Link Between Cash and Credit Defines Current Corporate Bank Relationships

I would like to look at the bank/corporate relationship from a corporate treasury and cash management point of view. The credit crisis has, for many companies, changed the way the relationship with their banks works. For some companies, this has changed in a negative way while for others it has been positive. In days gone by, many banks did not directly connect corporate working capital credit facilities to cash management transactional business. Now they do. This has led to some interesting conversations with the banks. For the banks, cash management and treasury business is good fee-earning business and exactly the sort of business they like now. Credit is not, and many companies are telling us that their bank is linking these two areas together. Some corporates also are making this link and when they decide to put their cash management out to tender they only look to their credit banks for proposals.

Another outcome of the banks’ reluctance to lend is the move by a number of corporates to proactively engage with their banks more frequently on their future strategy and direction with a view that they will be looked at favourably when it comes to facility renewal and negotiation.

There is general consensus that the continuing crisis in the financial markets has raised the profile of the treasurer in many companies. Corporate boards are turning to their treasurers for more detailed and more frequent briefings. Companies are now far more willing to invest in the process changes required to ensure they have visibility and control over their cash positions. The CEO is more keenly interested to ensure that there is enough cash on hand to fund their strategy. This in turn adds a complexity to the relationship the company has with its banking partners.

Over the past few years there has been a steady drive by many corporates to centralise their treasury activities. Technology has been a key driver in this process and one of the trends that I have observed is that companies are often looking to non-bank providers for this technology. The argument used is that if a corporate uses an independent system for making payments or retrieving banking statements then it makes it easier for them to move banks or bring in new banks if needed.

Finally, and again on the subject of technology, I see many corporates taking a keen interest in how it can deliver bank relationship information. This is sometimes referred to as ‘wallet sizing’ and is available through treasury management systems and other products, giving the treasurer a summary of all treasury and cash management business that has been placed with any bank in its portfolio, including deals won and lost, fees paid, etc. Treasurers tell me that this information is very powerful to have when negotiating pricing or limits with their bankers.


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