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

Blog entry
By jneu, January 31, 2013

Along with members of our Latin American Treasury Managers' Peer Group (LATMPG), we want to thank HSBC for sponsoring last week's meeting in Miami. HSBC's Senior FX Strategist Maya Hernandez set up member discussion well with her presentation on the two economic speeds of the region and what differentiates the runners from the walkers. Contributions from her colleagues, starting with tips on ways to shift money out of markets that look more like walkers, or worse, were also always timely. Plus, insight into using SWIFT in Latin America  to better bridge global and local banks used in region fits the bank relationship realities faced by most MNC treasuries and best practices shared by members.

Of course, we appreciate our member contributions very much also;  in particular, the framework with which to monitor developments in Venezuela, given the uncertainty surrounding its political leadership. Thanks to all who helped make this meeting a success.

Blog entry
By afriberg, January 18, 2013

We are pleased to announce that Deutsche Bank and FiREapps will co-sponsor our 4th Biennial NeuGroup FX Summit with both our FX Managers’ Peer Groups (FXMPGs) in New York on March 19-21. Agenda planning for the meeting has begun, and topics ranging from the latest on Dodd-Frank’s impact on derivatives use in hedging to FX trading execution and the next-stage of evolution in eFX platforms to decision making surrounding earnings hedging are being considered. 

Deutsche Bank, which has been a frequent supporter of other NeuGroups, is sponsoring our FX groups for the first time. As the recognized Number 1 Foreign Exchange provider, we are very pleased to have them in the mix here.

FiREapps returns as a meeting sponsor to our FXMPGs, and is thus very well known to our members as a leader in FX exposure management, enabling them to better identify, analyze and manage FX risk using fact-based collaboration and avoid FX-related earnings surprises.

Each of our NeuGroups for MNC Foreign Exchange Managers meet twice per year, as do most of our groups, but they also come together for a joint summit day every other year, to accompany a meeting with their own group. This enables members to meet more of their peers in the NeuGroup Network, while maintaining the ability to share in-depth with the members of their own distinctive groups that they have come to know and trust.

For more information about membership or sponsorship of the FXMPGs, please contact afriberg@neugroup.com.

Blog entry
By afriberg, January 09, 2013

The NeuGroup's Latin American Treasury Managers’ Peer Group is gearing up for a day and a half of lively discussion this month at its Winter Meeting in Miami, hosted by PepsiCo International, and sponsored by HSBC.

 A recap of 2012 treasury accomplishments and 2013 challenges from each member will introduce the meeting, which will then proceed to cover topics ranging from the finer points of Latin American banking structures to the ever-changing business environments in Venezuela and Argentina. 

Our sponsor, HSBC, will outline the 2013 economic outlook for Latin America and give an update on their own strategies, capabilities and service offerings in the region, including structured solutions to support or replace intercompany loans, alternative funding and ways to enhance yields on liquidity.

We will also have an update on members’ supply chain finance initiatives and related technology in a session anchored by a member’s update on initiatives in two areas. The first will focus on using customers’ supply chain finance structures in Brazil to reduce collection times, and the second will focus on integrating an in-house tool with HSBC and SWIFT utilities. There will be further discussion on using SWIFT in LatAm and how to make the best progress with it given limited payment and cash management capabilities in some areas.

The continuing deterioration of the business environments in Venezuela and Argentina, especially the increasingly capricious FX regulations and risk of currency devaluation, will be the subject of another session, and in a members-only discussion, the LATMPG will debate LatAm banking structures and relationships, such as the roles of global, regional and local banks in the region, and the consequences of foreign banks withdrawing. The final session will be an Open Forum for topics not covered more extensively in the meeting agenda.

For more information about the LATMPG, please contact afriberg[at]neugroup.com.

Blog entry
By jneu, January 08, 2013

Although year-end brought a hint of certainty, 2012 saw a continuation of the challenges born of the financial crisis. Here is International Treasurer's list of the Top Ten stories that best described 2012.

Continuing the theme of the last several years, 2012 was a tumultuous 365 days. And International Treasurer had the stories to prove it.

In no particular order, the top story lines depict the on-again, off-again concerns with Europe and the prospect of a Greece or other Eurozone countries exiting the euro; changing dynamics in global treasury organization deemphasizing centralization in the US or Europe to help focus support on business in growth areas of the world; continued trouble in developing economies that hinders their ability to take up the slack for slower growth in the US and Europe; the changing nature of credit and counterparty risk assessment as post-crisis responses have become part of the new every day; the rapid change taking place in banking and the impacts on bank relationship management; and, finally, the growing impact to be felt from fiscal imbalances plaguing public sector institutions, while so many private-sector corporations have been hoarding cash.

See iTreasurer.com for the full list of top ten stories here.

Blog entry
By jneu, December 31, 2012

On behalf of everyone at The NeuGroup, I extend our best wishes for a prosperous 2013.  With these new year's greetings, I also want to share some highlights from 2012 and previews for 2013.

NeuGroup launches. The NeuGroup Network added its 15th group, the Assistant Treasurers' Group of Thirty, with the support of Citi in September. The AT30 proved to be long overdue in filling a gap in our offerings for AT-level professionals and is already near capacity (we may need an AT30-2). We also continue our push in Asia with a successful test meeting of MNC treasury professionals in Shanghai (hosted by our advisory board member, Rob Vettoretti with PwC). This effort complements the Asia Treasurers' Peer Group we launched last year in Singapore for regional MNC treasurers.  

Next up, T30-3 and a NeuGroup Treasurers' Summit. Expanding our treasurer-level offerings, we have a pilot meeting for a third Treasurers' Group of Thirty (T30-3) coming up in the first half of 2013 sponsored by Standard Chartered. The T30-3 enables us to serve an even broader cross-section of corporates ranging from larger mid-caps to mega-caps. With six treasurer-level groups, we are also excited to begin plans for a NeuGroup Treasurers' Summit in 2014 (stay tuned).

The NeuGroup Exchange. In the second half of the year, we introduced NeuGroup members to our new web platform at neugroup.com. It includes several new community elements for members to interact in between meetings and provides us tools to further collaboration in preparation for meetings, post additional content relevant to agenda topics and distribute benchmarking data. Members can look to the NeuGroup Exchange to further enhance the value of their membership. In addition, we continue to offer our trusted insight via International Treasurer and updates via our twitter streams (see @iTreasurer and @neugroup).

There are now over 300 members in the NeuGroup Network. Finally, we are proud to have recently surpassed the 300-member mark, representing over 180 organizations. We are truly privileged to have the trust of so many world-class professionals who allow us to lead them in peer knowledge exchange.

To all of our members who make this network special, our International Treasurer readers and the service providers who support our unique brand of professional collaboration, thank you!

Blog entry
By jneu, December 20, 2012

The Wall Street Journal reported yesterday that Blackrock and Federated are prepping for large inflows of cash fleeing bank deposit accounts that no longer enjoy an unlimited FDIC guarantee in the new year. The implications range from further depressing yields on cash investments to funds barring new entrants.

If the influx is large enough, BlackRock and Federated have told investors, some money-market funds could be closed to new entrants, said people familiar with the conversations.

In October, we asked members of our Tech20 Treasurers' Peer Group what their plans would be if the unlimited FDIC guaranteed was not renewed, with the added context that money market reforms might make traditional money funds less enticing. Their response indicated a split opinion:

  • 42 percent would leave deposits where they are, given that they had already filtered deposit banks for counterparty risk and bank risk generally has declined, but
  • 32 percent indicated that they would shift some deposits to "safer" banks
  • 42 percent indicated they would move funds into other assets, including self-assembled money fund equivalents (a popular alternative for cash-rich tech companies with sophisticated investment acumen)
  • 32 percent, however, also indicated they would shift some funds to traditional MMFs.

These results may give some color to how the top end of the roughly 1.7 trillion in bank deposits will flow. If money funds don't accept new money, then the percentages for leaving deposits where they are or shifting them to "safer" banks will increase, but it will also inrease the percentage that shift funds into other assets, including bespoke and self-assembled money fund equivalents. Some say this last result is the intent of MMF reform, and it would appear that closing funds to new entrants merely supports the intended outcome.

How will these developments affect your plans?

Blog entry
By afriberg, December 17, 2012

The NeuGroup’s European Treasurers’ Peer Group (EUROTPG) recently met in Dublin, Ireland, hosted by Accenture. Our sponsor, J.P. Morgan Treasury Services, EMEA, returned to this group for the third time in two years and we appreciate their strong support of the EUROTPG (J.P. Morgan has also been very supportive of several US-based NeuGroups in the last couple of years). Our warm thanks to our hosts and sponsors, as well as to the members for their contributions to the discussions.

Projects and Priorities

A morning session highlighted the breadth of projects in the treasury pipeline, including:

  • Worries about the eurozone crisis continue.
  • In low-interest environment, do intercompany loan rates need a reset?
  • Derivative portfolio review: Coming Basel requirements and derivatives regulations taking effect have members worrying about the cost of executing hedge transactions, including posting collateral.
  • Supply-chain finance initiatives.
  • Re-centralization of regional treasury centers.
  • Process standardization across multiple treasury centers.
  • Vendor and bank selection and implementation woes.

Regs Update

Next, the moderator synthesized a couple of Dodd-Frank updates, presented recently to other NeuGroups. Among other concerns, it raised the issue of how centralized hedging in a financial subsidiary will be affected by central-clearing requirements; two members in particular thought this would impact them. The cleared vs. non-cleared tug-of-war should lead to a reevaluation of hedge programs to increase efficiency and lower costs, both by reducing the number and total notional amount of hedges, the latter with a view to keep a lid on required collateral posting going forward; and yes, a review of the derivative portfolio was indeed mentioned as a priority project in the introductions by a couple of members (and has been raised in other NeuGroups as well).

Counterparty Risk and Bank Relationships

In the following session, one of the bank’s representatives reviewed trends in how corporates measure and monitor counterparty risk (with examples), and members and bankers debated the way forward given the ongoing efforts to de-lever the bank sector and what product/service-offering decisions will come out of having to manage client relationships with a slimmer balance sheet. Is it time for corporates to worry about whether they will fit in their banks’ business models once the slim-down is complete, and what types of conversations should they be having with their banks? Wallet analysis, consequently, has also returned to the fore as banks and their clients eye each other in this new light. In the ensuing members-only session, the debate took a turn toward what would happen if all corporates employed the same counterparty risk analysis, and automated it to boot: would everyone pull the plug on the same banks simultaneously?

Bank Account Rationalization

Next, a member highlighted the goals, key considerations and progress to date in his company’s effort to rationalize its bank account structure. If you look at a company from the outside, how close to having only one bank account could you get, and how would you get there? With a shared-service center already in place, next steps include an in-house bank where payments will be made-on-behalf, followed by establishing a virtual bank-account structure.

The 2013 meetings of the EUROTPG are tentatively scheduled in the date ranges of May 14-16 and November 19-21.The group meets somewhere in Europe for one full day with a group dinner the night before. For more information about membership or sponsorship of this group, contact afriberg[at]neugroup.com.

Blog entry
By Anonymous, December 17, 2012

The Engineering and Construction Treasurers’ Peer Group (ECTPG) met on December 5-6 in Pasadena with Parsons as the meeting host and Bank of America Merrill Lynch (BAML) as the sponsor. The group covered several of the topics on everyone’s mind, including an update on the banking sector and debt capital markets in light of Basel III and Dodd-Frank, as well as the effect on FX markets of the resulting regulation, and an updated view of the Eurozone crisis. Members also discussed strategies for public bond issuance, optimizing shared service centers and the future of public/private partnerships. Some highlights of the meeting are below.

  • Exercise caution with employee stock ownership. While employee stock ownership offers an incentive to employees to ensure their activities are making value-add contributions to the company, there is a risk if employees hold too much of the company stock in their retirement plans.
  • “Regarding regulations, everything is uncertain.” This is how Bill MacDonald from BAML summed up the regulatory environment. He also assured the group that “banks’ capital will become more expensive,” even if it hasn’t yet.  
  • Banks are eager to lend and provide services. In spite of regulatory uncertainty, 2011 was in fact a record year for lending at BAML, but 2012 has been slower and 2013 is expected to be more like 2012 than 2011. Additionally, BAML expects future credit business to be more specialized, such as for M&A deals and term debt for capital expenditures rather than unfunded revolvers. Bank focus on ancillary business and broader profitability is real.
  • Dodd-Frank and FX. ISDA protocol and “business conduct rules” seek to put documentation and standardization around current trading activity and allow for full automation. The protocol can be utilized even without using ISDAs. Also, counterparties technically will not be able to trade beyond spot transactions outside of the rules after January 2, 2013.
  • When issuing bonds, a good sales pitch yields results. One member recorded an “electronic road show” a week prior to its bond offering, outlining the details of the offering and compelling reasons to invest. The result was an offering 4 times oversubscribed with $2 billion in commitments. The other factor investors liked was that the company was committed to a maximum limit for the issue, which signaled that the company would not respond to investor enthusiasm by adding to the issue and over-leveraging itself.
  • Is single A the new triple A? The large too big to fail banks have lost their AAA ratings with some dropping into single A status. If this is characteristic of the industry then all financial counterparties are likely to be out of compliance with policies. Since there is no place to go for mitigation there is no option but to lower your hurdle.
  • The SSC concept may need to be sold internally. Business units with a history of decentralized independence are often reluctant to give up control of any part of their operation. However, one member has had success in rolling out SSCs in multiple locations by giving BUs input and buy-in into the initiative. Consensus is that it is easier to start from scratch when opening an SSC, rather than leveraging existing operations.
  • P3 projects need special treatment. Several members noted that their P3 activities are run in a separate organization, which are tasked with scrutinizing potential deals for returns and risk, and ensuring the counterparties are appropriate for the company. Designing and sticking to your deal parameters will improve the likelihood of better returns with lower risks.
  • The worst eurozone fears are not materializing. With the peripheral credit crunch we can expect to see corporate lending rates remain elevated in the periphery for some time. These countries need to export their way out of debt, but they cannot become globally competitive overnight. However, the ECB is doing its best to contain euro-exit risk.  Notably, the eurozone as a whole can actually afford the crisis. So we are unlikely to see any break-up in the near future provided the wealthier countries remain as such and are amenable to further support of the struggling countries.

A special thank you to Bank of America Merrill Lynch for sponsoring and Parsons for hosting.

Blog entry
By jneu, November 15, 2012

The Tech20 2012 Annual Meeting took place last week with BNP Paribas returning as sponsor for the fifth consecutive year. We thank them for their continuing support. Following closely on the US presidential election, members heard and discussed a variety of mostly sanguine opinions on the impact of the election results on the fiscal cliff negotiations, the US and global economies and US tax reform among other things. Members also discussed stress testing and contingency plans to help cope with future crisis, heard an update on the banking environment, shared thoughts on how treasury supports the business through change and reached further consensus on the importance of IT support models in treasury systems selection and successful implementations. To close the meeting, members also got some practical guidance from Ernst & Young on how they should be preparing to comply with the end-user exception and other aspects of OTC derivatives reform being implemented in accordance with Dodd-Frank.

Some key takeaways:

  • G-SIB is a league table nobody wants to top. The SIFI or, now, Global Systemically Important Banks table indicating the banks that need to retain additional capital buffers is one that no bank wants to top. BNP Paribas, for instance, is pleased to have dropped one place in the November list from last October.
  • IHBs are the way to go. Discussion with members on treasury support models, as well as the member session leader presentation, further validated the pre-meeting survey results indicating that in-house banks are a best practice organizational tool offering flexibility to support business change in response to new growth, tax and regulatory drivers (see related article here).
  • Bring global operational efficiency best practices to new markets. Increasingly banks are seeking to fit globalized solutions, with their efficiency and leveraging of technology to the new, developing markets that MNCs are entering. Unlike in the past—where  MNCs were entering these markets to conduct low-cost manufacturing, R&D or support services—current market-entry plans are often to generate new revenue with real business being conducted.
  • Understand your treasury IT support model first. One member emphasized and elaborated on a point made at a prior Annual Meeting about the importance of treasury technology support in the success of a treasury management system. The support model is probably more important to the success of system than the selection of a given tool, he said. As part of their treasury end-state vision, treasurers should be realistic about what support model is sustainable.
  • Tax reform will be about give to get. MNCs with off-shore cash should work together to ensure that efforts to reduce the corporate tax rate (see here) don't come totally at the expense of tax treatment on off-shore earnings.
  • Start work with your board now on Dodd-Frank-related derivatives compliance. It is better to ensure this gets done in the natural sequence of board meetings before next summer. 
Blog entry
By Anonymous, November 09, 2012
The Treasury Investment Managers’ Peer Group (TIMPG) met October 24 – 25 in Palo Alto at the offices of VMware. The meeting was sponsored by DB Advisors and had a strong turnout with 25 member companies present along with the sponsor guest, Symantec.  The group welcomed new member from SanDisk and a returning founding member from Procter & Gamble.

Meeting highlights

  • Repos and covered bonds. The meeting began with an overview and drill down into two asset types, repurchase agreements (repos) and covered bonds. The sessions were led by DB Advisors who impressed the group with their in-depth knowledge of the mechanics, markets and history of both products.
  • Focus on an emerging market: Turkey. Later, a member walked the group through his recent trip to Turkey with an asset manager to research the methodology for researching and performing credit analysis on emerging market debt.
  • Portfolio modifications discussion. The group also had a roundtable discussion on what modifications they have been making to their portfolios since the last meeting. Most have held steady but those who have made adjustments have centered on extending duration and increasing credit risk offshore and adding a few new asset classes onshore.
  • The "really big concerns:" Europe, the US and China. The first day concluded with DB Advisors reviewing with the group their views on what they consider to be the “really big concerns” in the global economy. Their top three included the prolonged problems in Europe, the prolonged economic sluggishness in the US (including a worst-case Fiscal Cliff outcome) and the economic slowdown in China.
  • In-sourcing client entertainment. While many members are outsourcing more of their asset management, they saw their meeting sponsor break new ground by in-sourcing the after-group dinner musical entertainment, illustrating that at least some financial types have interesting lives outside of work.
  • MMF reform: a place for variable NAV. The final session covered the current state of money fund reform and  DB Advisors, which has been deeply involved with regulators in this matter since the beginning, outlined the current reform scenarios and how variable NAV fits into the mix. With the later topic, they drew on their experience with the launch of their vNAV fund (see video clip here or iDevice version here).
The meeting also had an open forum where The NeuGroup did a demonstration of the new peer group website and several of its key features. The group also used this time to discuss the group’s current size and how to manage future inquiries for membership.
Overall the meeting was very successful and we thank VMware for hosting and DB Advisors for sponsoring the 16th meeting of the TIMPG.
[This post has been updated]