Striking a deal is one thing but sustaining the relationship is
important too. “The number one requirement is to get the bank to
demonstrate commitment,” notes Meyer.
Offering a short-term contract of say 12 months’ duration may seem
ideal in that the bank has the perfect opportunity for early price
rises. But commitment is a two-way process and the longer the
arrangement, the stronger the bond between parties.
In taking the longer-term view, the bank knows its client is less
likely to run an RFP in that period. This saves time and money and
guarantees revenue for the bank for that period, she explains. “Banks
would also rather take on a longer commitment so clients don’t bother
them every year for a price reduction.”
Out of common decency, the commitment period offered by the bank
should be respected by the corporate who should not go out to RFP until
the agreement is coming to an end. However, it is not unheard of for
banks to insert terms and conditions in their pricing proposals that
allow fee increases on a sliding scale if volumes of business fail to
hit a certain level, so the level of commitment is managed by the bank.
Perhaps it sounds too much like the balance of power is stacked in
favour of the banks. This is not necessarily the case, says Meyer, but
for the treasurer, to keep the banks sharp, “it is important to let them
know that you are watching them,” she advises.
Bank fees can appear to rise inexplicably, even for large companies
that are sharing a sizeable portion of their wallet, so it is clearly
incumbent upon treasurers to keep their eyes wide open.
Treasurers should periodically benchmark their fees against the wider
market using an RFP (bearing in mind the commitment to the partnership
referred to earlier). The process has the advantage of testing the
appetite for the treasurer’s specific business in a competitive
By discussing results with the RMs, it sends the message that the
client is very much aware of and tracking its bank fees. “The more
treasurers pay attention and let their banks know that they are
watching, the more the banks will know to keep their pricing in check,”
Failure to benchmark at all is a mistake. It can lead to corporates
keeping certain banks on their panel purely out of habit. Inertia is
never a good thing in business. Similarly, although the attitude that
‘if it’s not broken don’t fix it’ is common, it suggests to Meyer that
“some companies don’t want to know if its broken”.
This is a curious notion but she explains that there can also
sometimes be “an apprehension of rocking the boat”. This fear is
misplaced. “No bank ever pulled out of a partnership because the client
asked for a discount on cash management.”
When it comes to broaching the subject of fees, let no more than five
years elapse before going through an RFP, says Meyer. Requesting a
discussion on fees with the current providers every two or three years
is “not unreasonable”. Of course, some public bodies (such as
municipalities) may even be obliged by law to run regular RFPs.
If an organisation is monitoring and paying attention to results, the
treasurer will know when the right time comes to have that
conversation. However, so many corporates don’t do anything, notes
Meyer. If a treasurer waits for the banks to comes in to do their
quarterly reviews, it invites a glossy and somewhat passively received
explanation of what the bank is doing for the corporate, with maybe a
few service issues raised on the side.
But these reviews are an ideal opportunity for the treasurer to
really find out where the relationship is going and improve their
treasury services. Do some homework before the review, advises Meyer.
Perform an account and service rationalisation and come to these
meetings with questions based on your analysis. Why do we have this
service on this account and not the others? Timing discussions and
negotiations with one of those meetings makes it a “relationship review
on steroids”, she says and produces real results.
There is no point negotiating on superfluous services; if paper
billing is going to be dropped soon don’t bother getting a reduction on
Send the findings to the bank, asking it to come prepared with a
response at the next quarterly. The bank should be given enough notice
to prepare and not feel like it is being pressured; this should be seen
as a friendly reminder that treasury is taking fees seriously.
With RMs servicing many clients, “it’s the squeaky wheel that gets
the grease”, says Meyer. If the corporate and bank have been on
autopilot for a number of years, a sudden focus on fees may reveal areas
where they have risen beyond acceptable levels. The relationship may be
quite satisfactory in all other respects but if the treasurer knows
they are paying above market rates, the bank now has the opportunity to
address the issues and create a win-win situation.
This is not just a tale of prices incrementally increasing over time
because they were not kept in check. There are cultural differences that
can influence pricing changes too. In the US, fraud protection services
are lucrative because businesses are scared of doing the wrong thing;
few will ever turn these off. However, banks in Europe know they cannot
charge directly because corporates have always seen banks as duty-bound
to protect their clients’ interests.
Anecdotal evidence further suggests that banks can and do amend their
menu of chargeable items, and they are entitled to do so. Some banks
may even use the complexity of their contracts to impose a range of
price increases more or less at will.
These contracts are subject to negotiation, and treasurers have been
known to challenge and win. But the process is far from easy because
banks have vastly experienced legal teams; they have to because they are
undertaking huge liabilities and risks.
A large corporate may have the legal resources to return red-lined
copies of such documents and enter into negotiation. Even in such
organisations the legal expertise will not be in banking per se.
However, many more businesses do not have the capacity to do this and
will have to accept the contract as is.
Although a smaller banking institution may be more compliant if it
wants the business, the likelihood of getting a large bank to sign a
service level agreement is minimal. For the treasurer, an appendix of
agreed pricing may be about the extent of acceptable amendments in many
When seeking to negotiate, it requires more than just a database of
industry best prices to make headway. These figures cannot possibly take
into account the full and unique client relationship, which often
encompasses a broad suite of products and services across multiple
In any case, attempting to browbeat the bank with a list of the
lowest rates on every product and service is likely to prove
unsuccessful in negotiation. On the other hand, the ability to think
from the bank’s perspective about the depth and desirability of the
relationship, and from here set a reasonable pricing target on only the
services needed, will be more fruitful.
The treasurer should only use those lowest prices as the starting
point, considering each, line by line, only in the context of the entire
package. Obviously, the target prices should not be revealed to the
bank as sometimes the final offer can improve on these.
Allowing the bank time to think about the deal and come back with
what it considers to be a better price is therefore a much healthier
approach. It gives the bank the fairest opportunity to demonstrate what
it believes is the true worth of the unique relationship it has with the
client. If the offer has not met expectations, the client should review
it as a good first try, using this as the starting point for the next
round of negotiations.
Whether engaging in an RFP or bilateral negotiation, being forearmed
with the information, taking a big picture view that encompasses a
degree of flexibility and, importantly, being able to understand the
bankers’ perspective, will give the treasurer the tools needed to seek
and achieve rates that serve both parties well.
Treasurers who are prepared to ask their banks to revisit fees can
save between 20% and 30% on pricing alone, says Meyer. Whilst no one
benefits from driving too hard a deal, she believes many more in the
profession should be thinking about “getting their best game face on”.
Top tips for fee negotiation
Don’t be afraid to ask for a fee reduction.
Try to understand pricing from the bank’s perspective.
Enter a negotiation with something to offer such as ancillary business.
Try to work for the long-term relationship and see the arrangement as a partnership.
Don’t take the first offer – push a little harder.
Keep monitoring fees and let the bank know you are doing so.
Never go more than five years without a review.