Excess cash, lots of options, one smart cash approach

Treasury Spring - Oscar Coyle

Oscar Coyle

Sales Director
Tuesday, Jun, 28, 2022

It has been a fast paced and high-growth year now since I joined the team at TreasurySpring. The mission of bringing the best in cash investing to all institutions is as vital today as it ever has been.

After quite literally hundreds of conversations with treasury professionals across a variety of sectors, it felt the right time to share the insights I have gained and discuss some of the reasons why they turn to TreasurySpring for a solution and see us as an additional leg on the stool of their cash management approach. With cash and liquidity management the top priority for treasurers in 2021*, there has never been a more pertinent time to consider all the options available.

Safety still comes first

We all know the old adage of ‘Security, Liquidity, Yield’ when it comes to prioritising cash investment – has this changed? No. With plenty of new and exciting options around, it is still plainly clear that ensuring the firm’s cash is safe is the top priority for treasury professionals.

Naturally, to get the appropriate level of diversification in their portfolios, it is important for treasurers to be able to access many safe banks. At TreasurySpring, we have 18 of the top-20 safest banks in the world, according to Global Finance’s 2021 ratings. With 65% of Treasurers considering bank rationalisation* (which is reducing the number of bank accounts (and bankers!) they have to deal with, the ability to access these 18 banks, via one logon and onboarding process, speaks to this view.

What has changed is that we now find ourselves in the first rising interest rate environment in a very long time. It’s quickly become apparent that the cost of not doing anything with cash is greater than it has been in recent times; more on that later.

Balancing risk with reward

We know safety is the top priority for treasurers when it comes to managing cash – does this mean that they aren’t interested in yield? Absolutely not. Now that we find ourselves in a rising interest rate environment, if there is a way to improve the returns on cash, whilst staying within conservative treasury policies – then there is real demand. According to HSBC’s corporate risk management survey, 44% of treasurers** were looking to improve returns on cash investment in 2020 – when interest rates were at their lowest. Today we see a totally different environment.

As Henry Adams, our Chief Product Officer correctly points out in our latest insight piece, interest rate futures are indicating that the FED will continue to hike rates this year and peak at over 3.5%, whilst the UK is predicted to see interest rates of over 3%. This means that treasurers stand to benefit more than ever by optimising their cash – and I would certainly expect more than 44% of treasurers will be looking to improve the return on their cash investments in 2022!

We understand that treasurers are busy people; with a myriad of objectives and tasks to get through on a daily basis, searching for the options to get the best return on their cash (whilst staying within a prudent treasury policy) can easily slip down the pecking order. This is where TreasurySpring step in to do the leg work so they don’t have to – with over 300 products available on our platform across 6 different currencies, treasurers have more options and ultimately more time to focus on the rest of the job.

However, this still works hand in hand with a safety-first approach. To achieve that level of safety, treasurers do not only have to think about the institutions they are placing their cash with, but the products they are in and what the structures of those products mean to their security and liquidity…

How we are opening up the reverse repo world

Repo? Understand it? If not, you are certainly not alone. This market has long been one that is shrouded in a cloak of complexity – but it really doesn’t need to be that complicated.

Now, when you place money with a bank in a simple deposit, you are lending them money on an unsecured basis. Simple.

A repo transaction is one where a cash investor (lender) lends money to a bank (borrower) on a secured basis.

This means, collateral is taken in the form of assets, so that in the event of a bank default, the lender can liquidate these assets to recover their cash. This ‘basket’ of collateral is managed by a third party, on an intra-day basis in order to maintain its value above that of the original loan amount.

An easy way to think about it is to consider a mortgage; when a bank lends you money to buy a house, you put the house up as collateral. If you stop making your repayments, the bank can seize the house. In the case of a reverse-repo, if the bank defaults, and can’t return your cash immediately – you will have the collateral to liquidate and get your cash back.

Clearly, to be in a secured position (where you have collateral) is always better than if you are in an unsecured position – this is how the world’s largest and most sophisticated banks lend money to each other.

When you add to this the fact that these secured positions can often pay higher returns than unsecured deposits – that is, more return, for less risk – you really are in the land of the “no brainer”. So why doesn’t everybody already do this?

The amount of work needed to establish these repo relationships with banks has typically been astronomical, creating significant entry barriers for investors. Institutional investors will have had to establish Global Master Repurchase Agreements (GMRAs), open custodial accounts with tri-party agents, decipher and negotiate complex collateral schedules and build full technological/financial infrastructures – and that is just the start.

The entry barriers don’t end at the complicated set up. Traditionally, ‘using’ repo can be expensive; the legal fees to agree the GMRAs, the cost of a custodian and the fact banks will typically only transact in these markets in “wholesale” amounts (>$100m).

This sea of complication has been enough to put off almost all institutional cash investors from using repo. Until now.

TreasurySpring was created, in part, to offer access to the repo market for all – in a simple, standardised and digital format. Providing all the technological and financial infrastructure required in a single platform, sparing investors from all of the heavy lifting.

With just a few clicks of a mouse, clients can now access the previously inaccessible repo markets and take up secured positions with multiple top-rated banks, in multiple currencies, across multiple tenors. Easy.


Green is the new Black

Unless you have been living under a rock for the last few years, you will definitely be familiar with ESG. It has taken everything by storm, including cash investing! From the fledgling ESG MMFs to more established green deposits, there are yet more ways treasurers can theoretically manage their cash in a sustainable fashion. According to a survey carried out by The Global Treasurer in partnership with Aviva, over 75% of treasurers believe that ESG criteria will become more important over the next 12 months – the topic is certainly in vogue and doesn’t appear to be going away, and nor should it.

The challenge is, navigating through all the noise. Are these options credible? Are they genuinely sustainable? Some of the products on offer have certainly proved controversial and sadly, it seems increasingly clear that they lack the necessary rigor to provide truly ESG friendly options.

The good news is the space is growing; with more institutions becoming involved, the definition of ESG is becoming more consistent. This is what makes our new partnership with the London Stock Exchange Group so exciting – the chance to bring real sustainable homes for cash to treasurers and help shape this burgeoning market.

Our sustainable corporate FTFs provide investors with a transparent and robust option to manage cash and positively contribute to an ESG agenda whilst never compromising their core objectives of security, liquidity, and yield.

The chance to work alongside an institution of LSEG’s size, scope and scale is unique in this space – together we are opening up sustainable funding channels on the financing side while providing new sustainable homes for cash investors.


Key insights

My time with TreasurySpring so far, working with treasurers to help them harness innovation and technology to add value to their existing approach, has been enlightening.

  • When managing cash, safety is still the number one concern for treasurers
  • With this, the ability to manage money in a secured way is game changing for cash investors, enabling them to improve returns whilst reducing risk
  • TreasurySpring has opened up the repo world, a huge, valuable and previously inaccessible market to all corporate treasurers.
  • Now interest rates are rising, the opportunity cost of not reviewing cash management is higher than ever and real, material gains are at risk of being left on the table
  • ESG cash investing is here to stay and it is crucial investors pay particular interest to where they are placing this money – to not fall foul of greenwashing
  • TreasurySpring’s partnership with LSEG can cast light on this world, allowing sustainable cash investors to meet their firm’s ESG regime whilst maintaining focus on the core responsibilities of cash management

Our mission at TreasurySpring is to deliver the best cash investment options globally through a free, simple and intuitive platform. Why wouldn’t you want to give it a try?


*According to PwC’s 2021 Global Treasury Survey (August 2021)
**According HSBC’s corporate risk management survey (June 2021)





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