ATEL Summer Conference 2019: Ever-Evolving Treasury

 

The ATEL Summer Conference was held on Tuesday 25th of June in Luxembourg and marks the start of the association’s 25th anniversary. Here are three takeaways  from the event.

 

Legislation and implementation

Patrick Siméon of Amundi reviewed the EU Money Market Fund (MMF) reform – implementation in March 2019 - in the context of the US MM reform of 2016. The latter aimed to address systemic risk in the financial world. US implementation led to a shift from prime MMF to government-only MMF that left the private sector of short-term borrowers deprived of more than $1 trillion. This was mainly due to the non-applicability of liquidity fees and gates on public debt MMFs. For the EU, such a cliff effect in the MMF changes was not perceived despite a change in the MMF classification. A shift was witnessed with most C-NAV Funds converted into L-VNAV Funds, the latter having kept a stable, share format. Regarding the Anti-Base Erosion and Profit Shifting Initiative (BEPS), the transfer pricing for financial transactions discussion draft is currently on the table at the OECD. Danny Beeton from Arendt presented recent legal cases and their implications on transfer pricing reform. Recommendations included inspecting additional national guidance that can provide deeper insight into the matter - such as the UK National guidance on cash pooling. Alain Goebel focused on the Luxembourg legal cases and underlined the importance of TP reports to mitigate exposure to tax authorities and of TP documentation as legal proof.

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“Treasury solution providers need to remain focused on how the treasury function will evolve over time.”

 

Answering the call of the treasurer of the future

Stephane Marlin and Cyrille Oudard from Kyriba said treasury solution providers need to remain focused on how the treasury function will evolve over time. Liquidity followed by risk management and transactions will remain key priorities of the treasurer. Treasurers will consistently need ways to assess the reliability and performance of every process. Data quality, AI and machine learning will shape the answers of treasury solution providers with SaaS tools – the cloud-based, software distribution model becoming more and more prevalent due to its tailor-made function and its low infrastructure costs.

 

Exchange mutation

David Bloom from HSBC said there are three factors affecting financial market behaviour. The structural – Fed QE, debt to GDP ratio, eurozone evolution – the cyclical – ECB tapering and the BOC or BOE raising rates – and the political sphere with its increasing unstable nature. He discussed the Trump trade wars, American tactics to tackle the deficit, German industrial decline and Brexit. In this last case, treasurers need to assess which of the three possible outcomes – deal, no deal, remain – hurts them the most and where they need to hedge. Bloom made the case that FX traders are trapped between two challenged economies – the USA and Europe. But, despite its shortfalls, the US dollar remained the best of the worst, Europe being too exposed to the aforementioned factors affecting financial market behaviour. Michael Anthony of HSBC concluded the conference by presenting capital structure optimization case studies and discussing the uncertainty around IBOR transition, focusing on treasurers’ need to assess the impact on their products – bonds, loans, deposits/overdrafts and discount rates etc. – and to reassess their strategies.

 

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