Derivatives such as currency options are used by companies to limit their exposure to factors such as forex swings, but are being increasingly controlled as regulators look to tighten supervision of previously opaque instruments in the wake of the 2008-2009 financial crisis.
Speaking at the Association of Corporate Treasurers (ACT) Conference in Glasgow, Colin Tyler, the association's chief executive, said reporting requirements for trading of over-the-counter (OTC) derivatives contracts under the European Union's European Markets Infrastructure Regulation (EMIR) are increasing workload for no apparent business benefit. "Having to do this is onerous and not helpful. If it becomes too onerous and expensive, we may stop managing those risks, which will leave those risks unprotected. That's bad news", Tyler said.
Two-thirds of treasurers in the European Union now say financial market regulation has had a negative impact of their business, compared with 41 per cent who said regulation was "about right" last year, according to an ACT survey of 122 treasurers in the region. "EMIR is a pain in the backside", said one treasurer from a major company, who declined to be named because he was not authorised to speak to the media. "There is nothing in it for us."
Separate regulation brought in following the financial crisis that forces banks to hold more capital has also changed the way treasurers do business, the survey showed. Banks' share of treasurers' funding activity has fallen sharply from 33 per cent to 25 per cent over the last year, though it remains the second most-used tool for funding. Debt capital markets were again the top method for money raising, accounting for more than a third of funding.
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