Derivatives such as currency options are used by companies to limit
their exposure to factors such as forex swings, but are being
increasingly controlled as regulators look to tighten supervision of
previously opaque instruments in the wake of the 2008-2009 financial
Speaking at the Association of Corporate Treasurers (ACT)Conference
in Glasgow, Colin Tyler, the association's chief executive, said
reporting requirements for trading of over-the-counter (OTC)
derivatives contracts under the European Union's European Markets
Infrastructure Regulation (EMIR) are increasing workload for no
apparent business benefit.
"Having to do this is onerous and not helpful. If it becomes too
onerous and expensive, we may stop managing those risks, which will
leave those risks unprotected. That's bad news," Tyler said.
Treasurers determine a firm's financial strategy and financial
policies, advising on what businesses to invest in and organizing
the funding for its plans. Their decisions can influence investment
banking and financial market activity.
Their role became regulated for the first time under EMIR - a new
set of rules that, like their U.S. equivalents Dodd Frank, require
trading of standardized OTC derivatives contracts, previously bought
and sold through dealers, be moved onto electronic platforms,
through central clearing and recorded in the interest of improved
transparency and lower risk.
Reporting, which involves submitting up to 80 pieces of data for
each trade, came into force in February and brought about a sharp
change in sentiment toward regulation among treasurers, the ACT
Two-thirds of treasurers in the European Union now say financial
market regulation has had a negative impact of their business,
compared with 41 percent who said regulation was "about right" last
year, according to an ACT survey of 122 treasurers in the region.
[to top of second column]
"EMIR is a pain in the backside," said one treasurer from a major
company, who declined to be named because he was not authorized to
speak to the media. "There is nothing in it for us."
Separate regulation brought in following the financial crisis that
forces banks to hold more capital has also changed the way
treasurers do business, the survey showed.
Banks' share of treasurers' funding activity has fallen sharply from
33 percent to 25 percent over the last year, though it remains the
second most-used tool for funding.
Debt capital markets were again the top method for money raising,
accounting for more than a third of funding.
More than 1,000 treasury professionals, including executives from
FTSE 100 companies ranging from miner Rio Tinto to drugmaker Shire,
and bankers are attending the ACT Annual Conference in Glasgow,
which lasts until Friday.
(Editing by David Holmes)
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