Jean-Marc Anciaux (ING): Treasury in 2021: Challenges of the “New” Treasury
Jean-Marc Anciaux, Head of Group Treasury ING Luxembourg and ING Group Global Head Collateral Management & Repo explains how increased regulation has created a more central role to be played by treasuries since the 2008 financial crisis and reveals how ING is striving to enhance the efficiency of its treasury activities.
What is an efficient Treasury organization in 2021?
The need for a unique treasury organisation that efficiently support clients and manages the risks induced by their activities arises from the very different legal status and different balance sheet compositions of banks located in Luxembourg. As part of large banking groups outside the Duchy, some banks are also considered systemic by the EBA. That automatically means more regulatory obligations (not to mention additional capital buffer requirements). While every treasury organization will need different competencies and different people, they always need to act as a single team. No silos, please!
What has changed?
It was vital to acquire new competencies to stay tuned to the rapidly evolving regulatory environment following the 2008 financial crisis. The “old treasury” only managed cash balances and the interest rate (IR) risk. The “new treasury” needs not only to deliver its previous activities but must also respect a robust internal and regulatory liquidity framework. This enhanced risk and governance (ILAAP, ICAAP) have had to become part of the treasury DNA. Balance sheet composition is suddenly key to a better assessment of the liquidity position and adherence to regulatory liquidity metrics (LCR, NSFR). IR risk is no longer only measuring exposure to financial markets, it now also incorporates some stress testing, tightly linked to capital requirements. The implementation of IRRBB is a very technical regulatory requirement requiring new skills and dedication.
What has ING implemented to be efficient?
ING decided three years ago to bring liquidity management, ALM, interest rate management and capital management, throughout the Group, under a single umbrella reporting to the CFO. Such a structure addresses the way core financial matters are more inter-linked than previously. Our goals are threefold: to support our client’s activity and be competitive; to minimize the costs of the capital and liquidity structure and to maximize and stabilize bank P&L by transforming interest rate and liquidity risks. We strive to have a clear dashboard of all metrics (liquidity, solvency and leverage). This ensures ING supports its clients’ activities according to detailed dynamic plans that show expected business developments per product for up to three years. IRRBB forces the treasurer to consider other stressed scenarios that go well beyond the traditional outright BPV (basis point value) and rotation risk. The treasury role is no longer limited to following ECB policy, now the treasurer must also be sensitive to ECB prudential side developments. This enables Group Treasury to establish its funding plans to ensure all regulatory requirements are met in normal and stressed scenarios.