New Bank in 2016 Tops List of Treasury Challenges

treasury cash management

March 15, 2016
Colin Evans

Here’s a link to a very thought provoking article in Treasury Today, which suggests that due to actions of certain cash management banks, the corporate treasury function of many corporates is being forced into unwanted flux.

Whilst the higher credit rated corporates will always have a long list of banks on speed dial, this is not a situation that firms with poorer ratings really want to consider right now when they are in process of re-building a P&L or balance sheet.

This is a great article, raising the kind of practical implications that face Treasurers on a regular basis – the fact that RBS ‘fell on its sword’ and had neither the budget or inclination to continue offering cash management services left many Corporates in no-win situations; there are many corporates of low or sub-investment grade who don’t have the luxury of holding a ‘beauty parade’ of interested providers offering both cash management and credit.

There is a startling stat produced by respected Treasury researchers Greenwich Associates which states that ‘Switching Cash Management Providers’ is the top challenge that 1 in 5 treasurers face in 2016; which underlines how many pressures there are on keeping the core cash management function of major corporates in a stable long term bank relationship.

The change in bank attitudes means that for many corporates, the notion of choosing  a cash management provider who is a both good fit with the firm, (economically, technically and geographically) AND interested in providing credit is increasingly challenged – I can’t help thinking that many chose BNP without the proper due diligence that should be afforded the usual RFP process, and that some will be starting to see negatives from taking the easy decision.

For corporates with provider credit issues, an alternative approach seems to be a dual provider solution

(i) obtaining credit from the wider community of non-cash management banks, whilst

(ii) implementing an ‘agnostic’ in-house cash management solution such as direct SWIFT participation or payment factories; using a well aligned bank as generic host for international bank accounts, which is still a good income generator for some banks, and would attract competition without having a credit requirement tagged onto it.

Therefore, I see this as an opportunity for some banks and also specialist providers of in-house cash management solutions being able to work in a complimentary way.  Of course this also highlights the huge value in having an independent specialist sit alongside the Treasurer to help build a strong bank evaluation process as well as treating bank migration as an important project that needs dedicated resource in order to avoid major issues in the migration process.

I would be interested in hearing what other people think