global Transaction Banking
Deutsche Bank
 
Derrick Walton
Executive Vice President of Global Financial Networks
Hyperwallet 
 
For more than two decades, NeuGroup has lead the way in peer knowledge exchange for treasury and finance professionals. With an unrivaled network of 18 invitation-only peer groups, NeuGroup facilitates more than 30 face-to-face meetings that connect peers, exchange knowledge and distill discussions. These face-to-face interactions, coupled with formal benchmarking, inform actions, transform practices, and enhance careers for the 440 members of the NeuGroup Network. Find out how you can connect at www.Neugroup.com.
 
 
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Blog entry
By thoward, May 21, 2018
Earthport is speeding up payments not by wowing with new tech, but by using old rails, solid research and a global presence.
 
Faster, cheaper, transparent. These words are music to any treasurer's ears and a goal for departments where doing more with less is the mandate. Unfortunately, this is a challenge to achieve when it comes to cross-border payments. Despite the emergence of new technologies and promise of initiatives like the Federal Reserve’s Faster Payments Task Force, getting to that sweet spot has been tough. In cross-border payments there are a lot of moving parts that even blockchain and other innovative technologies may be challenged to overcome.
 
Under current structures, corporate treasurers must navigate a byzantine network of platforms and messaging systems to get payments from one point to another. This means they can wait a day or more for debits or credits to appear in their corporate bank accounts. The current set-up is also prone to error, inefficient, expensive and very often unpredictable. What’s more, it’s not very transparent and one of the reasons why payments in the US take so much longer to settle versus just about every other developed economy -- and some developing ones, too. 
 
But payments company Earthport, using old rails of ACH augmented by regulatory knowledge and a global reach, has been able to smooth out and speed up payments. Learn more about it here.
 
Meanwhile, banks are learning that getting too fancy when it comes to cash management platforms actually works against them in the long run. According to an Aite study, cash management systems that have been overly customized by banks cannot be as easily upgraded. As a result, they fall behind. 
 
Lately banks have been trying to rectify things and Aite says 86% of corporate banks are upgrading to new systems. Read more here.
 
For over 20 years, iTreasurer has delivered intelligence for treasurers. Based on exclusive access to senior treasury executives who are members of The NeuGroup Network of treasury peer groups, iTreasurer takes their real-world experience to produce articles, case studies and reports that are specifically meaningful to treasury best practice. www.iTreasurer.com.
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