Like their peers in other countries, UK corporate treasurers still value close relationships with their banks, but are finding them harder to sustain. As the impact of the Basel III capital adequacy regime is felt and the strictures of know your client and know your bank (KYC/KYC) kick in, the strain is being felt.
The final day of the UK Association of Corporate Treasurers’ (ACT) annual conference in Liverpool began with a session facilitated by Michelle Price, the ACT’s associate policy and technical director that asked where relationships between corporate treasury departments and their banks are headed.
Four treasury professionals described their own experiences: Bente Salt, head of treasury at multinational Rentokil Initial; James Kelly, group treasurer at Associated British Ports, aka AB Ports; Joanna Hawkes, group treasurer for the venerable UK department store chain Marks & Spencer (M&S); and Jane Pilcher, group treasurer for the utility Anglian Water.
Salt reported that the growing amount of regulation meant that banks were finding it an increasing struggle to achieve decent returns from their corporate clients. Many were exiting certain markets as a result. “The question is often whether your bank will still be there in two years’ time,” she added.
Kelly agreed that many banks had scaled down their operations; in some cases leaving little more than “zombie departments” remaining. As it was difficult to predict whether all would survive, it was sensible for corporate treasury departments to have a more diversified group of banks, although maintaining relationships with them was demanding more time.
Nor are treasurers content to rely on credit ratings when assessing the longevity of their banks. Hawkes reported that when M&S undertook a refinancing of its facilities last year, it had lengthy negotiations with each of its long-term lending banks to assess what was important to them in the relationship. Pilcher said that Anglian Water supplements the credit ratings by conducting its own annual review of each of its banks, while for Salt it is also important to know what level of financial technology (fintech) offering is available from each bank.
Asked whether the banking sector suffered from too great a sense of entitlement, panellist agreed that this was no longer the case. “Banks have traditionally operated in a privileged position, but that has now come under threat,” observed Kelly.
The case for sustainability
What does the term ‘sustainability’ mean to treasurers and their teams? The issue was examined in a morning session hosted by the ACT’s engagement director, Peter Matza.
For Shenley Connolly, membership director of Heart of the City, sustainability is a means of doing business better, which has seen it develop for a passing fad to be regarded as fundamental strategy for business leaders. HotC is a network established to support small to medium enterprises (SMEs) in developing sustainable business strategy and also to dispel the perception that sustainability requires a big budget and drains company resources.
Alison Wilson, head of treasury and governance for the juices to smoothies group innocent drinks, said that the group endeavours to follow an ethical policy and instil the same values in their suppliers. This means sending out team members direct to see what the farmers supplying them are doing and how they are doing it “rather than relying on a third party report”.
Founder of the group Lawyers for Better Business, Adrienne Margolis, added that recruitment studies suggest that young people increasingly seek to work for business that have values they can align with. Reputational risk is increasingly important: many UK consumers still recall the furore back in 2012 when coffee chain Starbucks admitted that it paid only what it was legally obliged to in UK corporate tax, but subsequently agreed to pay more voluntarily after a customer backlash.
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