InternationalTreasurer2014Feb -- New Regulations Highlight Importance of Bank Partnerships

8/12/2019 InternationalTreasurer2014Feb -- New Regulations Highlight Importance of Bank Partnerships

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Bank Supervision

Regulators Give Banks a Pass on LeverageBy Dwight CassBasel IIIs leverage ratio now constrains derivatives and off-balance-sheet activities much less than

initially proposed.

Several years of lobbying by banks and theirsupporters paid off in January when the Basel

Committee announced changes to the calculationof the bank leverage ratio that make the measureless onerous to banks involved in capital markets,

derivatives and off-balance-sheet activities.Big US banks joined with European institutions

scrambling to raise capital to lobby regulators fora less effective leverage limit. They argued that

the additional capital the banking industry wouldneed to meet the leverage ratio published last yearwould cut the amount of credit available to busi-

nesses and consumers.Originally the 3 percent leverage ratio calcula-

tion lumped together most assets to which bankshad exposure. The modified calculation is more

complex, and allows banks to avoid lumping inmost off-balance-sheet exposures. (The BIS an-nouncement can be found at www.bis.org/publ/

bcbs270.pdf.) For example, banks only need toaccount for 10 percent of assets such as letters of

credit. Derivatives and repo arrangements con-ducted with the same counterparty can be netted

out, significantly reducing the amount of capitalrequired under the Basel III leverage provision.

Banks criticized the leverage ratio for being too

blunt a tool, even though at 3 percent it wouldbe swept away in the first days of a 2008-style

financial crisis. Even so, it was meant to back-stopthe risk-based capital calculations that banks arbi-traged and muddled in the run-up to the financial

crisis with an absolute minimum level of equityto total assets. Giving banks the ability to noodle

around with the calculation of total assets meansthat the leverage ratio is now more or less another

calculation that banks can tweak as they see fit.Banks complained about the leverage ratios

effect on credit availability. But its not the lending

institutions that benefit most from the changes.Rather it is securities and derivatives broker-

dealers. As originally proposed, these firms wouldhave had to include all their off-balance-sheet

exposures, including securities, derivatives, guar-antees and even letters of credit.

For trading houses, the change is particularly

beneficial. These firms can now net securities fi-nancing transactions and can avoid double count-

ing transactions with central counterparties.

MORE CREDIT DUE?

It remains to be seen whether banks will be ableto offer derivatives or other off-balance-sheet

Featured Meeting Summa

The Tech20 Treasurers

Peer Group

continued on page 3

FEBRUARY 2014

Regulators GiveBanks A Passon LeverageBy Dwight Cass

Basel IIIs leverageratio now constrainsderivatives and off-balance-sheet activitimuch less than initiall

proposed.page

The Need forNon-BankEngagement onProposed LCR RuleBy Joseph Neu

There is good reasonfor non-banks to beengaged in LCRdiscussions.

page

Best ofiTreasurer

Europe Blinks on SEPACompliance Date; UBSNeo Offers Hassle-FreSEF Access; more

pages 4

New RegulationsHighlightImportance ofBank PartnershipsBy Bryan Richardson

Having effective toolsto measure and trackthe extent of your banrelationship are critica

pages 12-

Revals SaaS HelpsTreasury Keep UpBy Hilary Kabak

A TMS profile focusingon NeuGroup-membeexperiences.

pages 14-

BASEL III PHASEIN ARRANGEMENTS

Source: BIS

* Including amounts exceeding the limit for deferred tax assets (DTAs), mortgage servicing rights (MSRs) and financials.

Transition periods

(All dates are as of 1 January)

PHASES 2013 2014 2015 2016 2017 2018 2019

Leverage Ratio Migra-tion toPillar 1

Minimum Common Equity Capital Ratio 3.5% 4.0% 4.5%

Capital Conservation Buffer 0.625% 1.25% 1.875% 2.5%

Minimum common equity plus capitalconservation buffer

3.5% 4.0% 4.5% 5.125% 5.75% 6.375% 7.0%

Phase-in of deductions from CET1* 20% 40% 60% 80% 100% 100%

Minimum Tier 1 Capital 4.5% 5.5% 6.0%

Minimum Total Capital 8.0%

Parallel run Jan. 1, 2013

Jan. 1, 2017 Disclosure

starts Jan. 1, 2015

4.5%

6.0%

8.0%

CAPITAL

l

i


2/16

Founding Editor & PublisherJoseph Neu

Managing EditorTed Howard

Contributing EditorsAnne Friberg, CTP

Bryan Richardson, CTPGeri Westphal

Advisory BoardAndy Nash

SVP, TreasurerAhold Finance Group

James HaddadCorporate Vice PresidentCadence Design Systems

Ron ChakravartiManaging Director, Global Solutions Head Liquidity

& Investments, Global Transaction ServicesCiti

Peter MarshallPartner

Ernst & Young LLP

Adam FriemanPartner

Etico Capital LLC

David RusateDeputy Treasurer

General Electric Company

Martin TruebSenior VP & Treasurer

Hasbro, Inc.

David WagstaffManaging Director, Head of US Tech, Media & Telecom

HSBC Securities (USA) Inc.

Eileen ZicchinoManaging Director

Chief Marketing Officer, Treasury ServicesJP Morgan Chase & Co.

Michael IrgangVice President and Chief Accounting Officer

OSI Group, LLC

Arto SirvioGeneral Manager, Nokia Finance International

Peter ConnorsPartner

Orrick, Herrington & Sutcliffe LLP

Robert VettorettiDirector, Treasury and Financial Management Services

PricewaterhouseCoopers LLP

Doug GerstleAssistant Treasurer

Procter & Gamble

Susan A. HillmanPartner

Treasury Alliance Group LLC

Academic AdvisorsGunter Dufey

University of Michigan

Donald LessardMassachusetts Institute of Technology

Richard LevichNew York University

The company and organizational affiliationslisted above are for identification purposes only.

Advisors to International Treasurer are not

responsible for the information and opinionsthat appear in this or related publications and websites. Responsibility is solely that of the publisher.

ISSN:1075-5691 Vol. 20, No. 122014 The NeuGroup, Inc.

135 Katonah Avenue Katonah, NY 10536(914) 232-4068 Fax (914) [email protected]

www.iTreasurer.com

EDITORS NOTES

While the comment period for US pruden-

tial bank regulators Notice of ProposedRulemaking (NPR) on the Liquidity Coverage

Ratio (LCR) ended January 31, it is not too

late to engage. Reading from the 100+ com-

ment letters, mainly from banks and affiliated

groups, most seek to underscore the unin-

tended consequences that the NPR, which

goes beyond the Basel III requirements, will

have on vital economic activities. Many also

point to the unintended consequences of the

Volcker Rule, i.e., upon trust preferred bonds

and collateralized loan obligations, that led to

swift backtracking by regulators as reason to

act similarly on the LCR NPR.

Bank treasurers, of course, are deeply

engaged with the LCR rules impacts, but

there are very good reasons for their peers

at non-banks to be engaged, too.

REASONS FOR ENGAGEMENTThe key reason for non-bank treasurers to

be engaged is to ensure that the banking

services they rely on will continue to be avail-

able on reasonable terms. But a related reason

is that bank regulators, according to a major

global bank that contacted The NeuGroup

recently, are very interested in hearing from

corporate customers on how new regulations

might affect them.

Along these lines, the National Association

of Corporate Treasurers signed on to a com-

ment letter with the Competitive Enterprise

Institute, the National Association of Real

Estate Investment Trusts, the Real Estate

Roundtable and the US Chamber of

Commerce requesting that the impacts

of the proposed liquidity ratio rules upon

non-financial companies be considered and

that a roundtable of all participants be held tobetter understand these concerns and avoid

the real-life adverse consequences as was

recently witnessed [with the Volcker Rule].

Their letter calls out a number of concerns

for non-financial companies found in others:

The impact on credit facilities for

structured products:the application of a

100 percent outflow factor in LCR calcula-

tions makes these equivalent to unsecured

undrawn credit facilities (see the Structured

Finance Industry Group/Securities Industry

and Financial Markets Association letter);

The impact on derivative use, as thecalculation of collateral outflows does not

allow the offset of collateral inflows; and

The scoping in of non-bank financial

companies that help facilitate customer

transactions.

Non-bank treasurers should also consider

the wide-ranging potential impact on transac-

tion banking services.

Banks willingness to take deposits.

The BAFT-IFSA, the leading international

transaction banking association, notes how

the LCR and leverage ratio (see page 1) are at

cross-purposes: For example, the LCR requires

banks to hold HQLA in case of a liquidity stress

scenario. These assets that are mostly held at

Central Banks are counted into the leverage

ratio exposure although they cannot actually be

used for anything other than HQLA and are not

a source of leverage. Additionally, when a bank

takes cash deposits from its clients, the cash is

either matched off against a loan (i.e. used as

funding) or it is placed with a Central Bank. If it

is placed with a Central Bank, an asset is created

on the banks balance sheet which adversely

impacts the leverage ratio Exposure Measure.

Accordingly, banks are penalized for

deposit takinga basic banking service.

Some MNCs looking to deposit sizeable

amounts over year-end have already found

transaction banks reluctant to accept them.

And this says nothing about the sizable cash

balances of many stable and highly-rated

companies, deposited for an extended period

of time that T30 Alumna Cathy Santoro,

formerly treasurer at MGM Mirage and VP

Finance at Walmart, notes in her letter.

Cross-border solutions hampered.

The BAFT-IFTA also calls attention to thejurisdictional deviation from the Basel III

LCR that the US NPR introduces. If other

jurisdictions follow suit, this will hamper

global banks ability to offer standardized

global products. In addition, they call

attention to the 100 percent outflow factor

applied to deposits associated with corre-

spondent banks and similar arrangements

used to offer operational account-related

services outside a banks own networks.

And the list does not end here.

Bank Relationships

The Need for Non-Bank Engagementon Proposed LCR RulesBy Joseph Neu

SUBSCRIPTION INFORMATION

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of The NeuGroup, Inc.


3/16

products to corporate hedgers andother institutions more cheaply than they

would have otherwise. The prospect ofmore expensive hedging and credit was

one of the threats the industrys lobbyingarms used to attempt to convince regu-

lators that the leverage ratio needed to

be weakened. A similar set of argumentswere deployed against Basel IIIs liquidity

requirements, which now allow all typesof assets to be counted as liquid, includ-

ing equities.

It remains to be seen whether

banks will be able to offer derivatives

or other off-balance-sheet products

to corporate hedgers and other

institutions more cheaply than they

would have otherwise.

There are few examples of banks pass-ing on savings to customers from regula-tory reprieves, despite their propensity to

pass on regulatory costs.

In terms of off-balance-sheet items,specifically derivatives, interest rate prod-

ucts receive the most favorable treatment.(See chart.) Banks will be unable to use

the leverage ratio as an excuse for higherprices on swaps and similar instruments.

However, commodities other than pre-

cious metals have a higher add on in thecalculation of assets, and this could have

some effect on their cost.The BIS also issued its guidelines for

liquidity ratio disclosures in January.(They can be found at www.bis.org/publ/

bcbs272.pdf.) The point of the liquiditycoverage ratio (LCR) is to ensure a bankhas enough high quality liquid assets

(HQLA) to survive a significant stresslasting for 30 days. The related regulatory

tool is the Net Stable Funding Ratio (NSFR)which is meant to reduce bank funding

risk by ensuring each institution funds itsactivities with sufficiently stable sourcesof funding.

The LCR will kick off on January 1, 2015, with a minimum requirement of 60 percent. That will increase in annual steps to

reach 100 percent in 2019. However, theBIS says that banks can use their stocks

of HQLA during times of significant stressto weather those periods even if thatmeans their LCR falls below the minimum

as a result.All internationally active banks will be

required to disclose their liquidity position at the same time as they report thei

other financials. The reports will be madeon a consolidated basis but individuacountries regulators can tweak thei

specific requirements to ensure that thedisclosures are adequate to the market

and to keep a level playing field.

REGULATORY WATCH

Leverage, continued from page 1

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ADDON FACTORS FOR FINANCIAL DERIVATIVESUNDER BASEL III LEVERAGE CALCULATIONS

INTEREST

RATES

FX &

GOLD EQUITIES

PRECIOUS

METALS

(EX-GOLD)

OTHER

COMMODITIES

One Year

or Less 0.0 1.0 6.0 7.0 10.0

One toFive Years

0.5 5.0 8.0 7.0 12.0

Over FiveYears

1.5 7.5 10.0 8.0 15.0

Source: BIS

According to the BISs June 2013 pro-

posal, the leverage ratio is intended to:

restrict the build-up of leverage in thebanking sector to avoid destabilizing

deleveraging processes that can

damage the broader financial system

and the economy; and

reinforce the risk-based requirementswith a simple, non-risk-based dri

measure.

The rationale for the ratio was:

a simple leverage ratio framework iscritical and complementary to the

risk-based capital framework; and

a credible leverage ratio is one thatensures broad and adequate capture

of both the on- and off-balance sheet

sources of banks leverage.

The Ratios Rationale


4/16

Regulatory Watch

Europe Blinkson SEPACompliance Date

Acknowledging that there wasntenough of a migration to the SingleEuropean Payments Area regime tomeet the February 1 deadline, the

European Commission in Januarydecided to push the compliance

date to August 1, 2014.[The] migration rates for credit

transfers and direct debits are not high

enough to ensure a smooth transition toSEPA despite the important work already

carried out by all involved, wrote MichelBarnier, the ECs Internal Market and Ser-

vices Commissioner, in a press release. Hepointed out that it wasnt really movingthe deadline date, just adding more time

for actual transition.Andrew Owens, managing director

of global payments at SunGard, said thatbecause the deadline was a law passed

by the European Parliament and thus anychanges must go through it, the EC was

just adding a grace period. The EC

is saying, Were going to let you off thehook for a period of 6 months and were

not going to penalize you and weregoing to continue to make sure that

your payments and direct debits canbe processed by that time.

The EC was also likely adding a grace

period because of the delicate natureof the European recovery. It seems

obvious just when the economy starts

to recover there was no way the

European Parliament or European Com-mission would step in and stop people

being able to do business, Mr. Owenssaid. The deadline was a bit of a mirage

to begin with, he added.

Citing the most recent statistics fromthe European Central Bank, it was the

direct debit side of the SEPA equationthat stayed the ECs hand. It added that

despite its repeated efforts to raiseawareness there just wasnt enough

migration, particularly among small andmedium-sized companies.

Tom Deas, treasurer at FMC Corp and

current chair of the International Groupof Treasury Associations, says his compa-

ny is already ready for deadline. He addsthat most treasurers that he interacts

with via various treasury organizationshave been focused on SEPA and theplan was to be ready.

MOST READY ALREADY

In The NeuGroups European TreasurersPeer Group, most members in a recent

survey said they felt confident theywould meet the February 2014 dead-line. However, being fully compliant in

all countries had so far proven to be achallenge, so perhaps this extended

transition period will help many of thosecompanies tie up loose ends.

And while many larger companies arelikely close to compliance, it was manyof their smaller suppliers that would

not be ready, likely causing problems incollections and payments for an indefi-

nite amount of time. For companies stillstruggling with getting ready for SEPA,

the added time will help. And bankshave said they will continue to processlegacy payments.

Deutsche Bank will continue to

process clients electronically submit-ted legacy credit transfers and directdebitsdirect debits under the collec-

tion authorization procedure onlyintheir existing legacy formats, said MartinRunow, DBs head of cash management

for corporates in the Americas.However, the bank recommends its

clients stay the course in their SEPAmigration projects and finalize their

SEPA migration project as soon aspossible, Mr. Runow said.

Still companies may get lazy ahead

of the new August deadline. SunGardsMr. Owens says there also will be plenty

of nervousness as the new deadlineapproaches. Now [the EC has] opened

up a Pandoras Box in that, what happens

when we get to August 1 and peoplestill arent ready?

Software & Systems

Neo Offers Hassle-Free SEF Access

As regulators approve more submis-sions requiring an ever-broaderrange of swaps to be traded over SwapExecution Facilities (SEFs), UBS Securi-

ties is enabling clients to trade over SEFswithout the legal or technical headachesof connecting to them directly. So far

UBS is the only major Wall Street firmwith an active desktop product that

does this.Javelin was the first SEF to receive

approval for its broad made-available-to-trade (MAT) application, in mid-January, and since then TrueEX, TW and

MarketAxess have received approval.That means the swap contracts theyve

submitted must soon be traded overthe 20-odd SEFs that have emerged,

either electronically or through theirtrading desks.

Some SEFs trade either credit-default

or interest-rate swap products, butliquidity for each is clearly fragmented

across multiple execution venues, andto find the best price or liquidity by

connecting to them directly wouldrequire meeting burdensome legaland technical requirements.

Although most corporate end-users

are exempt from clearing, those nowtrading on longstanding trading plat-forms such as Bloomberg or TradeWeb

will have to trade over SEFs. If theydecide to connect to the execution plat-forms directly, theyll have to review and

sign each ones specific legal documents,and submit themselves to inspections in

areas including books and records, per-sonnel histories and audited financials.

UBSs Neo trading platform allowsclients to trade across all the SEFs,

BEST OF ITREASURER.COM

4 International Treasurer / February 2014 For additional information visit iTreasurer.com

For more valuable articles published

on our website visit iTreasurer.com.

Latest postings include:

What Does the Audit Committee

Need to Know? Depends. What to

report to the audit committee can vary

widely. Heres a look at what some in

The NeuGroup report.

Basel III Will Have Big Impact on

Corporates. Volcker Rule and other

regulation will also shape less market-

friendly bank products.

EMIR Derivatives Deadline. Most

companies arent ready.

More iTreasurer Online!


5/16

BEST OF ITREASURER.COM

whether using algorithms to search

broadly for best price or liquidity, or on aspecific execution platform. It also places

only one screen on the clients desktop,instead of several.

Neo avoids market fragmentation

and simplifies access to liquidity by usinga single platform to connect to multiple

venues to price and trade swaps, saidTimothy Lawton, a director at UBS.

For corporates, which tend to tradeswaps less frequently, Neo represents an

efficient and potentially cost-effectiveway to access the new SEF swap market.In addition to benefiting from UBSs

existing connectivity and price discountsit receives on certain SEFs, Lawton said,

the commission charged for trading overNeo may be negotiated.

It resonates with people who justdont do a lot of swap activity and maywant an agency to take care of it all, and

prefer having only one legal agreementwith their agent bank, said Tod Skarecky,

senior vice president at Clarus FinancialTechnology, who has blogged extensive-

ly about SEF-market developments.At least two other competitors, Morgan

Stanley and Credit Suisse, have report-

edly talked to clients about establishinga similar service. Those firms either didnt

respond to queries or said those discus-sions were in preliminary stages.

UBS may have an advantage over

most Wall Street rivals because it exitedtrading swaps for its own book in 2010

and the next year launched its PriceImprovement Network (PIN), an elec-

tronic platform to trade interest-rate and

credit-default swaps on an agency basis.Neo is focusing on the interest-rate and

credit-default swap products now, andits anticipated to eventually provide

access to the bulk of UBSs productsand services.

Regulatory Watch

SEC Worried AboutBond Dealer Health

The Securities and Exchange Commis-sions Division of Investment Manage-ment (IM) is worried that the primary

dealers of the fixed-income world mightnot have enough capacity to make

markets effectively if volatility spikesbecause bond fund flows rapidly turn

negative. The question has pertinenceto treasury investment managers sincesuch outflows crippled the MMF market

for a short time in 2008, gumming upcorporates access to needed cash.

The IM issued guidance earlier thismonth entitled, Risk Management in

Changing off Market Conditions. As

context, the agency notes that net assetsof bond mutual funds and ETFs are at

near-historic highs of $3.6 trillion with$2 trillion of this coming since 2008.

The taper vapors back in June caused a

1.8 percent outflow from bond funds.While thats not unprecedented, it occurs

in a time when the market fundamentalshave changed somewhat.

The problem is, primary dealers nowhold inventories similar to those they had

in 2001, despite the markets growth by afactor of four since then, according to IM.

This is a much bigger disparity than was

seen even in the 2008 crisis, and it raisesthe question of whether they are capable

of making markets effectively in a timeof crisis. Prior to the crisis, primary dealer

inventories were 4 percent of the totalmarket. Now they are 0.5 percent.

IMs intended audience is investment

fund managers, and so it goes on toissue some reasonably mundane risk-

management best-practice suggestions,such as make sure stress tests account fo

liquidity, and let your customers knowwhat theyre in for.

Treasury investment managers need

to consider the additional liquidity riskas well as the market risk they could run

due to the change in the dealers abilityto make markets during a crisis.

For additional information visit iTreasurer.com International Treasurer / February 2014 5

Source: Meeting material, The NeuGroup Treasurers Group of Thirty 3; Fall 2013

DRIVERS FOR GLOBAL CASH FORECASTING

GLOBAL CASH FORECAST

PRIORITIES OVER THE

NEXT 1-2 YEARS

Most members plan to

invest in better tools,

including upgrades to

ERP or TMS systems tofurther improve forecast-

ing capabilities. Other

priorities include educat-

ing the business on

the importance of an

accurate forecast and

improving treasury

processes and discipline.

CashPositioning

ImproveLiquidity

Mgmt

MitigateTrapped

Cash

ManageCounterparty

Risk

IdentifyFX

Exposure

ImproveYield

EnsureBusiness

Focus

Respondto SrMgmt

100%

80%

60%

40%

20%

0%

More important Less important


6/16

Thank YouA successful NeuGroup Network Peer Group depends on the par-

ticipation of its members. We thank you, the members and sponsors of

The Tech20 Treasurers Peer Group, for your open dialogue and peer

knowledge exchange at the recent Annual 2013 Meeting.

Your active involvement is the key to maintaining an unrivaled level of

interaction and networking within the group, as well as providing highly

valued contributions to the entire NeuGroup Network of 330+ members at

180+ companies.

2013ANNUAL MEETING

The Tech20 Treasurers Peer GroupNovember 6-8, 2013

Facilitated by:Sponsored by:


7/16

Tech Treasurers Consider On-Going Plans forRaising Debt to Substitute for Domestic CashTech20 treasurers discussed how best to fund on-going shareholder distributions thattax domestic cash flows and keep their investors happy.

With the prospects of a US tax reform to fix the offshore cash conundrum remote, Tech 20 mem-

bers marked their 13th Annual Meeting (sponsored by BNP Paribas) in November 2013 by focus-

ing on various ways to maintain their current path of issuing debt to fund dividends and share

repurchases. Fortunately, debt capital markets look to be receptive to tech issuers and this is likely

to be the case for some time. With US interest rates expected to continue to stay lowthanks to

tempered expectations about overall post-crisis GDP growth and employment rates, plus forward

guidanceborrowing is likely to beat the cost of repatriation for some time, too. Rating agency

sentiment, meanwhile, appears to be on Tech20 treasurers side, allowing them to keep issuing

debt to return cash to shareholders without too much concern over the rating impact. But what

makes borrowing easier, also makes investing the cash balances remaining more challenging.

Here are some further highlights from the meeting:

1) So long as tech issuers avoid taper panic periods, the market reception will be very good.

Members shared insights on issues pre-taper panic and another noted how his turn to the euromarket in July 2013, to move away from it, met with strong demand. BNP Paribas Tim McCann,

head of US syndicate, and Mark Howard, head of US credit strategy, suggested further that tech

has maintained its distinctiveness from telecom issuers that have saturated the bond markets

(see Verizon, most recently), and therefore tech issuers are likely to continue to enjoy better

relative spreads and demand.

2) Ratings seem to be accommodating the new normal of tech bond issuance and dividends.

Moodys Rick Lane participated in a session that suggested there is acknowledgment on the part

of rating agencies of what the offshore cash situation means in the current state of the sector.

Moodys still seems comfortable with techs relative cash levels, even given the growing off shore

portions along with increasing use of dividends to return cash.

3) Reconsidering the cash investment norm.The discussion of cash investment management

practices revealed that while the norm is still to be conservative with excess cash, there is a grow-

ing minority that is crossing the Single-A rating threshold and considering additional asset classes

in the name of diversification for portfolios of size. The rest will be building their own money

market fund equivalents in separately managed accounts and looking to certain eager banks to

bid for their deposits.

Member Debt Issuance ExperiencesMembers shared key takeaways from large bond issues from earlier in the year, and for what

follows when you dont time the market right and need to search for alternatives. Members also

SPONSORED B

2014 The NeuGroup. T

information is sourced f

The Tech20 Treasurers P

Group.

For more informatiowww.NeuGroup.com

FACILITATED

THE TECH20

TREASURERS

PEER GROU

PART OF THE

NEUGROUP NETW

16+ GROUP

330+ MEMBE

180+ COMPAN

RELATED GROU

The Assistant TreasGroup of Thirt

The Bank TreasurPeer Group

The EngineeringConstruction TreasPeer Group

The Treasurers Gof Thirty 1, 2 an

The Tech20 Treasurers Peer GroupThe NeuGroupfor MNC Treasurers in the Technology Sector

2013 annual meeting briefing


8/16

discussed unique aspects of a convert deal, for companies who still do not wish

to become regular bond issuers.

KEY TAKEAWAYS

1) Structure debt issuance to balance cash portfolio.Prudent ALM for compa-

nies with duration in their cash portfolios may wish to offset that with some

longer duration liabilities and thus not be so quick to swap back a longer-term

bond issuance to floating.

2) Use a tight group to make the process as efficient as possible, keep the

deal a secret and issue on time. For a first time issuer, especially, it is important

to have a well defined project plan, tight workstreams and frequent communica-

tion with a small group of lead bookrunners.

3) Acknowledge rating agency leverage ratios and state intention to main-

tain significant net cash. A debt issuing member said the one concession made

to rating agencies was to agree to maintain significant net cash, even if the need

arose to repatriate offshore cash, and to promise not to issue again in 2013.

Agencies might seek to apply a leverage test but that does not mean your firm

needs to agree to it.

4) If you get caught out, there are alternatives.What if you need to issue when

the timing isnt right in the US? One member described a situation where his

company needed to issue to meet domestic spending needs, including share

buybacks. As it prepared to issue, US rates were still low, but as June rolled around

this was no longer true. Since the company had to move, it decided to look more

to the euro markets where coupons remained low.

OUTLOOK

Tech companies can continue to issue debt and see strong demand relative to

more mature corporate sectors so long as they maintain significant net cash levels.

The window of opportunity to fund at historically low rates is closing, however.

Changing Rating Agency PerspectiveMoodys and BNP Paribas shed light on how the rating agency perspective ontech debt issuance is evolving. One clear way it is evolving is in how rating

agencies choose to acknowledge the growing portion of offshore cash in tech

8

A Conversationwith Private Equity

notable private equity firm responded to

member questions about how they look at the

ech sector and evaluate investment opportu-

ities. Reiterating the theme from the start of

he day, this firm noted that part of the evalua-

on process must reconcile the fact that growthpportunities are not what they once were;

ut, even so, tech has the ability to outperform

nd will contribute to productivity gains

hroughout the economy.

KEY TAKEAWAYS

) Looking for companies where P/E/G

atio has been undone by overly pessi-

mistic fear. This it also includes companieske Dell, which represents a company in a sec-

or that is undergoing transformation and that

as multiple ways to win with a proven profi-

iency in a business model that can work in

more than one type of market.

) Activism creates alpha, so it will remain

n asset class. In general activism is pro-cycli-al and its effectiveness will wane once the

ycle turns. Tech, however, remains vulnerable

ecause balance sheets in the sector tend to be

east efficient with too much net cash. This will

orce boards at tech companies to look at

ecapitalization and M&A activity.

) Friendly transactions where you work

n partnership with the target add the

most value. Also, unlike most activists, this PE

rm only engages in friendly transactionswhere it can work with existing management

o improve the business through its transfor-

mation period. This is something member firms

hould keep in mind if they decide to pursue

heir own M&A opportunities.

OUTLOOKerhaps the key to investing successfully in the

urrent environment is to understand how

THE TECH20 TREASURERS PEER GROUP8

TTech20 members were urgednot to give in too much to

activists and overdo cash

return in the near term. But

also not to hoard cash for

the sake of it.

Continued on page 9

MORE OF THE SAME FOR 2014

4%

10%

4%

10%

13%

67%

62%

58%

50%

33%

29%

29%

38%

40%

54%

Economic growth

Economic growth

Unemployment

Unemployment

Better

Aboutthe same

Worse

2014

201

3

2014

2014

2013

US economic growthrelative to growth

in eurozone

Source:NeuGroup

meeting materials,

Tech20 2013


9/16

9

companies net cash positions. Rating agencies have had to come to terms with

what the off shore cash situation truly means in the current state of the sector.

KEY TAKEAWAYS

1) Cash levels still sufficient, even with growing portions offshore. While

Moodys is not moving toward as much accommodation as S&P apparently is

on accepting a net debt view on leverage, it still seems comfortable with techs

relative cash levels, even given the growing off shore portions along with increas-

ing use of dividends to return cash. Less accommodation, however, was indicated

on the question of allowing cash-rich tech companies to forego CP back-up lineswithout a potential long-term rating impact.

2) No problem dealing with blunt CEOs.Members expressed concerns about

putting CEOs in the room with rating agency analysts, where they might say

something unkind about how rating agencies want them to manage their

business. However, the Moodys analyst said that these conversations are wel-

come regardless and would not adversely impact a rating decision. The more

communication, the better was the analysts advice.

3) 12-18 month window to prefund without adverse rating impact.Asked

what a reasonable time period was where firms would be allowed to pre-fund

commitments to take advantage of the current rate environment, Moodys

suggested 12-18 months was reasonable, but there is no bright line. It helps tohave good communication with the rating analyst as to the companys situation

and the intended use of proceeds. Several members pointed out that this is less

than the three years the rating agencies provided firms ahead of HIA.

OUTLOOK

As S&P has inched closer to European net debt considerations in credit ratings,

it will be interesting to see how much Moodys sticks to the view of not formally

factoring in off shore cash into leverage calculations for cash-rich firms. Given

that investors increasingly are not relying on ratings, it may be becoming imma-

terial, as a panel of investors to follow confirmed. Meanwhile, members do seem

to be getting accommodations based on the cash generating ability that lies

behind their cash positions, which somewhat mitigates the fact that Moodys

is not letting itself get pinned down on a cash factor. In short, ratings do not

appear to be the show-stopper for borrowing to avoid the tax consequences

of repatriating offshore cash.

Changing Practicesin Cash Investment ManagementMembers reviewed cash investment management processes and benchmarking

for large cash portfolios, to see where their own practices were in relation to the

norm. Thereafter, Rudy de Cand, director, and Jim Santoro, director, GlobalLiquidity Advisor at BNP Paribas shared their thoughts on how cash investment

management is changing.

KEY TAKEAWAYS

1) A growing minority crossing the Single-A threshold. Six of the pre-meeting

survey respondents indicated they had policies allowing investment of cash in

securities rated below Single A.

2) Few earning returns above 1.5 percent. Just one respondent in the pre-

meeting survey said their cash portfolio earned a return greater than 1.5 percent

in the past year (ended June 30, 2013). Little wonder as, overall, cash portfolio

much more volatility comes into play. A

news event can trigger a big move in pr

perhaps much more than is justified. W

generally speaking valuations are reaso

fair for most firms given todays lower-gr

environment, there is greater sensitivity t

as everyone is walking on eggshells.

creates windows of opportunity to buy iare ready for them. Look for opportunitie

growth at a discount, especially situa

where free cash flow is strong and stable.

Foreign Exchangethe Shale Revolutionand the USDAs the US shale revolution continues,

Paribas illustrated the potential consequ

for the US dollar.KEY TAKEAWAYS

1) US Shale Oil Revolution ticks the

for longer-term economic growth.economic growth stimulus needed, incr

in US shale oil production fit the bill. The

lead to increases in natural resources ava

to US business, investment in physica

human capital, improvements in techno

and new institutional frameworks to enco

subsequent growth. Indeed, the US will

six-fold increase in its oil exports and three

increase in natural gas as it takes a gro

share of rising oil and gas productionbecomes energy independent.

2) US moves from importer to expo

of energy. Shale production will switcdirection of international oil trade that has

China surpass the US as the largest oil imp

As a result, 90 percent of Middle Easte

exports will be drawn to Asia by 2035.

THE TECH20 TREASURERS PEER GROUP

Continued from page 8

Continued on pa


10/16

10

) The growth and trade factors will

trengthen USD over next decade.ccording to a BNP Paribas FX strategist, all

his could benefit the USDs fundamental

quilibrium exchange rate (FEER) by as much as

6 percent in the next decade.

OUTLOOKWhile not everyone bought into the shale revo-ution scenario, it would have a profound

mpact on decisions to hedge the dollar or

orgo hedging as was contemplated earlier. It

would also impact decisions to continue to bill

n dollars, which has been the norm for tech

nce Intel decided to bill for semiconductors

lobally in dollars to prevent grey market

rbitrage. Regardless of the degree to which

members thought the impact realistic, the big

uestion it left them was: if not this, what else

will spur better US economic growth over the

ext ten years?

THE TECH20 TREASURERS PEER GROUP10

TO LEARN MORE CONTACT:

oseph Neu

914-232-4069 [email protected]

or

Anne Friberg

212-233-2628 [email protected]

asset allocations, remained heavily weighted toward money market funds, US

Treasuries and Agency Debt, Corporate Bonds above the Single-A threshold and

corporate CP/CDs.

3) Money market reform driving members into build-your-own equivalents

and deposits.The clear consensus of the discussion was that if reforms ended

up with the need to mark variable NAV funds to market, members would simply

mark funds of their own creation to market. This is a continuation of the already

pronounced trend by Tech20 members to build their own short-term funds in

separately managed accounts. More may also want to investigate bank depositswith certain banks bidding for corporate deposits in certain jurisdictions where

they need them in response to bank regulation. Given that operating cash

deposits are better than traditional time deposits, look for banks to continue

seek to create structured products that can be labeled operating deposits for

regulatory purposes but pay more like time deposits.

4) Investment committees under review. Several members indicated looking

afresh at investment committees formed to help guide investment decisions.

One member indicated that he felt his had become something of a bureaucratic

obstacle to timely investment actions rather than a value added review. Others

also cited turnover, attendance and conflict of interest concerns. Having an invest-

ment committee might also contribute to 1940s Act requirement concerns, whicha few members cited as a recurring consideration. For the most part, however,

external investment managers and the advice and research they provide seem to

be offering members greater value in guiding investment decisions.

OUTLOOK

Against the backdrop of many of the issues under discussion, including the con-

stant threat of activists who might call out members if they ever get too aggres-

sive with their cash investments (and exceed their earnings impact thresholds),

it is likely that we will see continued, but gradual changes in cash investment

approaches to stress diversification with a more sophisticated understanding of

risk. This is what prompted one member company to change its credit thresholds

and is what pushes another into new asset classes. It makes no sense to let a

rating thresholds create concentration risk or limit non-rating views on risk from

keeping the cash portfolio from the efficient frontier of risk/return. Nor does it

make sense to let accounting-driven currency concerns prevent cash-rich US

corporates from investing offshore cash in non-dollar denominated assets.

Meanwhile, new wrinkles with bank deposits may replace some of the traditional

money funds, but money market reform is also pushing corporate cash out

into risk assets. So long as members understand the risks in these, this is not

necessarily a bad thing, as it will make their investment portfolios and their asset

liability management stronger.

ontinued from page 9

CONCLUSION & NEXT STEPS

In line with the lowered expectations

of the new normal, which was one ofthe themes highlighted by BNP

Paribas Economist for North America,Bricklin Dwyer, at the start of the

meeting, Tech20 members couldleave the meeting feeling relativelygood about themselves. While tax

reform to allow repatriation of offshore cash is not in the offing, debt

capital markets still look receptive to

tech issuers seeking to substitutedebt for available cash. Investor and

rating agency sentiment appear tobe on Tech20 treasurers side, as the

tech sector is expected to continue topunch above its weight as a contribu-tor to US growth.

The next meeting will be April 24,2014, hosted by Oracle.


11/16

Thank YouA successful NeuGroup Network Peer Group depends on the partici-

pation of its members. We thank you, the members and sponsors ofThe

Treasury Investment Managers Peer Group, for your open dialogue and

peer knowledge exchange at the recent Autumn 2013 Meeting.

Your active involvement is the key to maintaining an unrivaled level of

interaction and networking within the group, as well as providing highly

valued contributions to the entire NeuGroup Network of 330+ members at

180+ companies.

2013AUTUMN MEETING

The Treasury Investment ManagersPeer GroupOctober 22-23, 2013

Facilitated by:Sponsored by:


12/16


REGULATORY WATCH

Bank partners are some of the most

important relationships for a business.And selecting and effectively managing

the right ones is a critical role that trea-sury plays. Therefore, effective tools are

needed to measure and track the extentof the bank relationship as well as thelevel of service they are providing.

Whats more, treasurys bankingresponsibilities are becoming even more

important as the new capital require-ments from the Dodd-Frank Act and Basel

III regulations drive banks to deploy theircapital much more selectively, resulting inmore scrutiny on whom they do business

with and how much business they do.However, depending on who you are

and the amount of clout you have, twocan play the game of being choosy. Com-

panies have been responding to this newenvironment by also being more selectiveabout who their bank partners are. At a re-

cent meeting of The NeuGroups AssistantTreasurers Group of Thirty (AT30), mem-

bers engaged in a substantial discussionon bank partners, sharing examples of

how they maintain and manage bank re-lationships and how they make decisionswhen bank groups need to be downsized

or increased. Following are highlights thataddress some of the key considerations in

the decisions of which banks to keep, addor move along.

WHAT MATTERS TO TREASURY

Big decisions regarding the addition or

removal of a bank, the award of addi-

tional business, or reduction of businesscannot be made flippantly. Conversely,they should be made based on objective

data that can be defended against chal-lenge. According to a pre-meeting surveyof the AT30, the element that is measured

most is simply the allocation of businesswith their banks. The other common mea-

sure, the performance report card, is per-formed much less frequently. The report

card tends to be more qualitative and

anecdotal in nature, relying on input from

many sources. The share-of-wallet analy-sis, on the other hand, is more data-ori-

ented and useful in revealing what busi-ness banks have and determining how to

reallocate that business when necessary.There are split views on whether or

not to share this type of information with

banks. Those who do expect that this ac-tion will help develop, deepen and im-

prove those key relationships. Sharingthe data can communicate that the bank

is important enough for the client to goto this trouble; it also communicates thatthe client is watching and is serious about

having strong healthy relationships. Thosebanks that value the strategic relationship

take it seriously and value the feedback.We love to receive this feedback,

said one banker at the AT30 meeting.One member added that some banksare more interested in this input than

others, which in itself is insightful aboutyour bank partners. The ultimate goal

of sharing this information with banksis to increase the level of transparency

between the two organizations.Those who elect not to share the infor-

mation believe it may weaken their posi-

tion with their banks, or that it may driveundesirable behavior on the part of the

bank. For example, if a bank knows thatit is number five on the list it may increase

the pressure for more business or scaleback its commitment to the client.

HOW MUCH DO THEY MAKE?

Naturally, a bank partner is not goingto share their profit margins with theirclients, and especially their profitability on

their relationship with your company. Butimagine the value this information couldhave to your management of the rela-

tionship. If you knew their margins wereparticularly low then you would know to

press them and you would know to pressthem if you knew the opposite were true.

Knowing the answer to this question is

important enough to some practitioners

that they have taken steps to figure it outOne company has devised the following

calculation they believe gets them closeto the answer and have found useful. Here

are other considerations.(See figure 1.)Ask the bank what it wants.Practitio

ners often refer to their banks as partners,

but a productive partnership considersthe interests of the other party. There-

fore, it is prudent to at least know whatbusiness the bank wants most from you

organization. Banks have a variety oproduct offerings, which vary by profitability, level of competence and relevance

to the client. Practitioners and bankersagree that there should be a discussion

about the business banks want most froma client. For example, clients often assume

lockbox services is a desirable piece ofbusiness for banks when in fact it is not.

Credita key relational ingredient

new questions about its role. It is no surprise to hear a treasury practitioner say

we award business only to banks in oucredit group, or it is a challenge to keep

all of our banks happy with sufficientbusiness. It is for that reason that someare challenging the industry practice o

banks using credit as a loss leader andthen clamoring for the real revenue-gen

erating business. Why not simply pricethe credit accordingly and therefore not

be so dependent on the other sourcesof business? This could end up in highecosts for corporates but less headaches

with managing relationships.

Further, many companies have creditfacilities that are not even needed, muchless used, and simply function as a security

blanket in the event of an unforeseen hitto liquidity. Is it prudent then to eliminateor downsize the credit? One practitione

thinks not. Her team had previously con-sidered eliminating their revolving credit

facility since they have never used it anddont expect to. But they chose not to

do it because they like the idea of banks

Banking Relations

New Regulations Highlight Importance of Bank PartnershipsBy Bryan Richardson

Having effective tools to measure and track the extent of your bank relationship and the level of service the bank providesis a key ingredient to successfully managing bank partners.


13/16

paying attention to them and watching,

so that there is always familiarity in theevent there is an unexpected need.

When its time to reshuffle the bank

deck. Large MNCs continue to re-engineer

banking relationships around the globe.

In designing an optimal banking struc-ture, liquidity optimization is usually a

driver but other key considerations, in ad-dition to those discussed above, include

costs, counterparty risk management, andsupporting the needs of the operat-

ing business. However, in more recentyears, the components of the regulatoryavalanche are also weighing on the de-

cisions. Below are some salient points toconsider, offered by practitioners, as you

evaluate who should and shouldnt be inyour bank lineup. (Also see figure 2.)

CONSOLIDATION CONSIDERATIONS

Less is more.Keeping every bank hap-

py is a tough job, if not impossible. Beingable to spread the wallet across fewer

banks is one of the positive by-productsof a bank consolidation. There is also less

time required by treasury as there arefewer bankers you need to meet with.

A meeting of the treasury minds.

In addition to the quantitative scorecard

and share-of-wallet analysis, a qualita-

tive exercise can be useful to identify thebanks to keep and lose. An approach one

company takes is to have each key personin treasury prepare a list of their top 10

banks based on their function and expe-

riences with the banks. The AT then ag-gregates everyones input with a score to

arrive at a collective top 10. In this case itwas interesting how aligned the team was

on their experiences with their banks.The credit message: Step it up.

When a company determines they needto reduce their bank group, banks shouldunderstand that they stand to benefit

from fewer competitors for the limitedbusiness. In exchange, the remaining

banks should be asked to increase theircredit commitments. One company took

this approach and experienced an over-subscription to their new credit deal.

Credit is the price of admission but

no guarantee. This is the view amongmost treasury leaders who utilize bank

credit. As previously mentioned, manycompanies confine their ancillary business

awards to those banks that have commit-ted credit. However, ancillary business isnot a given. Prudent companies still go

through the RFP process and awards are

based on the merits of the banks propos

als. But if all things are essentially equabetween two competitors, the award wil

go to the bank with the lesser amount ofcurrent business.

Adding strategically.In a bank con

solidation initiative the goal isnt neces-sarily about just reducing banks. Getting

rid of low-value banks opens the door toadding more strategic banks to the mix

In the case of one practitioner, 10 bankswere dropped but two were added that

the team felt could bring additional valueAnother company elected to add a Chinese bank to their group in anticipation

of growing business in that country.Bank relationship management has

been a prominent topic for decadesBut given the major shift in regulatory

requirements that will impact credit availability and bank fees, it will truly be anarea that requires heightened attention

in the coming years.Many banks warn they will be focusing

more on their strategic clients and that itcould be at the expense of those clients

who are not considered strategic. Thisview of the banks will require treasury toensure it is keeping the right banks and

keeping those banks happy.

REGULATORY WATCH


BANKING CONSIDERATIONS

DRIVERS FOR BANK CONSOLIDATION 4 PT. SCALEFIGURING OUT THE BANKS CUT

Source: The NeuGroup, AT30 meeting materials Source: The NeuGroup, AT30 pre-meeting survey, 2013

Credit Reserve Requirement differs by type

Multi-year committed credit facility @ 50%

364-day committed credit facility @20%

Issued and outstanding irrevocable standby letters of credit @ ICO%

Basel II Tier I Capital Requirement assumed at 10% for all banks

(Credit Commitment + Credit Reserve Requirement

+ (Basel II Tier I Capital Requirement)

(Product Bank Fee *Product Margin) *(1 -Tax Rate)

i= 1

n

i= 1

n

2.55

2.72

2.75

3.00

3.05

3.15

3.40

Reduce bank fees

Changing business / ops needs

Improve service levels

Reward credit providers

Reduce internal tech/processing costs

Improve liquidity access & mgmt

Improve governance & control

Figure 1 Figure 2


14/16

SOFTWARE & SYSTEMS

Although treasury has assumed a morestrategic role in business, they still have

their other duties. This is where technol-ogy vendors stepped in to help treasurers

meet the challenge of doing more withless. One company at the forefront of this

trend is treasury and risk management so-lutions provider Reval, which has soughtto be the go-to all-in-one software-as-a-

service (SaaS) system to help treasurersmanage their increasingly busy worlds.

Justin Brimfield, Revals executive VP ofcorporate strategy, noted the companys

appeal to cost-conscious and pragmatisttreasurers as installed models and non-connected systems fell out of favor.

Based largely around client demand,Reval has grown through the financial

crisis focusing on risk management and,in 2011, rolling out a global suite that

included cash, treasury, risk, paymentsand accounting management. Reval hashistorically spent over 30 percent of its

revenue on research and development,and does two major upgrades per year.

The service component of the busi-ness is critical, says Mr. Brimfield, noting

that the driving questions for Revals con-tinued growth are: How can we improvethe user experience? and How can we

allow treasury to add strategic values?Mr. Brimfield also emphasizes that the

business model really comes down tothe partnership that we have with our

clients, a sentiment echoed by NeuGroupmembers who are Reval clients.

But can one system do it all? Here is

a sample of NeuGroup user feedback

addressing this question.

THE BASICS

Reval has 575 clients in over 25 coun-tries, representing all industries andcompany sizes. The company was ranked

the 303rd-fastest-growing companyin North America on Deloittes 2013

Technology Fast 500, and recently an-nounced a new STP community partner

with Atlas. It was voted best in class inClient Services, Risk Management and

Hedge Accounting at the 2013 annualTreasury Management International (TMI)

Innovation and Excellence Awards.Revals key features include:Cash and liquidity management. The ability to manage, track, value,

stress-test, and account for entiretrading portfolios in one centralizedlocation.

Identifying and quantifying expo-sures for hedging and risk decisions.

Managing hedge strategies.The ability to maintain regulatory

compliance (internal and external).Automatic updating of integrated

market data.Integration of bank connectivity.Visibility and reporting capabilities.

The company highlights the benefits of

being in a single-version SaaS system,where users only need a web browserto access the platform. Reval integrates

with all ERP systems and is a certified SAPpartner, and there is no need to install

anything on individual computers.

IS THIS TMS RIGHT FOR YOU?

We asked NeuGroup members from ourForeign Exchange Managers Peer Group

and Treasurers Group of Thirty-2 abouttheir experience with Reval.

What do you use it for? Onemember of The NeuGroups FX Managers

Peer Group (FXMPG) uses Reval for de-rivative accounting and to conduct CFaRanalysis, developing a new transaction

exposure forecast each quarter. Reval

generates different market scenariosbased on different timelines. It alsogenerates optimization analyses to find

opportunities to adjust hedge poli-cies and reduce CFaR. Another FXMPGmember noted the hedge accounting tool

and ability to customize forward curves.One member of The NeuGroups

Treasurers Group of Thirty-2 (T30-2) usesReval for IR, FX and commodity hedging,

as well as cash management, while an-other recently implemented the system

for intercompany loan management, IRhedging, journal entries, FAS 133 and

long-haul accounting. Whats good? As with any system

its as good as its ability to accomplishits tasks, which it does for our FXMPG

member: We like the ability of Reval togenerate the analysis we need. He citesits usefulness in understanding tota

portfolio behavior over various time pe-riods and the physicals that drive diver

sification and the effects of the hedgeprogram. He also notes the willingness of

Revals development team to customizethe product, which is a boon to any userfamiliar with excessively rigid technology

Several NeuGroup members cited Revalscustomer service strengths, with one

T30-2 member saying that the valueadded with Reval is that their custome

service team is on things right away, andyou are high priority. This experienceis aided by an overall user-friendly and

customizable user interface. Additionallybecause Reval employs treasury experts

they understand the problems treasuryprofessionals need to solve.

Whats bad? Our T30-2 user notedthat if you dont use it regularly, it can bedifficult to navigate. User-friendly does

not equal totally intuitive. And despitethe usefulness of the analyses, our FXMPG

user said that the process to load thedata necessary to conduct the analysis is

not trivial. Exposures and hedge policiesneed to be loaded and simulations generated prior to running reports, and the

ability to conduct extensive back-testing

and real-time monitoring needs to be de-veloped. One FXMPG2 member also citedthe less user-friendly nature of FIRST, and

difficulties with customization. She citedboth pushback from the Reval team whenrequesting something they dont normal

ly offer, and then the cost of getting it. How is the setup? Most aspects

of set-up were seamless for our T30-2member, but the cash forecasting piece

was too scientific about how it workson its own as opposed to centering on

Treasury Management Systems

Revals SaaS Helps Treasury Keep UpBy Hilary Kabak

This is the second in a series of TMS profiles focusing on NeuGroup-member experiences with alternatives to the Big Two.



15/16

SOFTWARE & SYSTEMS

what her team ultimately needed. As a

result, this piece has been slow to resolve,and the overall process was over budget.

Being able to use Revals own team forset-up is helpful, although the in-house

team still needs to take ownership of the

process to ensure that the system suitsthe companys needs.

Reval provides a user guide at the endof implementation, but it can be over-

whelming, so she emphasized: Only yourteam will know what they really need to

perform their jobs every day and thereshould be very clear and accessible play-books for those key items. This means

your team has to be diligent about activeparticipation in implementation, includ-

ing getting short cut notes to make thebest use of the system.

Setting up CFaR analysis from scratchwith Reval is described as not much dif-ferent from the usual quarterly process,

including loading exposures and defin-ing optimal hedge policies. While there is

some learning required to understandhow to do this and how to run the reports,

this is true for every system. Our FXMPGmember also noted that learning how tooperate and maintain the tools requires

serious engagement. This seems to be

par for the (TMS) course.

Both members praised the personal-ized customer service in set-up.

What about pricing? Revals pricingstructure is value-based, focusing on the

complexity of usage, number of users

and volume of flow. Mr. Brimfield notedthe difference in companies of $200M as

opposed to companies of $80B, and thedifference in volume associated with the

two. According to NeuGroup users, it ismore expensive than some other options,

but doesnt have the highest price tag.Some members noted that the adding onof transactions can get pricey, but most

agree that overspend is to be expectedwith any system. One T30-2 member not-

ed that when there was a significant priceover-run in implementation, she had a

very helpful conversation with the CEO,who ended up comping the difference.

Why is this the right system for you?

For our user from FXMPG, already havingthe relationship with Reval for derivative

accounting meant a relatively straightfor-ward initial set-up for CFaR analysis. He

also cites the willingness of Revals de-velopment team to modify and expandthe CFaR analytical capability to support

our needs, which is a theme echoed by

Revals employees. Several NeuGroup

members noted the breadth of Revalscapabilities and the relative ease of ex-

panding from one to the other. One T30-2member in the midst of looking for new

systems noted that his financial risk team

is in favor of Reval for its accounting capa-bilities. Another said Reval was the right

choice for her team because it has potential to become the one-stop shop for al

treasury-related management tools.

ASSESSING THE FEEDBACK

Members are satisfied with Reval, andthere is no doubt that they are at the top

of the customer service ladder. Reval offersextensive treasury and cash management

capabilities, and once one is established, itis safe to expect satisfaction from the next

Along with the customer service emphasisgoes the customizability of the productbut as with most technology solutions, it

helps to start with your own resources.As our FXMPG user noted, You wil

need to dedicate some resources to takeadvantage of what Reval offers. Reval is

a tool; it does not do the analysis for youOverall, if your team is willing to put insome effort to set up the product, there is

a high probability of satisfaction.


THE REVAL ECOSYSTEM

Source: REVAL

DATA-AS-A-SERVICE (DaaS)Leverage integrated and validated

historical market data

Evaluate, analyze and act upon

data right within Reval

Minimize costs and efforts associ-

ated with sourcing and managing

multiple data sources

CONNECTIVITY-AS-A-SERVICE(CaaS)

Seamless connectivity with internaland external systems

Streamlined and simplified treasury

activities connecting:

Bank statement reporting

Transactions and trading

Investments (MMF portals)

ERP systems

SOFTWARE-AS-A-SERVICE (SaaS)

Integrated, single-version platform with immediate

global access

Flexible and scalable for growth and expansion


16/16

Whether its for you or for a colleague, joining an additional NeuGroup will build a wider

network of peers that will enhance your drive toward a world-class finance function.

Your firm may be eligible for membership fee discounts and other benefits. Contact your peer

group leader for more information about joining additional groups.

SENIOR TREASURYThe Assistant Treasurers Group of ThirtyThe Bank Treasurers Peer GroupThe Engineering & Construction Treasurers

Peer GroupThe Tech20 Treasurers Peer GroupThe Treasurers Group of Thirty 1, 2 and 3

RISK & AUDITThe Corporate ERM GroupThe Internal Auditors Peer Group

FUNCTIONAL TREASURYThe FX Managers Peer Groups 1 & 2The Global Cash and Banking GroupThe Treasury Investment Managers

Peer Group

REGIONAL TREASURYThe Asia Treasurers Peer Group

The European Treasurers Peer GroupThe Latin American Treasury Managers

Peer Group

BUILD YOUR FIRMS PEER NETWORK

Join Another NeuGroup

To learn more, go to www.neugroup.com

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