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The New Year Will Bring a New Era in Cash Management

Heres how corporate treasurers can get a handle on cash management as markets begin to reflect the full effects of Dodd-Frank, Basel III, and money market reforms.

By Ben Campbell, Lance Pan | Updated on November 04, 2015
With interest rates poised to move higher in 2016, many treasury professionals are hoping for a return to the good old days of decent yields in safe investments for their corporate and institutional cash. However, the world they’ll encounter when rates finally do rise will be very different from the higher-rate environment they left eight years ago.

Since the financial crisis, the near-zero rates—combined with a lengthy period of guarantees on demand deposits—helped create a “business as usual” mind-set among many treasury professionals. But 2016 promises to be a pivotal year that will usher in a new era in cash management, requiring new ways of thinking.

Compared with a decade ago, today’s cash investment landscape is shaped by higher risk awareness, more sensitivity to liquidity costs, and stricter systemic regulation. Dodd-Frank and Basel III are already causing the biggest banks to limit uninsured deposits. And when money market reforms are instituted in October 2016, institutional money funds will have less stability, greater risk, and lower yield potential.

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