Approaches to Banking Relationships

Commentary

Managing banking relations is one of a treasurer’s most important – and most challenging – responsibilities.

In this lively discussion – it always is – we went over a lot of familiar ground. As always, we got new insights, and perspectives on how the landscape is shifting.

General, and mostly shared, approach:

• Nearly all treasurers try to manage wallet share as fairly as possible. A frequent comment is that the bank needs to view the corporate as a good and worthwhile customer: paying the lowest price is not always top priority.
  • COVID showed that banks will reduce support to corporates who they do not view as worthwhile clients.
  • A couple of participants said banks wanted to exit unprofitable relationships
• This requires keeping track of what you spend with each bank – that presents a whole series of challenges.
• It also means working out what money the banks make out of you. For obvious reasons, this involves quite a lot of guesswork. But it also means being sensitive to the fact that not all banks give the same weight to the same kind of business.
• Everyone tries to make sure the banks which provide credit support receive the best deal when it comes to allocating business. In some cases this is quite formal: taking part in the credit facility is often a requirement to be allocated fee business.
• This is all very well, but it presents challenges: 
  • Do you give FX business to a bank which is uncompetitive, just because they are in the RCF?  Generally, no.
  • Do you do cash management with a bank just because they are in the RCF? Here, it is nearly always no.
  • How do you handle debt and capital markets activity, where some of the major investment banks do not do corporate lending? This was a long discussion.
  • Travel cards and car leasing can help with the equation.
• What is changing?
• Most of our members on all calls prefer to work with local banks as little as possible, and deal with core international banks – preferably those who provide credit. Could this change as the global financial system may fragment? One participant is making preliminary moves in that direction. 
• Most participants are moving in the direction of greater diversification, at least for deposits, mostly driven by risk management considerations (SVB). One participant did this after finding that a core relationship bank had been over pricing. 
• Fintech solutions were discussed. Most participants prefer to