BCR Publishing

We are the leading provider of news, market intelligence, events and training for the global receivables finance industry.

Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.

BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.

Follow BCR Publishing

Free passes

For corporate treasurer roles/functions!

It’s India, you stupid

| 26-01-2018 | Rob Beemster |

In our daily business, we attend to corporations and institutions in their foreign activities. We notice among our clients more and more attention and interest in India. Several of our clients have invested in factories, what can be economically seen as Foreign Direct Investment in India. Others are increasing their sales and we also notice many newcomers who are firstly orientating on the country.

The policy of Prime Minister Modi is clearly opening the eyes of the international economic community. Indian corporates see chances of doing business abroad. These new economic partners built bridges to learn from each other, resulting in rising economic flows.

Many of our clients are active on the higher end of the agricultural value chain. They produce machines for vegetable processing, storage, cooling etc. India is known for its large waste of vegetable products; the government sees this as a big problem and it has to be eliminated. Collaboration of the Indians with institutions like the Worldbank and countries with decent knowledge in agriculture (like Holland ) are bound to find solutions to this waste issue. This “opening of doors” has resulted in the increase of Dutch corporate turnover with India.

And… there is a lot more to come. The spin-off from the agricultural segment to other segments can be enormous. India has tremendous opportunities for European corporations. The Dutch Embassy and the “Landbouwraad” in Delhi, are very active to help the Dutch in opening markets in India.

Non-Deliverable Forward

India has a much-regulated monetary system. Reserve Bank of India wants (full) control and insight on currency moves to or out of India. Hereby it has installed a so called non-deliverable forward system for off-shore rupee exchange. Currency hedging can be done, but not with regular forward contracts, where underlying amounts are bought and sold. At the end date of an NDF, the difference of the NDF price and the fixing is exchanged.

Currency risk

Very often the pricing in a tender and invoicing is done in Euro. So, one could say that currency risk is only ran by the Indian investor. “The European participants do not suffer due to eventual currency movements of Indian Rupee against the Euro”. One has to realize that if counterparty runs the full currency risk, there is still an indirect risk position for the supplier. So even the Euro receivers have to take a defensive stance.

Volatility

The necessity of taking care of the currency risk is because of the large volatility of the EUR/INR. It is dangerous to put all the risk at the Indian partner. Orders can be cancelled due to big swings in the value of the currencies. Profit margins of your client can diminish, which may end the relationship. The graph shows the rate moves of EUR/INR of the last five years. Even on short periods, large differences can be noticed. This should assure businesses to take full control of the currency risk. Rate changes of more than 10% within half a year have occurred several times.

Your guide in India

Transactional risk can be avoided by a good hedging structure. Economic currency risk on your long-term investment is another issue and has to be thoughtfully considered. Barcelona can help to make the hedging transparent. As said, hedging can be done but needs accurate and professional advice. Due to our experience in the Indian business of our clients, we are able to find the best solution for each trade or investment.

Rob Beemster

Owner of Barcelona valuta experts BV

BEPS and its impact on Corporate Treasury

| 25-01-2018 | treasuryXL |

The BEPS (base erosion and profit shifting) initiative is an OECD initiative, approved by the G20, to identify over a period to December 2015, ways of providing more standardised tax rules globally. Phases two and three involve implementation and monitoring (together with some remaining standard setting and clarification). BEPS is a term used to describe tax planning strategies that rely on mismatches and gaps that exist between the tax rules of different jurisdictions, to minimise the corporation tax that is payable overall, by either making tax profits “disappear” or shift profits to low tax operations where there is little or no genuine activity. In general BEPS strategies are not illegal; rather they take advantage of different tax rules operating in different jurisdictions, which may not be suited to the current global and digital business environment.

Impact

Many large companies have developed funding and cash distribution strategies around tax regulations. The Netherlands is specifically known for its activity in Trust Offices. The changes envisaged by BEPS could result in the corporate structure of a company being deemed invalid. Many large international companies have Dutch registered offices whilst no physical work is done within the Netherlands.

It is not uncommon to see intercompany financing being structured purely to avail itself to the current tax regimes and advantages within different countries. Interest is a cost and is deductible against tax in many places. Structures have been put into place where a company arranges for interest to be paid at a company within a high tax regime, whilst the interest is received in a country with a low tax regime. BEPS has been designed to tackle this sort of situation.

Companies will now have to submit detailed reports on their holdings and representations on a country by country basis. Such reports will assist the tax authorities in better understanding how the global operations of a company are performed. This should lead to greater clarity on the transfer pricing policy being used by companies.

Companies need to review and outline their existing structures and investigate what the changes and impact will be once BEPS is initiated. It is quite conceivable that certain operations will be seen as not meeting the new criteria – leading to a change in the existing company strategy. This could lead to disadvantageous results, such as increases in the weighted average cost of capital that a company reports, which could affect its share price.

This means action has to be undertaken and this could lead to significant changes within some treasury departments.

If you want more information please feel free to contact us via email [email protected]

Blockchain and payments: further on the Gartner Hype cycle?

| 24-01-2018 | Carlo de Meijer |

Payments is increasingly seen as an area that is ripe for disruption, having the potential to enhance payment processing. To overcome the current structural weaknesses in the payments area including low speed, high expenses, financial institutions are increasingly adopting the idea of blockchain or distributed ledger technology (DLT). This in order to offer (near) instant cross-border payments at lower costs, higher security and more reliability. Up till recently most of these trials have been non-interoperable stand-alone solutions. But that may change!

Last month Blockchain bank consortium R3CEV and 22 of its partners announced that they were collaborating on the development of a cross border payments platform built using distributed ledger technology. This may be the first time a shared infrastructure has been developed that addresses the full payment workforce.

The question is: where are we now in the Gartner cycle, and will this R3 initiative be the breakthrough for a more massive adoption of this technology in the payments area?

Central banks: still see hurdles

Also central banks are actively investigating and in some cases even experimenting with blockchain including those of the United States, Canada, China, U.K., France, Germany, the Netherlands, Singapore, South Africa, and Sweden. Central banks’ interest in blockchain represents further recognition of the technology’s potential to transform many aspects of financial systems worldwide, including international payments. They are generally positive about the technology’s potential for applications such as international payment solutions.

On the other hand central banks also note technical obstacles such as scalability and other concerns such as privacy, security and legal issues. They generally emphasize that the technology is still at an early stage and may be years away from widespread use for such applications.

In a recent published research paper, the Deutsche Bundesbank offers up some encouragement for DLT acceptance. They are highlighting the technology’s ability to eliminate reconciliation processes, boost transparency and protect against cyber-attacks. The Bundesbank however dampened the blockchain enthusiasm, dismissing distributed ledger technology’s prospects in retail payments, at least in the Eurozone, which already boasts fast transfers and systems that require a minimum of reconciliation and can process millions of transactions with ease every day.

The authors concede that “it is still unclear whether DLT also has the edge over today’s technology in terms of security, efficiency, costs and speed”.

Read the full article of our expert Carlo de Meijer on Finextra

Carlo de Meijer

Economist and researcher