| Treasurers welcome increased focus on corporate governance |
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| The increased appetite for regulation in the wake of the Enron scandal was broadly welcomed by panellists at the second annual Finance Treasury Roundtable discussion, which was held on November 7th in The Vaults in the IFSC. |
Leading Irish treasury players from both the banking and corporate sector believe that the trend towards a greater emphasis on rules and regulations will only increase confidence and protect both banks and corporates.
Despite the fact that compliance was frequently a painful affair, the experts felt that the outcome of more rigorous adherence to the rules was generally in everyone’s interest.
It was noted, however, that certain individuals in a small number of institutions continued to deal foreign exchange and treasury products without the appropriate and necessary documentation, such as mandates, using this strategy to gain a competitive advantage.
The treasurers met to Ireland’s to examine the latest issues affecting their field, and a wide-range of topics graced the agenda, including corporate governance, risk aversion, cash management, outsourcing, hedging and corporate bond issuance.
A short debate on multi-baking versus single bank saw even the banks conceding that it would be imprudent for large coporates to place all their eggs in one basket with one bank.
‘Obviously, from a banks perspective, we’d love our corporates to deal solely with our own bank’ said Philip Lenehan, head of corporate sales with Bank of Ireland Corporate Treasury, adding, ‘but I think, for prudential reasons, corporates should really look to spread the transactions that they’re doing, just to keep the banks honest, if nothing else’.
Jayne Bull, head of corporate sales at Ulster Bank Markets asked if it was not an argument to say that Ireland is over-banked given the number of businesses here? ‘There are a relatively large number of institutions chasing a relatively small amount of business,’ she suggested.
Jimmy Doyle, treasury manager from Bank of Scotland argued that it was more a case of Ireland being well serviced than over-banked.
The potential for outsourcing treasury was recognised by the speakers as a growth area, although most believed it was only really an option for the larger corporate at the moment.
With regard to managing surplus cash, participants identified liquidity as the main concern given that interest rates were in the doldrums.
Brian Colgan, head of commercial and corporate treasury at AIB intimated that risk hedgers in Ireland were an endangered species in the current interest rate climate as most people expected interest rates to stay low and stable over the short to medium term, although Jayne Bull noted that there was still an appetite for locking in rates in the UK.
It was also noted that the corporate treasurer’s main priority was the safety and security of the asset rather than the return, and that risk averse behaviour was prevalent in the market in the current climate.
Several speakers suggested that the current environment was not particularly conducive to euro bond issuance in Ireland believing there to be too few companies of the requisite size and too many banks offering competitive private placements.
‘A bond has to have a certain size to make it liquid. It’s very hard to expect someone to invest in it if it doesn’t have liquidity. In the Euro market you could be talking about upwards of E400 million.
That limits it automatically to a small number of Irish companies and most Irish companies are going to look at private placement route rather than go with a public issue,’ said Philip Lenehan. |
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| Article appeared in the November 2002 issue.
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