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.
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.