Treasury and Finance Qualifications

The treasurer’s viewpoint (Tariq Kazi)

The Social Housing (Regulation) Act 2023 brought in new rules to protect residents and raise standards in the sector, with social housing managers now needing to hold an appropriate housing management qualification.

While there’s no similar requirement for social housing treasurers and finance directors, it would be remiss to ignore the advantages formal training brings together with relevant professional qualifications.

The regulator’s Governance and Financial Viability Standard Code of Practice (April 2015) sets an expectation that housing associations have an appropriate skills strategy to address the needs of the business and address any skills gaps identified.

But even in 2023, several years after the regulator’s guidance was published, more than one housing association has faced a regulatory downgrade due to weaknesses in treasury compliance or strategic corporate financial planning.

Although individual reasons behind each downgrade vary in their detail, the failures would arguably fall into three groups:

1. Strategic or structural business challenges exposed by rising debt levels and rapidly increasing interest costs
2. Complex funding structures resulting in unsustainable financing arrangements that need to be unwound
3. Unforced errors, or control weaknesses, causing a loss of key stakeholders’ confidence in the business

The first two might result in unlucky treasurers and finance directors losing their jobs… eventually.

The third could see them losing their jobs rather more quickly.

The organisational impact is similar. Financial risks taken beyond the organisation’s capacity to tolerate them could weaken the housing association’s ability to continue as an independent organisation.

So far, the sector has arranged rescues where a housing association with spare financial capacity has taken on a weaker association’s operations, assets and liabilities in full and turned the business around.

But how many more rescues could the sector absorb?

The regulator has spoken about all housing associations’ need to look at recovery planning and has noted the time is coming for another conversation on resolution.

That means being well prepared with the right skills and experience in place, having plans ready to enact when there’s danger, and learning lessons to avoid trouble in the first place.

The Association of Corporate Treasurers (ACT, for which I am vice-president), is the leading professional organisation for treasurers operating across all business sectors, including other debt-intensive corporates such as real estate, utilities and infrastructure.

Its competency framework describes the full range of skills needed across a range of areas in a well-run corporate treasury setting, by job level – covering tactical, operational, managerial and strategic viewpoints.

A well-run housing association would value having these specialist treasury and corporate finance skills according to its business needs, and so would enhance credibility in the eyes of its lenders and ratings agencies.

The lender’s viewpoint (Arun Poobalasingam)

The social housing sector is arguably one of the UK’s best public-private partnerships.

With the freedom to raise private funding to supplement lower government grants since the late 1980s, private debt has provided a significant proportion of funding for the sector and currently stands at £119bn in England, according to the last quarterly survey from the Regulator of Social Housing.

This massive expansion of private funding has brought a number and variety of market participants into the sector, including a wide range of investors, advisors, funders and other intermediaries (including aggregators).

While this evolution has fostered creativity and new ways of thinking, it has also resulted in new intricacies and challenges as the social housing finance landscape has matured.

Some debt arrangements have become much more complex, with funding often involving numerous lenders with a variety of terms and conditions.

As a result, these agreements could result in painful consequences if not properly understood.

The sector has many good advisors providing great guidance to housing associations, but it has always been paramount for social housing finance teams to maintain a robust understanding of funding arrangements internally.

It is critical for finance directors and their teams to be armed with the necessary financial knowledge and skillsets to successfully manage all the nuance and detail within their funding agreements on an ongoing basis.

They, or their successors, will be the ones that need to live with these arrangements.

The long-dated nature of social housing finance is another crucial aspect to keep in mind.

Decades-long funding agreements mean that any given loan is likely to be managed by a string of different employees through the years, making it all the more important to establish a comprehensive corporate memory on individual loans, in addition to instilling broader finance education through multiple generations of employees.

The ability to secure long-term, predictable funding arrangements is something the sector should cherish, while recognising the critical management responsibilities attached to it.

As a long-term lender to the social housing sector, THFC plays close attention to the quality of management teams when making lending decisions that commit us for decades.

A leadership team’s collective knowledge and experience all play a part in our analysis of a housing association’s ability to uphold its funding commitments and maintain financial viability.

Although never the be-all and end-all, professional qualifications can also play a factor in this.

After all, while a driving licence does not guarantee that someone is a good driver, you’d rather be driven by someone who has one rather than by someone who doesn’t.

In summary

Both from the viewpoint of a housing association and a funder, the right knowledge and the training to achieve that are necessary to manage modern-day social housing finance.

Tailored and innovative funding structures have unlocked significant new opportunities for the social housing sector, but also mean the importance of proper treasury and finance training has grown.

Heightened scrutiny on the sector brings increasing training expectations.

The social housing sector’s finance leaders should receive the education they need in order to successfully perform their roles and maintain the sector’s overall financial viability.

Formal finance and treasury training programmes can help housing associations remain one step ahead of the game – and prepare themselves for the challenges of tomorrow.