It’s no secret that we’re in a depressed, negative interest environment. Treasurers need alternative instruments through which to make money. Money markets have become a default choice, but there are pitfalls to these markets. Can technology provide the answers for treasury and finance teams?
What are the key impacts for corporate treasurers when it comes to European Money Market Fund regulations?
the EMMR mirrors US regulation which came into force around September last year. The EMMR aren’t going into full effect until mid-2018. The key difference for treasurers is that they’re going to have access to more money markets as a result of some changes that are happening. Today, you’ve got a Constant NAV (net asset value) money market fund, a variable money market fund, or a Floating NAV money market fund. That’s going to now change to constant and variable but you’re going to have a Low-volatility NAV as well. It’s important because a survey was conducted recently from a treasury standpoint and 58% of treasurers advised that they would like to reassess their strategy in terms of investing money market funds.
In terms of who utilises these 58% of treasurers of EMEA utilised money market funds, because we’re in an environment where we’re in a depressed interest environment, we’re in a negative interest environment. This all means that a treasurer has to have access to other instruments to make some money through. So, Money markets are the default choice but even within these changes treasurers are going to need to change their strategy.
In terms of changing their policy, treasurers will need to provide evidence of the trends within these accounts that they’re looking to add money markets to. This is where tools like Cash Management can come in because they can draw down the data from a tool like Cash Management and then have a portfolio of data to present to a bank to say we have £150m across 30 days, we’re perfect candidate for a Stable NAV or a Low-volatile NAV as well.
