Thirty-five percent of companies spread their
deposits among a greater number of banks to further diversify
counterparty risk, according to the 2024 AFP Liquidity
Survey.
ROCKVILLE, Md., June 18,
2024 /PRNewswire/ -- 45% of organizations moved
deposits to large banks, seeking safety in systemically important
financial institutions, according to the 2024 Association for
Financial Professionals (AFP) Liquidity Survey, underwritten by
Invesco. To further reduce counterparty risk, 35% of organizations
diversified their deposits among a greater number of banks.
Forty-four percent of treasury professionals report an increase
in their organizations' cash holdings within the U.S. in the past
12 months (through March 2024). This
figure is up 8 percentage points from 2023 (36%). Thirty-one
percent of respondents predict that their companies' current cash
and short-term investment holdings will increase through the third
quarter.
Additional key findings from the 2024 AFP Liquidity Survey
include:
- Larger organizations (>$1
billion annual revenue) consider safety a key objective of
their investment policy more often (69%) than smaller organizations
(58%).
- Banks continue to be major depositories for companies'
U.S.-based cash and short-term investment holdings. The percentage
of cash and short-term investments maintained at banks is 47%, the
same level as in 2023. However, allocations to Treasury securities
(12%) increased by 5% over the same time period.
- Over two-thirds of respondents reported that their companies'
earnings credit rate (ECR) did not increase as rapidly as rising
interest rates, with non-investment-grade companies most impacted
(75%).
- When selecting a bank, the most important determinant for
treasury professionals is the overall relationship with the bank,
cited by 89% of respondents. This figure is up 6 percentage points
from 2023 and surpassed both credit quality and counterparty risk,
highlighting the value placed on relationships with banking
partners.
- Money market fund reform has had minimal impact on corporate
investing. Four percent of current allocations are in
Prime/diversified money funds. With the mandatory liquidity fee
requirement going into effect on October 2,
2024, 32% of those who have exposure to Prime funds are
taking a "wait and see" approach.
"The results of the AFP Liquidity Survey demonstrate the lasting
impact of the 2023 banking crisis on an organization's liquidity
management," said Jim Kaitz,
President & CEO of AFP. "As treasury professionals continuously
work to safeguard their organizations, strong relationships with
banking and money fund partners will remain critical to navigating
the evolving economic environment."
"As investors re-evaluate their liquidity needs, money market
funds continue to serve as a safe haven," continued Laurie Brignac, CIO and Head of Invesco Global
Liquidity. "We're pleased to partner again with APF to sponsor the
Liquidity Survey, helping treasury professionals benchmark trends
and gain valuable insights into how their peers are navigating
markets."
The 2024 AFP Liquidity Survey was conducted in March 2024 and received responses from 239
treasury professionals from organizations of varying sizes
representing a broad range of industries.
Full survey results are available on the 2024 AFP Liquidity
Survey page. Press inquiries may be directed to Melissa Rawak, Managing Director, at
mrawak@afponline.org.
About AFP®
Headquartered outside of Washington,
D.C., and located regionally in Singapore, the Association for Financial
Professionals (AFP) is the professional society committed to
advancing the success of treasury and finance members and their
organizations. Established and administered by AFP, the Certified
Treasury Professional and Certified Corporate FP&A Professional
credentials set standards of excellence in treasury and finance.
Each year, AFP hosts the largest networking conference worldwide
for about 6,000 corporate financial professionals.
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SOURCE Association for Financial Professionals