For better or worse

Published: Feb 2013
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A banking relationship can be likened to a marriage: it is a long-lasting commitment, built on shared objectives, trust and respect; usually involves an extended selection process, or courtship; and both parties need to benefit in order for it to last. “And in both cases you should have a full prenuptial agreement in place,” quips a Senior Treasury Manager from a large consultancy firm, who asked not to be named.

Corporate treasurers normally fall into two categories with regards to how they engage with their banks. There are those who have viewed banks solely as vendors of products and services, a ‘marriage of convenience’ in essence. Price is the sole driver in the relationship and they commonly play banks against each other in order to get the lowest fees possible. These corporates keep their business operations close to their chests and their banks very much on the outside.

The second type is comprised of those corporate treasurers who have taken a more holistic and forward-looking view of their businesses and relationships. These treasurers want to promote open and honest information sharing with their banks, and bring their relationship banks deep into their organisation. In addition, they are well aware that there needs to be a ‘win-win’ element to the relationship and that banks need to turn a profit too.

“In good times, those corporates that took a ‘vendor approach’ to their banks arguably had the upper hand,” says Carole Berndt, Head of Global Transaction Services EMEA, Bank of America Merrill Lynch (BofA Merrill). “However, in tough times it’s the corporate treasurers who invested in the relationship that have the advantage. Their banking partnerships have brought more to their organisation by providing information, resources and consulting services, such as help with euro crisis planning and Single Euro Payments Area (SEPA) readiness.”

Berndt believes that if previously the split was 60/40 in favour of the banks-as-vendors model, since the onset of the economic crisis the relationship model has become the prevailing one. This conversion has largely been driven because banks are now directly connecting corporate working capital credit facilities to cash management transactional business.

This is a knock-on effect of Basel III and return on capital pressures, which are forcing banks to review certain business areas. They find cash management a particularly attractive business because it is transactional and fee-generating. Therefore it stands to reason that if a bank is providing much-needed credit to a corporate, then they will also want a share of the corporate’s cash management business.

And credit is considered ‘much-needed’ by many corporates. Refinancing/ensuring availability of long-term funding and credit lines is treasurers’ top concern, according to the PricewaterhouseCoopers (PwC) Treasury Survey 2012; therefore when a corporate is choosing a new cash management bank, it often picks one that is part of its credit relationship in order to give some business back.

Many corporates are now taking a keen interest in how they can deliver bank relationship information. In order to guide their decisions, today’s “savvier” treasurers are pulling together a much more detailed picture of their wallet, believes Steve Dwyre, Managing Director Global Corporates, Lloyds. “The most productive discussions we have happen when we perform account planning with a client, mapping out their entire banking wallet, where they spend their money and where financial institutions make money.”

Treasury consultancy Zanders also works with clients to map out their wallets, for example Royal FrieslandCampina, with striking results. The ‘wallet sizing’ model developed jointly included all the company’s worldwide banking partners and helped it to extend its €1 billion general purpose syndicated credit facility in the last quarter of 2011. FrieslandCampina used the model to prepare itself for one-on-one negotiations with its syndicated banking partners and resulted in its facility being extended out to August 2015 at substantially lowered margins.

However, as many are finding out, if the wallet is not proportioned out fairly, then this can lead to a difficult conversation when a corporate comes to renegotiate its credit lines, as the bank may decide to place its credit elsewhere.

The bank/corporate relationship is complex but if both sides can hit the right balance, it can prove to be a powerful stabilising and strengthening force in the current turbulent market.

A how-to manual for a strong relationship

It is worth noting that some banking relationships last longer than many marriages. One Assistant Treasurer from a large global food company reported that its banking relationships have been fairly stable over a number of years. “For example, our cash management providers have been unchanged (except for mergers) for more than 25 years,” he says. “Our top lenders have been the same since 2001.”

The company has a large banking group of more than 25 banks. “We see value in having a lot of relationships because it reduces the hole to fill if a bank drops out (in the case of a merger) or changes strategy,” he explains. “A downside to a large bank group is keeping them all happy from a fee perspective and the time it takes to meet with such a large number of banks.”

According to a June 2011 Financial Director Bank Survey, the majority of corporate clients that have maintained a stable relationship for at least five years (73%) are significantly less likely to switch banks. Asked why they did not intend to change banks, 54% explained that their loyalty was a result of general satisfaction with their banks, but there was also a sizeable number (51%) who cited the difficulties of switching as their reason to stay put. Almost one in five (19%) felt that switching banks would complicate transactions, while 13% thought the cost of switching was too high.

If breaking up is hard to do, what steps can treasurers and banks take to get the best out of their relationships? Dr. Mark Goulston, founder of, argues that the foundation of a lasting partnership – although he means marriage, this can be applied in a corporate/bank relationship context – rests on six building blocks that form the acronym CREATE:

  1. Chemistry.
  2. Respect.
  3. Enjoyment.
  4. Acceptance.
  5. Trust.
  6. Empathy.

Chemistry is all about how well suited counterparts are in terms of business goals and approach. “Fit is a key element for a good banking client relationship,” explains Lloyds’ Dwyre.

In order to truly understand how well they fit together, corporates need to be open about their total wallet, business operating model and where the opportunities are. In return a bank also has to be clear as to what business lines are important to it and where it is operationally committed, as well as what it can and can’t do well.

In the turmoil caused by the economic crisis, many banks retrenched to home markets and have focused on just one or two core competencies. Honesty as to where the business is concentrated is much appreciated by corporates. For example, if a corporate is splitting its business between Europe and the US, a bank may decide to only bid for the US cash management business. Most corporates will not see this as a sign of weakness but an acknowledgement of where the bank’s strengths lie. Being honest and straightforward fortifies the relationship.


Respect is demonstrated by how well a party listens to the other. Dwyre agrees that the quality of a relationship directly correlates to the richness of dialogue. “In a marriage, if you are not talking then things aren’t going to go well. A good quality relationship allows for the two parties to connect, identify what’s really vital and work through it together,” he says.

For a treasurer it is essential to have a bank that understands the corporate, its business processes, drivers and operations. Importantly, this includes listening to what it needs. “Corporates say that the best banks are the ones that really make an effort to understand what their business is and to be proactive in offering advice,” according to David Kelin, Partner at Zanders UK LLP.


Enjoyment is all about the people and very often it is key bankers that really cement the relationship – those people that go the extra mile and show the same level of commitment in a client’s business as the corporate itself. Corporates want to have a hotline to one person at the bank that can make things happen when something goes wrong – and most admit that they would pay extra for this immediate responsiveness.

If those key people leave, then that could potentially pose a problem for the relationship. The consultancy’s Assistant Treasurer says: “Stability of personnel is important. As they begin to understand your needs, it is crucial that the team remains in place to continue to provide suitable ideas over an extended period.”


Acceptance is about feeling welcomed as you are, as opposed to having to prove yourself. It is essential to get to the place where both corporate and bank are able to speak openly and frankly (within the parameters of the business). Sharing information avoids misunderstanding, as things are not left unsaid or implied.

“Through that frank exchange of information, which only happens when you trust each other and this comes back to partnership and relationship, you can then broker an agreement or understanding of where value exists for both parties and what mutual support is needed to make it work,” says BofA Merrill’s Berndt.


Trust is a dominant theme in any relationship. It takes seconds to destroy trust and years to rebuild it.

With the current climate in mind, treasurers are placing more emphasis on the reputation and overall positioning of their banking partners. “Corporates want to see a credible strategy, a strong balance sheet and commitment from their banks,” says Dwyre. “They need trust in the individuals they’re dealing with but also the bank as an institution, particularly in this market environment – corporates want to be sure that their banking partner is here to stay.”

It is trust that gets a relationship through the rocky patches. “The true test of a relationship is if one stands by the other when the going gets tough,” says Berndt. “There are times when we have to make tough decisions around client selection and support. And without exception when we reached the brink of a critical decision, the tenure, transparency and depth of relationship are the biggest factors as to whether or not we are able to commit to the transaction.”


Empathy is about understanding, attention and care. When corporates put business out to tender, some ask that a relationship bank be brought into the tender process, even if the bank isn’t known for that specific task. In this sense, the bank is not excluded from the process but given the opportunity not to tender.

From a relationship point of view, it is important that a bank is shown what a company is doing in its tender process and also gives it a chance if it has recently expanded its offerings. “For example, if a traditional cash management bank creates a debt capital markets team and wants to lead a bond deal, when normally we wouldn’t have seen them in that role,” explains the food company’s Assistant Treasurer. “Banks may not like to be pigeon-holed for certain services, but our return model is based on banks earning fees in some areas and leaving fees to other banks in other areas.”

The spark: innovation

What is omitted from the CREATE model is innovation, which is vital for a lasting and durable relationship. A happy marriage is not just about the boring, everyday routine, but also continual change, development and spontaneity in the relationship.

In the corporate world, treasurers probably look more for proactiveness in their relationship banking partners than spontaneity per se. As treasurers are busy doing their day-to-day work, they would like their relationship banks to think ahead and proffer advice for future challenge, or in the case of a sudden event, to respond swiftly to help them through the crisis. For example, when the Arab Spring uprisings spread to Egypt, Citi reacted by setting up a response team to bridge the gap between in-country teams and overseas parent companies. From a technological perspective, the bank linked all the local systems, so that the team could see any transactions that were delayed or stuck due to infrastructural changes on the ground, which allowed the bank to give informed responses crucial to its clients’ business.

A corporate with a strong banking relationship in place can take advantage of such bank-led innovations, as well as working together with the bank to develop new initiatives. For the Assistant Treasurer at the food company, “innovative ideas that reflect our needs and understand our situation” is the single most important factor for him when deciding on core relationships.

Interestingly, the shift to a more relationship-focused model is also driving co-operation between banks. “In response to a major client, we are now working with one of our competitor banks to architect a solution unique to that client,” says BofA Merrill’s Berndt. “This is only possible when a corporate treasurer is open with its banking partners, by engaging and bringing us into what is happening in his business. He is effectively getting more from the two banks working together to solve the problem, than he would were he to deal with us individually. Plus he will obtain a solution that is game-changing for his business.”

Corporate Treasurer Survey: Bank Relationship Management 2012

  • 44% of corporate treasurers polled believe that both parties profit equally from their primary banking relationships. Only 12% thought that banks were the sole beneficiaries, whereas another 36% thought that the banks gained more out of the relationship.
  • 65% believe that there is room for improvement regarding the current fees and earnings credit rate; only 17% are happy with the current arrangement, whereas 18% didn’t know.
  • When negotiating with banks, 10% said that their banks didn’t budge, while 48% said the bank gave them everything they asked for. More than one in five treasurers said that they had never tried negotiating with their bank.
  • 41% wished they had more time to proactively manage their banking relationships.

Source: The Montauk Group

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