June 13, 2023 — Bethesda, Md. — Forty-seven percent of organizations’ cash and short-term allocation are maintained in bank deposits, according to the 2023 Association for Financial Professionals (AFP) Liquidity Survey, underwritten by Invesco. This figure is down 8 percentage points from 2022 and is the lowest recorded in four years.

In response to the bank failures that occurred in March 2023, organizations began moving their cash and short-term investments from banks into Government/Treasury money market funds (up 4 percentage points), Treasury bills (up 2 percentage points) and Agencies (up 2 percentage points).

Thirty-eight percent of treasury professionals report that their organizations plan to continue increasing their cash allocations to Government/Treasury money market funds into the next year, while only 8% indicate that their companies plan to decrease allocations to these funds. However, 27% plan to increase allocations in bank deposits, while 25% are looking to decrease their deposits in banks.

An organization’s overall relationship with its bank remains the primary determinant in choosing where to maintain deposits (cited by 83% of respondents). However, this figure is down 10 percentage points from 2022 and suggests that treasury professionals are choosing to be more cautious in their approach to relationships with banking partners in response to recent bank failures.

Other key findings from the 2023 AFP Liquidity Survey include:

• Environmental, social and governance (ESG) parameters are influencing almost half of organizations’ investment policy revisions, with 27% adding ESG parameters/mandates and 21% adding ESG Money Funds in their investment policy.
• Despite a tumultuous environment, the three primary investment objectives reported by treasury professionals remain consistent with those of 2022: safety (cited by 63%), liquidity (33%) and yield (4%).
• When choosing a U.S. domestic Prime/Floating NAV Fund, yield (cited by 50% of respondents) continues to be the primary selection criteria. However, this figure is down from the 68% reported in 2022. In turn, the share of respondents who select a fund based on the ease of transaction process rose 17 percentage points (38%).

“The global banking system has been fraught with concern in the wake of recent bank failures, and treasury professionals have responded accordingly with their organizations’ cash and short-term allocation,” said Jim Kaitz, President & CEO of AFP. “In an uncertain economic environment, treasury professionals will need to prepare their organizations for numerous possible outcomes. Strong relationships with banking and money fund partners will remain critical to keeping up as economic cycles change.”

“It’s not surprising that institutional investors have become increasingly discerning when it comes to their liquidity solutions given the remarkable — and quickly changing — investment landscape so far this year,” continued Laurie Brignac, CIO, Global Liquidity, Invesco. “We are proud to once again partner with AFP to sponsor their Liquidity Survey, helping treasury professionals benchmark these types of trends and gain valuable insights into how their peers are navigating the current environment.”

The 2023 AFP Liquidity Survey was conducted in March 2023 and received responses from 222 treasury professionals from organizations of varying sizes representing a broad range of industries.

Full survey results are available on the 2023 AFP Liquidity Survey page. Please direct all press inquiries to Melissa Rawak, Managing Director, at [email protected].

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.