Trésorier/Treasurer magazine - N°90 - July/Aug/Sep 2015 - (Page 39)

ONLINE WWW VERSION CORPORATE FINANCE The consequences of new regulation in financial markets have been well documented. Since 2008, financial institutions are required to reduce leverage, make more effective use of capital, optimise their balance sheet and diversify their sources of liquidity in the interest of making financial markets safer and more stable. But is this environment also safer for corporate treasurers? Arguably, the answer is yes although the environment has become much more challenging. As a result, corporate treasurers need to look into more innovative cash placements as part of an overall push towards more sophisticated investment strategies in the corporate world. One of the big challenges is that banks are awash with cash which makes time deposits, in particular short-term cash placements, unattractive as they increase the cost and volatility of balance sheets. In addition, new guidelines on money market funds and the introduction of variable net asset value means that liqui- dity funds could potentially lose value in times of market stress. As a result, there is an increased risk that the reinvested cash may not be fully returned in all cases. The additional complexity of the current negative interest rate environment in the Eurozone further strengthens the traditional mantra of the corporate treasurer that "security of re-investment comes first, then liquidity, then yield". Triparty repo as an attractive investment opportunity This is why triparty repo has entered the arena as new re-investment opportunity. And it is easy to see why. Unlike time deposits, triparty repos are backed with specific collateral which fully secures the re-invested cash. In addition, the collateral is marked to market on a daily basis by a triparty collateral management agent such as Clearstream. A triparty agent is a neutral third-party that focuses on asset safety and specialises in whole- sale custody and settlement services. The collateral it holds for its customers is completely ring-fenced. A further advantage of triparty repo is that when a corporate treasurer receives collateral under a repo, it can be re-used to support other financial transactions the treasurer engages in. This presents a genuine commercial advantage. In addition to offsetting the potential risk of an insolvency of the repo counterparty, collateral received under a repo is transferred with full title. It is therefore effectively owned by the corporate treasurer pending the closing of the repo (at which point the cash will be simultaneously returned to the treasurer and the collateral to the counterparty). This not only meets the security element that is essential to corporate treasury strategies but also offers genuine liquidity and yield alternatives. Since the triparty agent insources the operational management or back-office of any collateral movements or margin calls required on LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°90 - JULY The current difficult market environment raises the bar for investment strategies of corporate treasurers. Clearstream's Otto Vaisanen explains how innovative collateral re-use opens up a whole world of opportunities for corporate treasurers in line with upcoming regulations. / AUG / SEP 2015 Time for more sophisticated corporate investment strategies 39

Table of Contents for the Digital Edition of Trésorier/Treasurer magazine - N°90 - July/Aug/Sep 2015

Cover
Table of contents
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW DataLog Finance
FOCUS
What do financial leaders around the world earn?
BIG DATA in treasury
Credit rating agencies in the line of fire?
FORUM
Hedge accounting: New standard, new challenges
Cyber Risk: Can Insurance be an Answer?
When FX Volatility hits your Corporate Earnings - How
Best to Manage your Currency Risk
Repo cash management - how it works in practice
20 ans de AXA IM, l’histoire continue
CORPORATE FINANCE
Time for more sophisticated corporate investment strategies
VAT electronic audit file: not too late to act, but no more time to lose
Focus sur l’actionnariat salarié
Struggling with cash forecasting? You are not alone
Coupling Delegation of Authority (DOA) with Bank Account Maagement (BAM)
15 MINUTES AVEC INTL FCStone
THE RISK OBSERVATORY
NEWS
LIFE BEYOND NUMBERS

Trésorier/Treasurer magazine - N°90 - July/Aug/Sep 2015