When it comes to interest-rate risk management, it is quite common for corporates to have a rather static interest-rate risk policy in place which dictates, for example, fixing the interest rate for a pre-specified percentage of their (future) funding needs, without any fundamental reasons. So how can corporates improve their interest-rate risk management policy?
In our magazine we have published several articles regarding the deleveraging of the banks’ balance sheets and the corporate shift to an American funding model. As of 2008 we see that large European corporates have decreased the level of bank lending in their total funding landscape and see an increase in alternative funding such as debt capital markets and private placements.
While Basel III may restore the health of the financial markets and the banking industry in the long run, it will also have an impact on the real economy and business in the mean time. The economic impact of Basel III is often mentioned, but seldom analyzed in detail. This article assesses the potential impact of Basel III on companies and outlines some options that corporate treasurers and bankers can explore in order to minimize the effects.