Ben Poole, CTMfile
Corporate counterparty risk concerns pre-date recent bank failures
Even before the banking turmoil sparked by Silicon Valley Bank’s failure, 80% of corporate treasury organisations responding to ICD’s 2023 Client Survey said they were concerned about bank and other counterparty concentration risks.
Current or planned investments in bank time deposits from the Americas were down 31% from last year, indicating a move away from single counterparty risk. Most survey respondents (93%) from all regions said they planned on increasing or maintaining investments in money market funds this year, up 12% from 2022. New clients investing through ICD Portal increased 283% in the first quarter of 2023, compared to the same period last year, and the average daily balance of those client investments grew 27 times.
Following the FDIC’s takeover of SVB, usage of ICD’s exposure analytics tool, which provides transparency into counterparties, countries, sectors and more, spiked 15 times its normal level
“The vast majority of corporate treasury teams are risk averse and invest in money market funds to diversify their cash portfolios, maintain daily liquidity and earn a competitive yield,” said Tory Hazard, Chief Executive Officer at ICD. “Our clients are quite sophisticated and use all the tools available to them through ICD Portal to achieve their investment objectives.”
Elsewhere in the survey, almost three-quarters (74%) of treasury organisations expect to maintain or increase cash balances in the first half of 2023. Regarding the flavour of MMFs that treasurers are investing in, 90% of Americas respondents indicated they are investing in US government MMFs, while 86% of UK/Europe respondents indicated they are investing in short-term low volatility net asset value (LVNAV) MMFs.
Turning to technology, 55% of treasury organisations are currently engaged in or are planning a tech project. Almost one-quarter (23%) of treasury teams say they are implementing a treasury management system this year.
The annual survey from ICD, an independent portal provider of short-term investments, closed in February with 116 treasury organisations responding from the Americas, UK and Europe.
