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How Is Your Cash Being Impacted by Regulatory Change? Now in its fifth year, FISís Corporate Cash Investment report is an in-depth study among corporate treasury professionals that explores corporate attitudes to cash investment, investment policies and transaction execution, particularly in the context of upcoming regulatory change.

How Is Your Cash Being Impacted by Regulatory Change?

Introducing the FIS Corporate Cash Investment Report 2015

by Vince Tolve, SVP, Global Trading, FIS

Now in its fifth year, FIS (formerly SunGard)’s Corporate Cash Investment report is an in-depth study among corporate treasury professionals that explores corporate attitudes to cash investment, investment policies and transaction execution, particularly in the context of major regulatory change in the months ahead. Having now built up five years of data, this report uniquely presents not only the 2015 findings but also identifies trends and developments over time.

Once again, the study involved corporations globally across all major regions and industries. Forty-six percent of respondents were located in North America, with a further 37% from Europe. Ninety-four percent of respondent organisations had centralised their treasury either globally or regionally, similar to previous studies.

Summary of key findings

  • Cash levels. Corporate cash balances continue to rise strongly in 2015, with 45% of respondents noting an increase. A third of companies hold cash for capital investment and M&A, and a quarter for working capital financing.
  • Investment priorities. Finding suitable repositories for corporate cash remains the top priority for treasurers. However, while Basel III barely registered a year ago, it is now a key priority for 43% of respondents.
  • Impact of MMF reform. 60% of treasurers in the United States expect to invest in prime MMFs at a similar level post-2016 SEC reforms. 37% expect to decrease their holdings, identifying accounting, intraday liquidity and investment policy constraints as the biggest obstacles.
  • Expanding portfolios. Treasurers expect to expand their holdings of cash in term deposits, commercial paper, certificates of deposit and government debt either in in addition to, or as an alternative to prime MMFs.
  • Dealing in practice. For the first time since the study was launched in 2011, use of independent portals has overtaken other dealing methods for short-term cash instruments, both telephone (38%) and portals provided by investment managers (21%).

How are cash balances changing?

Figure 1
     Click image to enlarge

Corporate cash balances rose once again in 2015, continuing the trend that we have seen since 2012 despite greater market confidence and strong M&A activities in some markets (figure 1). As the survey reveals, companies are holding (and growing) large cash balances for a variety of reasons, with only subtle changes in their relative importance over recent years. Treasurers had already been building up cash balances in the years leading up to the crisis to fund mergers and acquisitions (M&A) and capital investment, and for working capital reasons. Once the crisis struck, surplus cash became an important ‘buffer’ against revenue shocks and to mitigate liquidity risk, but this has become less of a priority.

What are treasurers’ key investment challenges?

Over the past five years, treasurers’ investment challenges have evolved significantly. Operational concerns, such as cash flow forecasting, predominated in 2011, while market and regulatory issues took over in 2012 as the Eurozone crisis struck and the Federal Deposit Insurance Corporation (FDIC) guaranteed non-interest bearing account scheme expired. In 2013 and 2014, with cash balances continuing to grow, treasurers were most concerned about finding suitable instruments in which to invest. Unlocking trapped cash held in regulated markets was also a major consideration.

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