Mobilising Market Activities for Corporates
Pascale Moreau, Global Head of Fixed Income and Currencies for Corporates within Societe Generale’s Market Activities, shares the feedback of her teams at the crossroads between financial markets and the real economy.
Like all businesses, banks have been affected by the health crisis that led to widespread shutdowns of entire sectors of the economy. Thanks to an unprecedented alteration of working methods, banks were able to mobilise and provide clients with an amount of financing that had never before been seen in previous bailouts. In France, the industry produced as many loans in seven weeks as it would normally in one year, especially thanks to state-guaranteed loans that were designed and made available in just 10 days!
For Societe Generale’s Market Activities, the incentive was to ensure continuity of service such that it could fulfil its vital role as a provider of liquidity and advice on investment solutions, financing and risk hedging for its clients.
As a direct result of global containment, businesses have seen a sharp drop in activity. In order to maintain financial commitments, such as paying their expenses, they required additional liquidity. At the same time, their operational, foreign exchange and commodity supply risks were rising rapidly. They naturally turned to their banking partners.
More than ever, bankers dedicated to the needs of corporates in the financial markets found themselves at the crossroads of markets and the real economy. While adapting their own work configuration in record time, these teams were able to assist, support and advise corporate clients in managing the emergencies arising out of the crisis. “Reactivity, follow-up and tailormade solutions were the cornerstones of this strategy,” said Ms Moreau. “We were able to use all the levers at our disposal within the Societe Generale Group to support our clients in their search for liquidity and to adapt their risk hedging strategies.”
For example, some clients were able to reduce or cancel derivative hedges that no longer corresponded to their future revenue projections and, at the same time, benefit from favourable mark-to-market, while also boosting their liquidity.
Now that the worst of the crisis has passed, the challenge is all about supporting corporates through the transition and helping them adjust to their future. This includes revisiting hedging strategies in the light of the new reality and designing, courtesy of sector experts and financial engineers, appropriate financing or investment solutions.
The crisis has highlighted two central themes for economic recovery: digitalisation and corporate social responsibility (CSR). Whether it is remote working with the use of new technologies or access to digital financial services platforms, the crisis has shown that we are only at the beginning of digitalisation. Our new SG Markets MyFX platform is a good example of these new digital developments. The platform allows small and medium sized enterprises to manage foreign currency needs directly. Simple to use and increasingly successful, it serves businesses with recurring small size needs.
For its part, CSR presents a new theme for the emergence from the crisis. Governments and central banks have injected billions of euros into the markets as calls for the ‘green’ and ‘sustainable’ use of these funds increase. Our research and financial engineering experts in Environmental, Social and Governance are working closely with specialist sector teams to remain at forefront of these societal challenges by offering market-based solutions that have either a positive or responsible impact. For example, after issuing the world’s first currency swap linked to the United Nations’ Sustainable Development Goals and launching the ‘Hedge to Pledge’ platform linking the execution of foreign exchange transactions to charity with Alexandre Mars' Epic fund, these ideas are studied and tested to ensure they reflect the transformation of our clients, understanding their needs, and providing them with innovative solutions. When ‘corporates’ and ‘markets’ operate in tandem with ‘CSR’!
As terrible as this crisis is, in both human and socio-economic terms, it is, for teams that are in direct contact with corporates, an intense experience and one in which the link with the real economy has rarely been so tangible. It is also a time when banking teams are more motivated than ever to study, analyse, design and calibrate the appropriate responses to the needs of corporates and to best help them face the world of tomorrow.