2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC. 2013 Wells Fargo Bank, N.A.

N.A. All rights reserved. Member FDIC.

Liquidity management
best practices in an evolving
regulatory environment
Global Payments Conference
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Agenda
Rate environment
looking forward
(Why would we want to look
back?)

A reading assignment:
2300 pages
Why does it matter to me
and my business?
Overkill or really
beneficial?

Tools you can use









The economy and
this presentation:

Starting slowly and
picking up steam
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2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Future Rate Environment: the FOMCs view
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2
4
6
8
10
12
14
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2012 2013 2014 2015
0.25
0.5
0.75
1
1.25
1.5
1.75
2
2.5
2.75
3.75
4.5
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2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Zero interest rates
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The Fed continues to
prime the pump
Source: Wells Fargo Securities, LLC

Recent actions by the Fed

Extension of exceptionally low
rate language from late
2014 to at least mid 2015.

Reintroduction of mortgage-
backed securities purchases:
$40 billion per month. No
specified cap

Reintroduction of Treasury
securities purchases: $45
billion per month. No specified
cap




2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
The Dodd-Frank Act
Executive summary of topics
Risk-based approach to
financial industry regulation
New regulation of
systematically risky institutions
Focus on consumer protection
Limits on bank investment
activities
Mortgage regulation
Genesis of several financial/
oversight committees
Signed into law on July 21,
2010
Implementation of changes
likely over next several years

Dont ever forget
2008
Bad mortgages
Incomplete securities
ratings
Alphabet soup: MBS,
SIVs, CDOs, AAA
Housing crash
Runs on banks and
money funds
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21
st
Century Reform
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Dodd-Frank and the FDIC
1933 - $2500
1934 - $5000
1950 - $10,000
1966 - $15,000
1969 - $20,000
1974 - $40,000,
1980 - $100,000
2008 (retroactive) -
$250,000



Unlimited FDIC
insurance was in place
due to temporary
legislation.
Historically, weve had
limits.
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Deposit insurance levels
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
FDIC insurance assessment shift to assets

FDIC model evaluates
assets based on risk
Assets = entire balance
sheet (loans, deposits,
etc.)
Each financial institution
is assessed different rate
Shift from domestic
deposits to assets less
tangible equity

New methodology effective April 1, 2011


Whats the
importance of the
FDIC model change?

How does this impact
me and my business?
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Still a cost of doing business
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Money market mutual fund reform
Type of mutual fund registered
under the Investment
Company Act of 1940
Convenient and cost-effective
way to have a diversified
investment in money market
securities
Exist under rule 2a-7, allowing
amortized cost method of
valuation: penny rounding
Only money funds use
amortized cost methods; all
other mutual funds value NAV
using market value of
securities

Source: Treasury.gov: FSOC Proposed Recommendations Regarding Money Market Mutual
Fund Reform




Money market mutual
funds have been as
comfortable as an old
pair of blue jeans
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Money funds as they exist today
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Money market mutual fund reform
Timeline

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May 2010
Reform of
Rule 2a7

May 2011 SEC
hosted round table
to discuss more
reforms. FSOC
recommended
structural reforms.
August 2012, SEC
Chair Mary Schapiro
announced
commissioners
would not support
public comment
September 2012,
FSOC, led by Tim
Geithner, took up
the cause
Feb 2013 Last
day for comment

2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Money market mutual fund reform
Removes the special
exemption allowing
money market funds
to use amortized cost
accounting and/or
penny rounding.

Objective is to increase
transparency of money
funds, with NAV based
on actual market value
of securities.




What has been
comfortable may end up
as an unacceptable
investment for some
Some say floating NAV
would make
shareholders more
likely to redeem with
fluctuation



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Floating Net Asset Value
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Money market mutual fund reform
Would require money
funds to have a reserve of
assets up to 1%-3% to
absorb day-to-day
fluctuations in the value
of funds securities
Would be an appropriate
transition period and
could be raised through
various methods





Opponents point out
that runs would be
likely should a fund
exceed its capital
buffer.

Fund yields likely
would suffer.




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NAV Buffer
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Money market mutual fund reform
Requires 3% of shareholders
highest account value in
excess of $100,000 during the
previous 30 days to be held
back for redemption for a 30 -
day period.
Objective is to diminish the
benefits of redeeming shares
quickly when trouble arises
and to reduce the damage to
non-redeeming shareholders.
1
Receivables Management for the Long Term, Aberdeen Group,
August 2012.




Full overnight
liquidity is lost. Many
clients indicate this
makes money funds
obsolete for their use




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Minimum balance at risk
(MBR) Holdback
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Money market mutual fund reform

Floating NAV
Stable NAV with NAV
Buffer and MBR Holdback
Stable NAV with NAV
buffer of 3% and other
measures, including:

more stringent
diversification requirements
increased minimum liquidity
levels





So tell me, whats
going to actually
happen?

The alternatives are
not mutually
exclusive.




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Alternatives
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Evolving regulation

Liquidity coverage risk ratio
- Ensures banks have an
adequate stock of High Quality
Liquid Assets (HQLA) to meet a
stress test of 30 calendar days
of outflows
- Initial proposal: 100% ratio,
2015 implementation, limited to
sovereign bonds and high
quality corporate bonds







What is being done to
keep my bank safe?





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Basel III: Global regulation
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Evolving regulation
January 2013 update
- LCR still implemented in 2015 with
minimum requirement at 60%
- Rises by 10% each year; 100%
LCR in 2019
- Asset requirements less stringent
Greater emphasis on cash
flow forecasting
- Banks will place more emphasis on
stickier assets tied to your
business. More competition for
your dollars?





What is being done to
keep my bank safe?





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Basel III: Global regulation
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Where does this leave my company?
Rates are low. What is out
there that is safe and offers
competitive yields?
Should I take a look at my
investment policy? (Yes,
and continue looking at it
over the next few months.)
What are other companies
doing?







Your investment
policy will dictate your
investment choices




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Regulation wrap-up
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Sweeps
Sweep accounts provide an automated solution for
overnight investing
Access to invested funds, or lines of credit, is always
available
No need to set a manual investment position every
day
Create efficiencies



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2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Sweeps
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Off Shore
Sweep
Commercial
Paper
Repurchase
Agreement
Credit Sweep
MMKT
Mutual Funds
Fed Funds
Overnight Eurodollar Investment
CP Investment
Collateralized Repo Investment
Sweep to available line of credit
Various Money Market Funds
Domestic Correspondent Banks Only
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Wholesale time deposits certificate of
deposit
Ideal for customers who can sacrifice liquidity for
higher yields
Minimum balance requirements
Various Terms 1 through 144 months
Various payment options for interest
Monthly
Quarterly
Annually
At maturity
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2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
A full array of fixed income securities
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Money Market
Mutual Funds
VRDOs Commercial Paper

U.S. Treasury
Securities
U.S. Agency
Securities
Brokered CDs
Municipal
Securities
Corporate
Bonds
Mortgage-Backed
Securities
INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Wells Fargo Securities is the trade name for the capital markets and investment banking services
of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities, LLC, a member
of NYSE, FINRA, NFA, and SIPC, Wells Fargo Institutional Securities, LLC, a member of FINRA
and SIPC, and Wells Fargo Bank, National Association. Wells Fargo Securities, LLC, carries and
provides clearing services for Wells Fargo Institutional Securities, LLC, customer accounts.
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Brokerage
Self directed strategy

Fixed income and equity investing
Investment representatives consultative approach
Market resources and expertise
Analysts and investment strategists, reporting,
accounting, safekeeping
Traded products corporate debt, government /
agency securities, money market funds

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INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Wells Fargo Securities is the trade name for the capital markets and investment banking services
of Wells Fargo & Company and its subsidiaries, including Wells Fargo Securities, LLC, a member
of NYSE, FINRA, NFA, and SIPC, Wells Fargo Institutional Securities, LLC, a member of FINRA
and SIPC, and Wells Fargo Bank, National Association. Wells Fargo Securities, LLC, carries and
provides clearing services for Wells Fargo Institutional Securities, LLC, customer accounts.
2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.
Managed Options
Externally managed approach

Customized portfolios = separately managed
accounts
Money Market Mutual Funds (Proprietary)
Short duration funds
Online reporting services
Investment policy creation and review

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Investments: NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE

2013 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.

Questions?
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