Unexpected hot issues

Treasury market update April 2009

This spring the PwC Treasury team spoke in depth with a number of Treasurers, asking their opinions about a range of issues. These findings are reinforced by insights gained through ongoing relationships with treasury professionals throughout the year. Over the next few weeks we’ll be summarising the main findings from those discussions and we’d very much like to know your thoughts.  Please use the ‘comment’ links below to add your views.  Yann

Unexpected hot issues

“The degree of write-off in the financial markets – most other things have sprung from that”

Extent of the fall
Though the credit crunch is now an accepted fact of life, many Treasurers are surprised by the extent to which the market has fallen and by how dramatically and rapidly the position of banks has changed. The collapse of major financial institutions has also increased the sense of insecurity – even fear – as to what might happen next.   

Relationship (?) banking
Treasurers are also disappointed – even hurt – by the apparent evolution of relationship banking. Cash and funding are key treasury priorities, but the banks are appearing less helpful – taking more time to make decisions, applying increased scrutiny, putting additional pressure on margins and attempting to accelerate re-pricing. Some Treasurers feel they are being bullied, others ignored.

Treasury functions are surprised by how slow and difficult even routine actions have become. Given the banks’ capital constraints, funding decisions are being made in the cold hard light of return on investment – relationship managers within the banks are having to risk their own reputations by backing clients, and are therefore demanding more reassurance and negotiating tougher terms.

Credit nationalism
There is also some suspicion of an emerging “credit nationalism”, with some Treasurers believing banks are more likely to support businesses in their own territories. Such suspicions reinforce the sense of a reduction in the support being offered by the banking sector to its corporate clients

Tougher banking attitudes and responses – real or perceived – have caught treasury functions off guard after years of relatively easy fundraising. The necessity of change to banking relationships built during those high liquidity days has revealed that some were less robust than was thought. This is leaving some Treasurers feeling less empowered to influence their situation.
But the news is not all bad. Treasurers who have put significant effort into their banking relationships, to win support based on a real understanding of corporate strength, business strategy and future opportunity are now reaping the benefits. Positive stories do exist, where Treasurers are achieving high success rates in their funding negotiations, despite the economic downturn.

What is the focus for the future? Check back soon to find out.