IGTA Journal - Autumn 2017

10 The Treasurer November/December 2017 www.treasurers.org/thetreasurer TECHNICAL BRIEFING As we head rapidly towards the end of the year, we offer some thoughts for issues that may not be front of mind, but which, nevertheless, you may want to consider as we enter the year ahead: • Rising interest rates The period of very low interest rates may be coming to an end. Now is the time to make sure your teams appreciate the potential impact of operating in a higher interest rate environment, something many of themwill not have experienced. As well as checking covenant triggers, the organisation’s fixedȀ ƪoating mix and interest rate policy should all be reviewed with the prospect of higher rates firmly in mind. • Leases The new lease accounting standard IFRS 16 comes into effect on ͝ January ͥ͜͞͝. Lessees will now have to account for virtually all leases, such as renting oƥce space, on balance sheet, which will reuire significantly more data on their leases than before. For those with more than a handful of leases or rental contracts, this could be a big task. • EU money market funds (MMFs) The revised EU MMF regulation takes effect from January ͥ͜͞͝, but decisions about which funds to invest in going forward need to be made and investment policies reviewed and potentially revised beforehand. (See story opposite.) • MiFID II This may be relevant to you if you: • Issue bonds; • Use commodity derivatives, emissions allowances and related derivatives; • Use FX forwards – although the exemptions mean that most NFC- corporates will be exempted; or • An NFC+. MiFID II is extremely confusing. Unfortunately, much of the guidance available appears contradictory, and some elements of the regulation (for example, relating to derivatives) is still not finalised. At this stage, your lawyers may be the best point of contact. (See story below.) • Cash management Another area where regulation may impact on the treasurer’s choices: changes to the availability of pooling structures and regulatory change, such as ring-fencing in the UK, both mean that ͤ͜͞͝ will be a good time to revisit your cash management structures and ensure that they are still eƥcient. • Interest deductibility The Organisation for Economic Co-operation and Development’s Base Erosion and Profit Sharing ȋBEPSȌ project is gaining traction. Treasurers will need to work closely with their tax colleagues to ensure that corporate structures are funded eƥciently. And three things to keep on the radar… none of these are likely to go away any time soon: • Brexit – coming up fast. We should get greater clarity during ͤ͜͞͝ of practical implications; • Benchmarks – clarity should start to emerge about the future of Libor; and • Technology – whether faster payments, distributed ledgers, managing KYC or cyber fraud, technology is increasingly core to treasury activities. Treasurers need to keep up to date as both risks and opportunities evolve. As 2017 draws to a close, we begin to look ahead to the new year and suggest a number of topics that might be on your agenda for 2018. There’s not much new to say on Brexit and potential Libor replacement at this stage, but please keep revisiting the technical pages of our website where we post updates: www.treasurers.org/technical We hope you enjoy the festive break – one thing’s for certain, 2018 won’t be quiet. PREPARING FOR 2018 Michelle Price (left) and Sarah Boyce (right) are the ACT’s associate policy and technical directors, and are always pleased to hear from you, whether with questions or with comments on areas of particular concern or interest to you. You can reach them at technical@treasurers.org THIS MONTH { IN DEPTH } Six things to plan for in 2018 The Markets in Financial Instruments Directive II ȋMiF)D ))Ȍ comes into effect from ͟ January ͤ͜͞͝. MiF)D )) provides the regulatory framework for firms that provide investment services or perform investment activities in respect of financial instruments. Most non-financial corporates that deal in derivatives may be able to take advantage of the ‘own account’ exemption. However, corporate users of commodity derivatives, emissions allowances or related derivatives; entities who apply high-frequency algorithmic trading techniques; or entities who have direct electronic access to a trading venue (except where a non-financial entity enters into transactions for hedging purposes) are not exempt from MiFID II. It’s a complicated area and we would recommend reading Slaughter and May’s briefing MiFID II: Key issues for corporate users of derivatives , available at slaughterandmay.com { REGULATORY } DOES MiFID MATTER TO ME? IGTA eJournal | Autumn 2017 | 48