1 It doesn’t really impact our use of derivative instruments as we hedge our interest rate and currency exposures with vanilla swaps and other simple derivative instruments. These qualify for hedge accounting under IAS39 and mark to market gains/losses are accounted for in equity reserves.
2 This is not relevant as we do not need to hedge credit exposures as these are well diversified in terms of receivables. As far as cash and deposits are concerned we use only AA-rated banks on a well diversified basis or invest in AA-rated money market funds, which are by nature well diversified.
3 The banks need to change their approach and become more relationship-driven rather than deal-driven. For example, banks need to provide cost-effective commercial financing as well, and not just try to sell lucrative FX services. They need to understand the needs of the corporates rather than present a whole range of FX products most of which are not relevant or might create additional risk for the corporate. They also need to ensure that the corporate properly understands the risks and sensitivities inherent in the product.
Technology is playing a role; for example, some major banks today are providing access to their websites which aside from offering research reports and market information is also providing real-time access to the derivative trades existing between the bank and the client. Technological features like these certainly make treasury operations more efficient.
