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Life in the Eurozone Back  
The heads of treasury in the three institutions nominated in the IACT
awards on phase II of EMU.
Donal Forde, head of treasury services at AIB Capital Markets, winners of the IACT best institution award, is delighted with the bank’s success and outlines the way they think of their customer service offering.

‘Price is most important, and our first priority is always to be the market’s price leader - this is not just about delivering the best price - it is also about doing so quickly and effectively,’ he says.
‘We rate our relationship with our clients as a close second and we work hard to understand their business and bring them the best advice and solutions. Convenience is important and we are uniquely organised so that we can offer all our products and services through a single relationship manager. Consistency is important too - not disrupting relationships by moving people around and working hard to repeatedly deliver good quality service.’

‘Over the past number of years, we have spent a lot of time benchmarking ourselves against leading European and US banks. Our aim has not been simply to be the leading Irish treasury
supplier, but to be a leading European treasury supplier.’

On the question of cash management services, he acknowledges that multi-nationals operating in Ireland are well serviced by the global banks. ‘However, we see that the growth in demand for cash management services is from domestic Irish companies who are involved in high levels of international trade - this is our domain and we are very confident that we have everything they need.’

In the context of life in the new euro-zone, Forde offers 3 pieces of advice for Irish corporate treasurers:

‘Be alert for sterling weakness through 1999, as it is a high possibility. Don’t be complacent about the timing of your euro transition - it may not be necessary for you to move at an early point, but beware of losing competitive advantage by leaving it too late. Finally, and looking much further into the future, be mindful that your treasury function will be operating in a more competitive, more dynamic, more transparent and more regulated environment. Consider how your role should change if you are to best respond to these developments.’

John Coffey, head of the markets division, and deputy general manager, at BNP in Dublin, is upbeat about the prospects for his bank and other European network banks with the arrival of the euro.

‘Certain businesses are disappearing, such as the authentic Irish pound market, but new opportunities are emerging. The comparative advantage of the domestic banks in the Irish pound market is being replaced by the relative advantage favouring pan-European banks, such as BNP, who can benefit from their liquidity in this market,’ he says.

‘One of the major changes in markets which affects the way corporates can operate is the increasing transparency of capital markets, with the result that price is not the primary issue of concern. Everyone can quote a good price, and corporates are looking for more, in the way of ideas,’ according to Coffey.

‘We are devoting a lot of time and effort into coming up with new ideas for clients, for example to exploit opportunities along the yield curve and in anticipation of the direction of interest rates,’ he says.

His key points for corporate treasurers to consider, assuming they have done their preparatory work, are:
l be aware of the netting opportunities which could be available on a Euroland wide basis, which could result in significant savings on cash balances;

l beware complacency on interest rates, which are undoubtedly at historically low levels. He says that the time to hedge is invariably when people are bullish. He advises that during the course of 1999 it is worth taking a look at your medium term funding strategy, for the opportunity to lock in cheaper money;

l foreign exchange risk still has to be managed vis a vis the dollar and sterling versus the euro;
l the largest corporates should consider, if they haven’t already, the opportunity to acquire a credit rating, with a view to bond issuing opportunities which may arise.

Colm Healy, head of corporate buisness at Bank of Ireland Group treasury, says, ‘we have been addressing the strategic realities of the euro for at least the last four years and feel that we have undergone the skills and mindset change required to compete effectively in an enlarged market for treasury services.’

‘We believe that the level of competition already present in the domestic market is comparable to anything in evidence abroad.We already service a range of overseas customers from our IFSC location and have centralised our global treasury activities there,’ he says.

‘The path and direction for currencies next year is clearly the topic of most interest to the majority of corporate treasurers. Our Economic Research unit are forecasting the cross falling to 98p by end 1999 and the dollar declining to 1.55. But as always the path will not be straight one and forecasts are subject to uncertainty. While the euro bloc will run a current account surplus and the US will run a trade deficit the size, direction and timing of portfolio rebalancing by fund managers and central banks is uncertain and could well add to volatility. This hopefully will present treasurers with opportunities for value,’ says Healy.

‘A big theme emerging is the search for yield, as we face into a prolonged period of low inflation and relatively stable interest rates,’ he says.

‘We see corporate treasurers having to diversify away from bank deposits and into different types of instruments, which may include commercial paper,’ he adds.

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