Can I Sign Iowa Banking RFP

Can i industry sign banking iowa rfp

and would matter if I I'm globally responsible for lots of things and but here I am here to talk about Bible story and the implications on the banking industry and what it means for you as a corporate treasurer so what we want to cover in a nutshell it's a sort of general high level impact given we only have 20 minutes and the bank relationship with a corporate as a consequence of that and maybe touch upon some strategies that you could look at as a corporate in terms of the evolving landscape so first I think it's worthwhile reminding ourselves that we brought a balanced 3 agenda still unraveling we have a confirmed liquidity regime from the Basel Committee one part has been rolled out this year the other part will be ruled out in a few years time we have a confirmed leverage ratio regime and a confirmed capital regime but we're still looking at some additional deliverables total loss absorbing capital has been the latest edition which is expected to be confirmed by the Financial Stability Board later this year and of course we have jiseop surcharges very recently the US has actually confirmed the way how you should as a large US bank calculate your dish surcharge but we know about more measures that are coming down the line of interest rate in the banking book which may require at some point a capital requirement cushion to manage that risk and we have actually adjustments to see VA and other elements in the fundamental review of the training book so suffice to say Boswell has not yet stopped here but what I'm sure you can see as clients of banks and particularly larger banks that are the key audience of some of the tougher measures you will start seeing how your traditional business is being reviewed and revalued and this is really down to a number of considerations that the banks themselves have to make so let me go to an example if you have deposit and lending activities you have the Bible metrics on the left hand side you will see that in each step of activity bowel triggers new requirements if you're taking on a deposit that is non-operational or not a time deposit over 30 days for example you as a bank under the new Bible rules may not be too excited to take on the deposit because it will trigger a liquidity charge and it will not give you any liquidity values structurally for your balance sheet it also means that some banks may be much more aware of working with their clients on how to announce if you have a non structural deposit that you want to deploy some point and of court or during the month it is important for banks to understand when this liquidity will come in order to then find a way to deploy the liquidity and potentially move it into different structures together with your agreement so non-structural non-operational liquidity is not a good thing for banks any longer equally when banks lend out and the lending is subject of course to the capital ratios which are significantly higher for the larger global players and at the same time you have a number of other considerations such as concentration risk and counterparty risks that are playing into the capital a cost for the bank and also you have the leverage ratio so basically these days banks are managing themselves almost as a balance sheet and with a lot of balance sheet focus and very often the balance sheet will be capped to some form because if you're a global large player the regulator does not want you to become more global and even larger and as a consequence you have to optimize within the balance sheet constraint both your liquidity as well as the capital and the Basel regime is driving you in various directions and that actually starts to translate back to the client so the deposit element of it is a very important one which requires banks to have an active dialogue with you I know that there are some differences in interpretation around what is operational what is non-operational but down the line for the global players you will get much stricter supervision from the regulator and therefore any excess cash that does not need to be on the balance to be deployed operationally will have a zero liquidity value for the bank so down the line non-operational deposits will become a real I'm kind of limiting factor for the bank and therefore banks are not necessarily interested in attracting too many of these non operational equally of course in terms of the trade sites or trait loans because of the capital requirements have an implication on becoming potentially more expensive under the leverage ratio you of course netting off and putting all the on and off balance sheet transactions together in terms of how much leverage you can have as a bank and the way you're putting these assets together is in a non risk weight adjusted way so you're looking literally at all assets and you can't argue that certain assets are much less risky and therefore shouldn't trigger a leverage limit so that's how these interactions are starting to play out and by 2019 roughly I think purely from a capital perspective we're probably looking at around fourteen to eighteen percent capital requirements and that may still increase with some of the elements of the tilak not having been decided yet so still the constraints we have today are going to continue into the future as you can see on the slide the most beneficial deposit that a corporate can give is a structural one I mentioned for example a term deposit of 30 days but in the future you will have the long term liquidity regime with the net stable funding ratio where corporates wear bangs are actually required to hold long-term structural liquidity over one year reisen for certain percentage in order to make sure that if there is a prolonged stress period and people will ask money back from the ATM literally you are able as a bank to deploy sufficient liquidity in this case it will be quite important to also think about longer term and longer tenor deposit types of solutions and literally see how banks can mobilize long-term structural funding via also different structures that may be amused for that purpose let me go to the next slide so just in terms of the bank relationship management because this was part of the of the objective of this session obviously no your company you're looking at your direct needs such as funding Treasury objective operation services and also how much you want to allocate with different banks and it becomes more important these days to understand very well how your bank operates we recently had cases where certain banks have decided for multiple reasons to pull out of certain businesses or certain jurisdictions and of course it becomes even more important therefore to have a close dialogue with your banking partner in order to understand what type of products solutions and also geographies they will continue to serve so that you don't get surprised from one day to the next that certain services are not available I know that there's a lot of conversation in the market about liquidity cooling solutions such as notional cooling again the liquidity regime has an implication on these solutions as has the capital regime because if you have notional pools in different countries and some are negative then depending on the implementation of your capital rules in combination with accounting regimes you may actually see that the cost as a bank of providing that service may go up because you have less opportunity to net and of course in a notional pool the whole key is netting so if you can't do that then you're attracting capital charges in jurisdictions where the country the account is in the minus therefore this service has become more expensive so again it's important that if certain solutions for individual banks depending on their regulatory and accounting regimes become more difficult and understand whether they're still prepared to offer them in the future and how they with you realistic you want to manage the relationship to maybe have other services to cross subsidize that and cost increases that are happening because it's certainly not that people will move out of the market just because things get difficult but they will have to have a much more granular focus on the client relationship and the different things they're doing with the client across different markets and different products so clear communication from the bank side with the corporate is very important it's important to understand where the bank strategy is evolving to I mentioned the example of deposits I'm sure that years ago banks who are very happy if they got a 1 million deposit one day before end of quarter because they could say yeah I've got a big balance sheet but these days if the deposit is non structural is not an operating deposit of some sort that has been pre discussed and comes pretty much out of the blue and is a large amount the bank will actually more be in shock and potentially even think about penalizing such a deposit because they don't know where to get the asset from right because they have a constraint balance sheet so you can imagine if something very large comes in the bank needs to find a very intelligent way to to also deploy it before poor to end and also regulators are very vigilant on monitoring our liquidity positions with climbs etc so these things will become more important so as you look across your banking partners in terms of the footprint they are prepared to continue to serve and the type of sort of solutions of focus on transact banking and also looking at the general risk of D globalization with some of the measures which are certainly going to for certain players to think very hard whether some business solutions they have been offered in the past are still viable it becomes very very important to have that close dialogue to align strategy and understand where you sit from the perspective of the bank I don't know how many seconds I've got left so maybe as the last sort of few words on how to look at it I mean I day-to-day operating working capital cash clearly that is something good operating balances have got certain run off under the liquidity regime but it's not that high so banks will get a significant liquidity value for these balances and it makes a lot of sense because they will be sticky you will be doing those payments and you will be receiving money back in as I said anything that comes out of the blue and is not yet structured into something we can work with from a liquidity value for the balance sheet will tend to be a problem for the bank so there what would be preferred is if you look at alternative solutions such as money market funds you know CP market direct securities so it really depends on on the spectrum as to where you are with the liquidity but again it's very important to understand how this is evolving at this point banks have implemented the liquidity coverage ratio which is the classical 30 days stress scenario for which we need to have enough 30-day structural liquidity to react to such a stress in the future we have another balancing factor with the nsfr over a one year horizon and it means that there will be different deposit solutions and a balance across the clients as to what types of liquidity shorter term longer term the bank will want to attract equally when you look at the sort of landing site the corporate loan business is working with transaction banks that pull in the deposits so the loan business is of course under a lot of scrutiny in terms of return on assets and return on Basel but all and there there's much more focus on having the right type of quality client the right type of risk and again this is an important factor in your conversation to understand where you are in relation to your banking partners do they see you as a top tier very safe client or do they have certain reservations and ultimately coming back to the concentration point you may also have situations where you as a client have quite some significant business with one particular Bank and the wallet share therefore is fairly concentrated banks themselves will look at have to look at d concentrating some of their relationships in a way that you get more balance because if one large customer work for themselves have a problem it would immediately feedback on to the balance sheet of the bank so it's a risk management factor as much for you as for the bank and of course within that wallet share it's again very important to understand how much of that liquidity is actually operationally valuable structurally valuable for the bank and how much needs to be optimized to be become more balance sheet friendly so obviously no one will stop taking just the causes like that Dickey who in terms of safe haven and and things moving in the market at the same time being cognizant about the actual balance sheet limits that banks are under is a very important factor to take into account and as I said the future will bring more challenges so I would say the total loss absorbing capital regime which will potentially be decided later this year for implementation in 2019 will mandate a different form of capital to be held in addition to the existing capital regime which is combined of various buffest tier 1 common equity etc and it will put a sort of late of convertible instruments on top which means you could literally sort of issue a bond that can convert into a share in terms of crisis academic it quite interesting to look at this concept because the regulators around the world as part of the resolution regime for banks have thought about the first step issue that tilak make sure that in resolution you could tap it but whatever were to happen if one major bank were to go down the T leg would be converted and the tilak market itself would become dry very quickly because investors may realize this wasn't such a serious ruin after all and I think no one has actually thought about that next step in terms of bank resolution it's all about trying to solve the problem of too big to fail without necessarily splitting everything out by force but the execution will require a bit more thought over time to understand how it will actually evolve with investors also being confident enough that this market is manageable so I don't know whether I'm over running or not but maybe open the floor for questions