Published on July 30, 2009
Regulation and Financial Reform: Impact on Treasury, Payments and Liquidity Management July 23, 2009 PRESENTED BY: Anthony J. Carfang TO: American Bankers Association Payment Systems Committee © 2009 Treasury Strategies, Inc. All rights reserved.
Major Regulatory Initiatives • United Kingdom - The Turner Report, CP0822 • European Union - The de la Rossier Report • United States - “Framework,” Group of 30 • Others - BCBS/BIS, Walker, Vatican, … w w w . T r e a s u r y S t r a t e g i e s . c om 2
Major Regulatory Themes • Curtail non-bank money market activity • Raise capital requirements • Increase low return liquidity buffers w w w . T r e a s u r y S t r a t e g i e s . c om 3
Banking in Ancient Times w w w . T r e a s u r y S t r a t e g i e s . c om 4
Modern Money Markets w w w . T r e a s u r y S t r a t e g i e s . c om 5
Quo Vadis? w w w . T r e a s u r y S t r a t e g i e s . c om 6
Current Proposals: Likely Impact on Bank Customers • Higher cost of financial services – Credit – Operating Services • Fewer financial service options – Fewer (and much larger) providers – Fewer available instruments w w w . T r e a s u r y S t r a t e g i e s . c om 7
Current Proposals: Likely Impact on Banks • Major consolidation of banks – Much larger banks – Oligopoly type competition • Mixed financial results – Rapid revenue growth – Higher margins – Not necessarily higher return on capital w w w . T r e a s u r y S t r a t e g i e s . c om 8
Proposed Regulatory Reform • FDIC changes - more coverage, higher premiums • Repo utility operated by government • Floating NAV for money market mutual funds • Elimination of Tier II CP from money funds • Designation of systemically important institutions that need more regulations and more capital • TLGP w w w . T r e a s u r y S t r a t e g i e s . c om 9
When Will the Market Stabilize? It may be 5-7 years before market returns to equilibrium • Initial regulatory initiatives – Each country, multiple agencies within each country • International bodies attempt at harmonization • Regulatory competition • Responses by financial institutions to these regulations – Consolidation – New products and price points – New target markets and target customers • Responses by customers to the new FI environment • Responses by regulators to FI and customer responses • Everyone fine-tunes • New equilibrium - 5 to 7 years later w w w . T r e a s u r y S t r a t e g i e s . c om 10
What To Do? • Need a framework to evaluate impact of regulatory report • Keep lobbyists appraised of your position • Ramp up advocacy • Work with your associations • Plan for your contingencies What not to do? • Sit around and wait until outcomes emerge. w w w . T r e a s u r y S t r a t e g i e s . c om 11
About Treasury Strategies, Inc. Who We Are Treasury Strategies, Inc. is the leading treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions. What We Do Corporations Financial Services We help you maximize worldwide treasury Our experience, analytic approach and performance and navigate regulatory and benchmarks provide unique consulting payment system changes through a focus on solutions to help you strengthen and grow best practices, technology, liquidity and your business. controls. Treasury Technology We provide guidance through every step of the technology process. Our expert approach will uncover opportunities to optimize the value of your treasury through fully integrated technology solutions. w w w . T r e a s u r y S t r a t e g i e s . c om 12
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