10th Apr 2018

Large exposure restrictions | Regulatory challenges for Treasury & Finance

Large exposure restrictions are one of the key strands of the new regulatory framework that banks must adhere to, but which will trickle down to corporates. Here, the role technology can play in automating rules and providing relevant information to corporate treasurers is explored.



What large exposure restrictions, levies, structural measures do treasury and finance professionals need to adhere to?


Large exposure restrictions are one of the key strands of the new regulatory framework that banks, in particular, have got to adhere to. Cash Management from AccessPay works primarily with corporates but it’s a regulation that has some elements of best practice which can be applied to the corporate world because effectively what it’s saying is that you are restricted in terms of how much of your balance sheet can be held with an individual institution, and what it’s seeking to address is the risk that your organisation could be brought down by the failure of a market participant or a group of market participants. So, what we’re seeing is corporate treasurers even in SME enterprises all the way up are starting to think about actually spreading the risk of the balance sheet across multiple providers. This is how it’s trickling down.

In order to do that there is a role that technology can play to automate some of these rules and provide the relevant information when lines have been crossed or predefined limits have been breached straight to corporate treasury so that corporate treasury’s job doesn’t become one of spending 80% of their day compiling info to make sure that they’re complying with either large exposures in the case of a bank or a similar internal risk framework that they’ve devised for a corporate. So, it’s good practice that we’re seeing across corporate treasury regardless of the type and size of organisation.

With levies, we’re in an environment at the moment where customers are finding they’re incurring a levy on long balances in Euros, in the form of negative credit interest. Because of that, we’re going to see a proliferation of alternatives. So, this is a fairly unique situation which corporate treasurers are facing and this is inevitably leading to the Fintech community and other providers seeking to find ways using technology to allow corporate treasurer to make better use of their cash balances and with the Cash Management product, that’s exactly the area of the market that we’re looking to address is to insert ourselves in between the corporate and the bank using technology and providing a software layer to allow corporate treasurers to gather info much quicker, make more timely decisions and therefore deploy their cash balances in a more productive manner for better returns and avoiding some of these levies.