The near closure of the debt capital markets to financial institution issuers for most of May and June at the height of anxiety over European sovereign debt sustainability was a sharp reminder to banks: they can no longer take for granted their ability to sell bonds whenever they want to.
The smart learnt this lesson at the end of 2008 and early 2009 and so had got ahead of their 2010 funding requirements earlier in the year before the latest seizure hit. They didn’t worry too much that the cost of borrowing was going up. "We’ve pre-funded this year already," Chris Lucas, group finance director of Barclays, tells Euromoney in August, "and if we can, we will continue to pre-fund next year’s maturities."
Ahead of the curve
Philippe Bordenave, chief financial officer of BNP Paribas, says: "Our borrowing programme for the year is €30 billion and we had completed two-thirds of it by the start of May. Through June we continued to issue albeit in smaller sizes and at higher cost, so that by the end of July we had raised three-quarters of it. The markets are volatile, prone to enthusiasm and panic, so it’s wise to be well ahead of your requirements so you can wait a couple of months for the markets to come back, if needs be."
