Corporates can have a say on industry rate benchmarks

Corporations and their treasury/corporate finance teams need reliable, robust and frequent benchmarks against which they can confidently set pricing, make independent valuations and measure performance. The so-called LIBOR rate rigging scandals, followed by evidence of bank-rigging of the FIX fx benchmark has undermined the confidence of benchmark users in offshore jurisdictions. Based on responses to an industry survey conducted in 2013, most corporate treasurers in Australia reported using local benchmarks such as BBSW, not IBOR benchmarks, and reported a relative comfort/satisfaction with existing benchmarks. Now given the ASIC inquiry announced in 2014 into alleged manipulation of BBSW is now receiving more media coverage, those numbers may have shifted.

The Australian Financial Markets Association (AFMA) administers BBSW and related benchmarks on behalf of Australia’s financial market participants. It actively reviews all aspects of benchmark construction, rate capture windows and market conduct related to benchmark setting. It’s oversight committee includes not only banks but user representatives, independent members and observers from regulators and offshore industry associations.

While there is no longer an AUD LIBOR benchmark, FTA understands that some corporates use USD LIBOR rates. The Intercontinental Exchange (ICE) via their subsidiary the ICE Benchmark Administration are the administrators of the LIBOR rate. IBA became the administrator of LIBOR in February 2014 and has adopted reforms recommended Financial Stability Board (FSB ) in reforming the world’s largest Interest Rate Benchmark. IBA are working with panel banks and an Oversight Committee with their remit is to consult as widely as possible with all stakeholders on the impact of proposed reforms – especially on corporates, banks and asset managers.

IBA published a Position Paper in October 2014 CLICK HERE  and in April 2015 a Feedback Statement CLICK HERE – summarising issues raised during meetings held with major users and central banks. IBA are will publish a further Consultation Paper in Q3 and are reaching out to as many treasurers as possible, especially in Australia this time.

Key recommendations are:

  • to create a single, clear, comprehensive and robust LIBOR definition
  • basing LIBOR on transactions where there is adequate activity
  • expanding the range of counterparties to include large wholesale counterparties including large corporations; and
  • expanding the range of transactions that can be used to derive benchmarks

For more information, refer to ICE website. If you wish to participate in the IBOR consultation, please contact Andrew Hill of ICE Benchmark Administration here via email.

If you have any views you would like FTA to communicate to either AFMA or IBA please let me know.

Other Advocacy – FTA Card Payments submission & Member article published globally

  • As previously flagged, FTA has put in its submission to the Reserve Bank of Australia’s Review of Card Payments Regulationwhich can be found on the RBA’s site CLICK HERE

We have also been invited to participate in an RBA-organised industry Roundtable on the subject.

  • The best advocates for the treasury profession in Australia are you, our members.

This week, FTA Board Member,  Fulvio Barbuio FFTP who is Head Corporate Treasury & Risk at the Australian Broadcasting Corporation has had his “Obtaining Treasury Resources: A Strategic Journey” published by gtnews, the globally treasury news service of the US Association of Financial Professionals (AFP). I concur wholeheartedly with the sentiments expressed by Fulvio about the importance of treasury being properly resourced to be a strategic contributor to corporate value.  Many members will be aware of Fulvio’s firm views about the need to track treasury performance and to have solid benchmarks to measure success. FTA will republish the article; for now CLICK HERE

Gtnews are interested in more content from Australia. Feeling a need to be expressed. Why not try your hand?

Professional Development – ET & Congress Early Bird

Essential Treasurer was a success-based on excellent feedback and the great numbers attending in Melbourne, and particularly Sydney.

Presentations will be sent out shortly to delegates, and will be made available to all members when our Member-only content section relaunches in coming weeks.

And finally, Congress Early-bird registration’s are NOW OPEN.

FTA’s Annual Congress in 2015 is at the Grand Hyatt in Melbourne from Wednesday 28th to Friday 30th October. FTA organises this event on behalf of its members, and the wider Australian treasury and corporate finance profession.

2015’s FTA Congress Program will again feature:

  • Practical corporate case studies and closed-treasurer sessions highlighting current practitioner thinking and best practice
  • Plenary sessions with Board and C-level industry keynote speakers addressing the strategic and financial challenges facing Australian companies
  • Concurrent streams covering the latest technical, regulatory and professional issues faced by Australian treasury and finance teams
  • Extensive exhibition featuring the latest in treasury products and services – along with great coffee and prizes
  • A social program including the Welcome ReceptionNetworking DrinksGala Dinner, and Sit-Down Luncheon.
  • FTA’s Annual General Meeting providing opportunities for FTA members to participate in the governance of Australia’s national treasury association

We are still working on the program. Members who would like to provide a detailed corporate case study, please contact me.

For a sneak peak at the Congress website please CLICK HERE

Until next time, David

David Michell CFTP (Snr)
CEO, The Finance and Treasury Association