How are Treasurers funding their companies? How do they make short term investments and manage short term liquidity? How does financial regulation come into play?

1. What’s Driving Corporate Treasurers?
August 23, 2009
Presented By:
Anthony J Carfang
To:
Crane’s Money Fund Symposium
© 2009 Treasury Strategies, Inc. All rights reserved.

2. What’s Driving Corporate Treasurers?
• Expanding Role of Treasurers
• Corporate Liquidity Market
• Regulatory Changes Impacting Treasurers
• Preparing for the New (Post Crisis) World
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3. Expanding Role of Treasurers
• Liquidity
• Global Visibility of Cash
• Risk & Compliance Management
• Availability & Cost of Capital
• Dealing With Impact of Regulation
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4. Corporate Liquidity Markets
Total Corporate Liquidity (in $ Trillions)
2004 - 2008
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5. Corporate Liquidity Markets
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6. Corporate Liquidity Market
• Liquidity portfolios vary by geographic location
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7. Corporate Liquidity Market
• Selection criteria for money market mutual funds
Most Popular MMF
Investment Large Corporate Mid-Corporate Middle Market
Determinates
Underlying Instruments Underlying Underlying Instruments
US
Instruments
Size of Fund Other Underlying Instruments /
UK Offered through
Concentration Bank
Underlying Instruments / Underlying Advisory Services
Advisory Services / Instruments /
France
Offered through Advisory
Concentration Bank Services
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8. Regulatory Change Impacting Treasurers
• Massive, Intrusive & Global
• 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, G20, …
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9. Regulatory Change Impacting Treasurers
• Major Regulatory Themes
– Curtail non-bank money market activity
– Raise capital requirements
– Increase low return liquidity buffers
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10. Regulatory Change Impacting Treasurers
• Banking Pre 1965
– High Concentration Risk
– Lack of transparency
Commercial
Banks
99% 99%
Investors & Borrowers
Depositors
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11. Regulatory Change Impacting Treasurers
• Modern Money Markets Direct Instruments
Markets (CP, Repo)
– Efficient
– High transparency Money Market Funds
– Diversified risk portfolio
Securities Dealers
80%-90% 80%-90%
Commercial Banks
10%-20% 10%-20%
Investors & Borrowers
Depositors
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12. Regulatory Change Impacting Treasurers
• Future Environment Direct Instruments
Markets (CP, Repo)
– Features unknown
Money Market Funds
80%-90% 80%-90%
Securities Dealers
Government
? ?
Commercial Banks
>20% >20%
Investors & Borrowers
Depositors
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13. Regulatory Change Impacting Treasurers
• 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 corporates and FIs to the new environment
– Responses by regulators to corporate and FI responses
– Everyone fine-tunes
– New equilibrium - 5 to 7 years later
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14. Preparing For The New (Post Crisis)
World
• New Environment for Corporate Treasurer
– Higher cost of capital
– Higher cost of credit
– Higher cost of operating services
– Higher cost of market risk
– Higher cost of market compliance
• Fewer financial service options
– Fewer (and much larger) providers
– Fewer available instruments
– Government allocation of liquidity
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15. Preparing For The New (Post Crisis)
World
• New Imperatives for Treasurers
– Solidify availability of credit
– Shore up balance sheet, capital structures
– Improve global cash visibility
– Improve global risk visibility
– Improve cash forecasting
– Become working capital efficient
– Update investment guidelines
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16. Preparing For The New (Post Crisis)
World
• How Treasurers say they would react to a floating NAV
Potential Destination of Departing MMMF Asset s
Percentage of all survey responses
Percentages do not sum to 100% as multiple response are included
Source: Treasury Strategies Inc.
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17. Preparing For The New (Post Crisis)
World
• Greater role for Money Market Mutual Funds
– Increased importance as a liquidity tool
– Risk management & credit analysis tool
– Vechle for global visability of liquidity
– Diversification tool
– Compliance tool
– Simplification tool (administrative ease, accounting simplicity)
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18. For More Information, Contact or Follow Us
Anthony J. Carfang
Tony_Carfang@TreasuryStrategies.com
312-443-0840
www.Twitter.com/TreasuryStrat
www.Linkedin.com/in/carfang
www.TreasuryStrategies.com
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19. 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.
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We provide guidance through every step of
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approach will uncover opportunities to
optimize the value of your treasury through
fully integrated technology solutions.
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