Global Banking Update: 15th Nov 2024

Welcome back to this week’s Global Banking Update! It has certainly been an eventful week, especially with Donald Trump’s re-election as U.S. President, which has many of us in the financial world considering what this could mean for the future of regulation and economic policy.

Treasury professionals are already anticipating potential shifts in interest rates, cross-border flows, and other critical factors that drive our industry. One thing is clear—it is crucial to stay prepared for any eventuality. If Covid-19 taught us anything, it is that the world can change dramatically without warning. Now more than ever, institutions need to stay proactive (particularly through hedging!) to avoid scrambling when it is too late.

In this edition, we’ll cover the key stories shaping our field and explore how these developments might influence treasury strategies in the weeks to come.

Key Highlights:

• BNP Paribas Reduces Staff in China: Facing a slowdown in deal-making, BNP Paribas has reduced its investment banking workforce in China. For treasury teams, this move highlights potential risks in regional liquidity and currency management. With a projected decline in capital inflows from Asia, treasury professionals may need to recalibrate their strategies, tightening liquidity management and considering hedging options to cushion against prolonged volatility in Asian markets.
• Citigroup Eyes M&A Revival: Despite recent market uncertainties, Citigroup is forecasting a surge in mergers, acquisitions, and IPO activity. This optimism signals potential growth in loan demand, which may require treasuries to bolster funding sources. Adjusting liquidity plans, securing a mix of funding options, and pre-emptively increasing cash reserves could position banks to respond to the anticipated uptick in deal flow while maintaining a balanced liquidity strategy.
• Commonwealth Bank of Australia Surpasses HSBC in Market Value: In a significant achievement, the Commonwealth Bank of Australia (CBA) has surpassed HSBC in market valuation. This leap in value reflects CBA’s strong domestic positioning; however, it also underscores the importance of maintaining a cautious approach amidst higher market valuations. Treasury teams may consider enhancing liquidity buffers to navigate potential market fluctuations, aligning funding strategies with a focus on stability to support ongoing loan demand without exposing the institution to undue market shocks.
• Swiss Regulator Strengthens Oversight of UBS: In the wake of its Credit Suisse acquisition, UBS now faces heightened scrutiny from Swiss regulator FINMA, reflecting a broader trend toward rigorous regulatory oversight. Treasury professionals in Europe and beyond may take note of the intensifying regulatory landscape, where stricter liquidity and capital requirements are likely. Evaluating current liquidity positions, preparing for more frequent stress tests, and reinforcing governance protocols around capital adequacy could enhance resilience and compliance in the face of shifting regulatory demands.
• Wall Street’s Tempered Optimism Post-U.S. Election: Early enthusiasm for possible deregulation has been tempered, as markets await more concrete policy details from the newly re-elected Trump administration. Treasury teams, however, should prepare for potential interest rate adjustments and currency market shifts that could arise as policy changes unfold. Remaining agile in response to these anticipated moves, treasury professionals may wish to review portfolios for interest rate sensitivity, consider currency hedging, and maintain a flexible funding strategy to guard against prolonged rate volatility.

Each of these stories provides valuable signals for treasury teams, offering insight into where strategic shifts may be necessary. As banks navigate this complex environment, treasury professionals remain essential in striking a balance between growth and prudent risk management, ensuring institutions are equipped to adapt to both market opportunities and emerging challenges.

To deepen your understanding of these developments and explore actionable strategies for your institution, access the full report.

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Free Article of the Week: The Interplay Between Bank Treasury and Financial Markets – A Symbiotic Relationship

This week’s feature article, 'The Interplay Between Bank Treasury and Financial Markets: A Symbiotic Relationship,' delves into how treasury functions influence and are influenced by financial markets. Explore how interest rate changes, currency fluctuations, and regulatory shifts shape treasury strategies—and vice versa. ?? Read the full article

As the banking landscape evolves, treasury professionals are at the forefront of strategic risk and liquidity management. Use this week’s insights to strengthen your institution’s resilience and position for growth. Stay engaged with our resources and let us know if you need tailored guidance—we’re here to support your success.

References

1. BNP Paribas lays off a dozen China dealmakers amid fee plunge. (2024, November 13). Reuters. Retrieved from https://www.reuters.com/business/finance/bnp-lays-off-dozen-china-dealmakers-amid-fee-plunge-2024-11-13/
2. Merger activity is down 40% from its peak. Citigroup CEO Jane Fraser sees a 'big unlock' ahead. (2024, November 13). MarketWatch. Retrieved from https://www.marketwatch.com/story/merger-activity-is-down-40-from-its-peak-citigroup-ceo-jane-fraser-sees-a-big-unlock-ahead-85652cb1
3. The 'big switch' driving CBA's mega milestone. (2024, November 13). The Australian. Retrieved from https://www.theaustralian.com.au/business/companies/matt-comyns-commonwealth-bank-quietly-hits-a-new-and-remarkable-milestone/news-story/de68dfe71f2c79b6d173375cf34281d7
4. Swiss financial watchdog to regularly review how it oversees UBS. (2024, November 13). Reuters. Retrieved from https://www.reuters.com/business/finance/swiss-financial-watchdog-regularly-review-how-it-oversees-ubs-2024-11-13/
5. Wall Street bankers temper optimism a week after Trump victory. (2024, November 13). Reuters. Retrieved from https://www.reuters.com/business/finance/wall-street-bankers-temper-optimism-week-after-trump-victory-2024-11-13/