Corporate treasurers given seat at the regulator’s table

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By:
Kimberley Long
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The Association of Corporate Treasurers (ACT) has heralded a decision to include one of its members in a working group looking at the replacement for Libor.

Bank of England-600
Bank of England, London

The Bank of England (BoE) has named ACT member Frances Hinden, vice-president treasury operations, Shell International, as co-vice chair of the working group on sterling risk-free reference rates.

The remainder of the working group comprises François Jourdain, chief compliance officer, Barclays International, as chair, and Simon Wilkinson, head of liability driven investment funds, Legal & General Investment Management, who is also co-vice chair.

The group is behind the move to the new benchmark Sonia (Sterling Overnight Index Average), which will be imposed in the sterling bond, loan and derivative markets on April 23, 2018.

Sarah Boyce, associate director, policy and technical at the ACT, says the ACT has been working with the Financial Conduct Authority and the BoE for several years.

“Frances has previously sat on roundtables with the Bank of England on the adoption of Sonia," she says. "They have recognized how valuable her input has been and invited her to take a role as co-vice chair of the Working Group.

“The ACT has been keen for there to be more treasurer involvement, and are delighted she has been made co-vice chair. It reflects how important corporates and non-financial institutions are in the process.”

Support

Boyce explains that while Hinden is not taking on a role in an official capacity for the ACT, the group will give her as much support as needed to give her an overview of the needs of all members of the ACT

She adds: “The ACT has a role to play of providing a voice for not only the large corporates but down to the SMEs that are also part of the association.”

A priority of the group highlighted by the ACT is to consider the development of terms or tenors for Sonia. It has voiced concern that as Sonia is an overnight reference rate it does not have the set tenors that Libor has. Corporates need to have a rate that has tenors to allow them to manage their liquidity flows and risk from interest on debt and derivatives hedging instruments.

Boyce says: “The implications of the Libor proposals will be wide-reaching. This step represents how the regulators are recognizing the impact on the real economy, and how they need their involvement.”

There has been treasury involvement before on the working groups for FX and money-market reforms, but they have not been given such a high-profile position. The hope is with such senior level representation, the needs of corporates will be given greater priority.

Boyce says it is recognition that the concerns of the real economy are being taken into account now when making financial reforms.

“We hope that this will mark the direction of travel for the real economy to have a greater voice in future discussions," she says. "With input from the outset, it will mean there is a thorough process, without the need to fix any issues that may arise afterwards. 

"Involvement is being sought and offered from both sides, which will give a balanced view.”