German Treasurers Face a Long To-Do List

A banking crisis, Basel IV, sanctions, and ESG: German treasurers have a number of weighty topics on their agenda this year, writes Verband Deutscher Treasurer (VDT).

The departmental meeting of the Equity & Debt team of the Association of German Treasurers (Verband Deutscher Treasurer, VDT) began with a look at the debt capital markets. These have been affected in recent months by the central banks’ interest rate hikes and the recent turbulence in the banking market caused by the collapse of Silicon Valley Bank and the rescue of Credit Suisse.

Although access for companies to the bond and promissory note market is generally still given, in view of the – partly sector-related – uncertain economic environment, issues by companies with a good credit rating are more in demand than those in the cross-over and non-investment grade segment. The focus of the market recently remained on transactions with volumes between €51m and €200m and maturities of five and seven years. Green and ESG-linked promissory notes now account for more than one-third third of the market volume.

But the Schuldschein market could still be in trouble. In addition to the aforementioned issues, the development at a French Schuldschein issuer, where investors were adversely affected by the priority of local insolvency law over German law relevant to the Schuldschein, could lead to a more cautious attitude towards French issuers.

Possible effects of Basel IV

The turbulence in the banking market is also still reverberating. It remains to be seen to what extent these will influence the votes currently taking place between the European bodies on the implementation of the Basel IV regulations in Europe.

Depending on the outcome of these consultations, the prices for equity-relevant transactions such as cash loans, derivatives, and guarantees may increase, especially for corporate customers of those German credit institutions that use their own models for calculating default probabilities, which are advantageous for customers.

ESG is omnipresent

Another topic that was discussed intensively at the departmental meeting was developments in ESG reporting. In addition to a more targeted provision of capital to redesign existing processes to be ESG compliant, the integration of ESG risks into further standardised corporate reporting and risk assessment will affect treasury. The status of the respective company’s compliance with ESG criteria will certainly become an integral part of discussions with banks and investors in the future.
The Corporate Sustainability Reporting Directive (CSRD), which will significantly expand the group of companies subject to reporting requirements from 2025/26, will also contribute to this. Companies that fulfil at least two of the following three characteristics will be affected by the reporting obligation:

• More than 250 employees
• Balance sheet total of more than €20m
• Net sales of more than €40m

eWpG initially offers no significant advantages for treasurers

In contrast, according to the assessment of the Equity & Debt department team, the German Electronic Securities Act (eWpG) will not have any impact on most treasuries in the foreseeable future. Although there have been initial blockchain-based transactions, the intended acceleration of the issuance process by eliminating the need for a physical certificate will not initially bring significant benefits to companies.

Finally, in view of the increasing importance of sanctions, the departmental team of the VDT is continuing to discuss the issues that may arise for treasurers as a result. These include the far-reaching, extraterritorial effect of US sanctions, which can also have an impact on companies that are only active in the German market – namely if their bank could be impacted by these sanctions. It becomes even more problematic for treasurers when companies are affected by conflicting sanctions regimes.

This wide-ranging selection of topics shows what German treasurers are up against at the moment. There is a lot to do!

Verband Deutscher Treasurer (VDT)