Is My Bank Still Looking Healthy?

Do lower credit ratings for banks cause corporates to reconsider their current banking relationship? This question is triggered by the shattered image of banks as an undisputable business partner and lower credit ratings following the credit crisis. Are these ratings a decisive factor for corporates to decide which bank to partner with? These questions are addressed by the Payments Advisory Group’s most recent survey.

Since the start of the credit crisis, marked by the default of Lehman Brothers on the 15 September 2008, the banking landscape has changed significantly.

During the crisis reputable banks were taken over or merged with other banks to avoid bankruptcy. The general belief and trust in the robustness of the banking sector disappeared overnight, while the diminished robustness or creditworthiness was confirmed by the lower credit ratings given to the banks by rating agencies.

This article reports the outcome of a survey conducted by Payments Advisory Group among large European corporates. The objective of this survey is to highlight which criteria corporates use to select their banking partners and if credit ratings are considered to be significant criteria.

The Use of Credit Ratings in the Selection/Evaluation of Banking Relationships

Most corporates regularly evaluate their banking relationships with respect to credit rating, a procedure which was already in place before the credit crisis. A third of the participants prefer to keep their existing banking relationships as long as they do not see an imminent default of a bank.

A small percentage only started to regularly evaluate their banking relationships through using credit ratings after the credit crisis.

Figure 1: Factors Influencing Banking Relationships

Source: Payment Advisory Group

In considering a banking relationship, the main factors influencing the decision are:

  • Cost effectiveness: this is considered important by 78% and very important by 22%.
  • SEPA readiness: this is considered less important or not important by 44%.
  • The scope of services in the financing area provided is considered important by 77%.
  • The scope of services in the cash management area is considered (very) important by 88%.
  • Geographical coverage is considered not or less important by 60%.
  • In specific cases, the scope of services offered in the derivatives markets area is considered important.

Change of Banking Relationships

A majority of corporates surveyed have recently made a change in their banking relationships.

  • Only a small percentage of the corporates have decreased the total number of banking relationships. Most of the corporates who have indicaed a change in relationships, added banking relationships.
  • About 50% of the corporates have banking relationships with two or more banks.
Figure 2: Changes in Banking Relationships

Source: Payment Advisory Group


The main reason to have multiple bank relationships is to spread the counterparty risk and to decrease dependency on one bank. In specific cases the corporates have established several credit lines for derivatives as no bank will grant these as an individual bank.

Figure 3: Reasons for Multiple Bank Relationships

Source: Payment Advisory Group

The few corporates that choose to have a ‘one bank’ relationship mention cost effectiveness as the main reason.


Most of the corporates regularly evaluate their banking relationships with respect to credit ratings. The majority of corporates changed their bank relationships recently and most of these changes were an increase in the number of banking relationships.

The changed (lowered) credit ratings were not the main driver for these changes. The lower credit ratings for banks may perhaps confirm the view of corporates that even banks may be less stable than before the crisis, but this is not per se a reason to abandon a relationship with one bank for one with a bank of with a higher credit rating.

The main reason for increasing the number of banking relationships is spreading risk by reducing dependency on the existing bank relationship(s). In times of general economic turmoil and with corporates being aware of the vulnerability of all their business partners, reducing and spreading risk is considered a sensible strategy.

When selecting a bank the most important deciding factor for corporates is cost effectiveness, followed closely by a fitting scope of services, particularly in the cash management area.

Interestingly, even though all corporates will be impacted to some extent by the advent of single Euro payments area (SEPA), about 44% of the corporates indicate that SEPA was less important for their choice of banking relationships. Only geographical coverage was considered to be (even) less important.

Banks competing in this domain should take comfort in the fact that bank consolidation from a corporate perspective is not taking place. There are more clients to win, even if it is only for a part of their business. However, at the same time, competition will increase so creating a competitive edge is imperative. Those banks able to provide a fitting service portfolio, both in the financing and the cash management area, at reasonable cost, should become winners in the years to come.



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