Changing Cost Of Capital: Dub Newman, Bank of America Merrill Lynch
Global Finance: What issues are of greatest concern to most treasurers?
Dub Newman: The very dynamic, rapidly changing economic and geopolitical landscape is what’s keeping them up at night. They’re wondering what’s going to happen the next day, the next week, and how they’ll deal with it. An example is the Swiss National Bank’s taking the cap off its currency. This had a significant negative impact on many companies that operate in the foreign exchange market. While the impact was less for corporates whose businesses aren’t as tied to currency movements, the shift was a data point on how quickly things can change. In contrast, while treasurers are always interested in when interest rates will move, we’ve all learned how to run our businesses in a low-rate environment—it’s been the case for so long.
GF: What are most treasurers’ primary goals when it comes to treasury technology?
Newman: Moving from paper to electronic is a huge motivation for the vast majority of clients. We see it more on the payables than the receivables side, with things like ACH [automated clearing house payments], purchasing cards and e-payables cards. It takes cost out of the system, while driving accuracy.
Companies also are continually trying to move along the treasury platform, to more advanced treasury workstations, ERP systems and greater integration within a region. Often, they’re trying to do this with somewhat constrained budgets or people resources.
GF: What sort of impact is the changing regulatory landscape having?
Newman: Of course, many of the regulations, like Dodd-Frank, were brought into play to ensure banks have appropriate levels of liquidity in a financial crisis. There is a greater impact on financial institutions, but the supplemental leverage ratio could ultimately cause credit facility costs to corporates to increase.
Financial institutions are not uniformly reacting to these regulations, given different levels of sophistication, depending on how much interaction they’ve had with regulators. The timing of compliance also varies, depending on the international regulatory authority.
No one wants to live in a world where things aren’t settled, but we’re in one of those.