January 2020


Dear Members,

Welcome to 2020 and a new decade!  Whilst it’s customary to say happy new year, I must admit it feels a bit hollow given the devastating start Australia has had with the bushfires.  That said, the response from the community both here and abroad has been fantastic. We do hope that the right people get the right assistance at the right time.  Some of the stories I have been following with interest is the phenomenal response to all of the fundraising requests.  On the face of it, that is fantastic, but the reality is that it has caused some challenges.

Where is the money going? What are the policies, procedures and controls around the management of the cash coming in? What are the banking and investment arrangements whilst it is determined how the money should be spent?  What are the governance arrangements?  These are all questions that are very familiar to the finance, treasury and banking community, and is a reminder that our profession is of utmost importance to all organisations, whether that be a top ASX listed company, or a volunteer organisation.

On top of this the Coronavirus has dealt a further blow to confidence in the Australian economy.   We are now starting to talk about negative growth and even possible recession.  Now is the time when treasurers earn their keep, and when financial risk management policies are put to the test.

At the FTA we have also been reflecting on the needs of the treasury community, and what the big themes and issues will be for 2020.  Here are our top 6.

1. How’s business?

It’s fair to say the Australian economy is not quite firing on all cylinders.  GDP, wage growth and inflation are still stubbornly flat.  The RBA is doing its bit by cutting rates, but with the recent bushfires and the Coronavirus, the economy will take another hit, and the impact to government finances will also dampen the prospect of fiscal stimulus, unless the government gives up on its surplus.  So what does this mean for the treasurer?  Interest rates staying lower for longer and possibly further cuts.  Risk of AUD further weakening.  Business risks mean liquidity and capital settings to be more prudent.  Counterparty risks elevated.

2. Very low interest rates

Interest rates globally seem to be stuck at very low levels, trying to get economies moving and inflation going up.  In Australia we have a cash rate of 0.75%.  The RBA does have the ability to cut further, and possibly even go negative as well as looking at quantitative easing (QE or printing money!)  But what do low or even negative interest rates mean?  Returns on surplus cash decline.  Banks net interest margins suffer.  Payer Interest rate swaps record bigger and bigger mark to market losses.  Unfunded pension liabilities balloon and new lease liability values increase.  Borrowing costs decline, if you are unhedged, and in theory weighted average cost of capital (WACC) should also decline.  That should mean lower hurdle rates and an inducement to invest (which is the whole point of lower rates), however with the heightened risk environment, the lack of confidence is not helping.  Also, some say asset values (as can been through equity markets) are too high, also discouraging investment.

Another risk as interest rates keep falling is hidden in loan and derivative contracts.  Most loan documents in Australia do not allow the reference rate (say BBSW) to go below zero.  That is, there is an embedded interest rate floor in your loan contract.  However, that is not the case in your derivative contract.  The risk management and hedging implications need to be thought through carefully.

3. Interest rate benchmark reform

It’s been known for a while now that banks will no longer be compelled to participate in the LIBOR rate setting process.  Hence the assumption is that the IBOR’s will disappear and so central banks have encouraged the rise of alternate reference rates, favouring overnight risk free rates.  In the US we have SOFR (Secured Overnight Financing Rate) and in the UK SONIA (Sterling Overnight Index Average).  In Australia BBSW is not going anywhere, however it has been established that the official Australian risk free reference rate is AONIA (Australian Overnight Index Average).  We have already seen a couple of issuances referencing the alternate reference rates, and with the deadline of 2021 looming for LIBOR, expect 2020 to see a ramp up in readiness activity in this space.

4. ESG (Environment, Social, Governance)

Regardless of which side of politics you are on, and whether you are a believer or non-believer when it comes to climate change, ESG is increasingly important in financial and capital markets.  For treasurers, the most direct impact is funding markets.  More and more investors are demanding ESG style investments, and depending on your industry and the broader ecosystem you operate in, it’s a significant risk area to address.  It’s not just climate change either.  Where does your company stand on social issues, including relationships with customers, employees, suppliers and communities?

5. Technology and innovation

There is no denying that the pace of technological change increases exponentially every year.  Who remembers what life was like before the iPhone was introduced back in 2007?  Robotics, automation and artificial intelligence (AI) threaten to have a significant impact on society – for better, or for worse, who knows?   Technological change is also opening doors for innovation and disruption to business models and established players.

For treasurers there are a few angles to this topic.

Firstly, there is the need for treasurers to understand the risks that innovation brings to the organisation – are the capital and liquidity settings right in order to allow the organisation sufficient time to react to disruptors?  What are the likely scenarios that could play out?

Secondly, the entire financial system is adapting to new technologies.  Payments innovation, digital currency, blockchain, trading platforms to name a few.  Are your banking and financial markets counterparties keeping up and offering the latest, or is there a new up and coming fintech snapping at their heels?

Thirdly, treasurers need to embrace new technologies in order to drive operational efficiencies in treasury operations (e.g. TMS) and be a strategic value-add partner to the business.

6. Professionalism and trust

The financial and corporate sector has been rocked with scandals over recent years, forcing financial and capital markets players to clean up their act.  Some of it has been forced upon them by regulators, and others have done so because it is the right thing to do and it makes good business sense.  Boards are also increasingly nervous and are no longer tolerating weak control and risk frameworks or poor governance.  As professionals, we should strive for excellence, and the highest standards of ethics and conduct.  To that end the FTA is focused on setting the benchmark of excellence in treasury and revisiting what it means to be a certified finance and treasury professional.  Watch this space!

Steven Cunico FFTP


The FTA’s The Treasury Currency podcast is a source for treasury news, insights and stories from Australia’s business leaders.

Episode 5: Leadership & Strategic Thinking

Duration: 28 mins


Peter Nankervis Managing Director – Lighthouse

Ben Leaver – CEO – Finance and Treasury Association

The Exchange Magazine 2019


Dear Members,

Our Technical Committee meeting in December was the first meeting for a number of our new members, as well as a chance to say farewell to departing members.

On behalf of the committee I’d like to thank our departing members for their service and contributions:

  • Andrew Palacios
  • Bijan Taghian; and
  • Justin Chau

And I’d also like to welcome our new members:

  • Alison Belot
  • Lachlan Cramey
  • Nick Burrough
  • Amit Mehta; and
  • Byron Gardiner

There were 3 main areas to discuss: the FTA Conference, professional development and our next big event, Essential Treasurer.

Overall the Committee was pleased with the program and numbers at the FTA Conference. Overall people were satisfied and felt it was good value, with good feedback on the quality of speakers. Although I was only at the final day this year, my impression was of a great event and I look forward to Sydney 2020. Congratulations to everyone (including members of the Technical Committee ) involved in organising the event.

Professional Development is the main role of the Technical Committee and in 2020 we are looking to frame the professional development activities around a curriculum and explore opportunities for more formal recognition of the development activities. This will be an area for active discussion in future meetings and given the ideas being thrown around at our initial meeting I expect some great ideas to come from the committee.

Which leads to the Essential Treasurer series of events in March 2020. A number of threads and paths to explore were identified, built around an afternoon event leading into networking drinks in the early evening. An organising committee has been established to develop the program and this is looking like another great event and opportunity to catch up on significant developments in Corporate Treasury. Watch out for announcements on the dates and places and mark your calendar accordingly.

I look forward to telling you more about each of these activities and the 2020 FTA Conference over the next few months.

Lindesay Brine FFTP
Technical Committee Chair