Members of The NeuGroup’s LatAm Treasury Managers’ Peer Group (LATMPG) have kicked off the agenda-planning process for their spring 2013 meeting (June 12-13 eBay in San Jose, CA). One of the topics on the agenda is a full review of LatAm banking partners in the region using a “bank assessment template” that members are currently completing. The backdrop for this detailed bank review is a session at a previous meeting on the balance treasury needs to strike between relationships with global and local banks to service their needs in LatAm countries.
The choice to maximize global banks complemented with local banks for certain services is consistent with a centralization trend that has been going on for a long time now; centralized cash management and banking relationships is an often-expressed goal for multinationals. You hope to get there, but “it takes a lot of effort to get to a simple and centralized relationship structure,” said one member at the LATMPG’s most recent meeting.
Some members of that group are using both, creating a hybrid structure of sorts. It’s no secret that one of the major global banks, with its impressive footprint and long history in the region, is the go-to primary bank for most of the companies in the LATMPG. Despite that depth and breadth, however, one member, whose company has been acquiring more entities to service its growing clientele in Latin America, has realized it also has a need for a more local bank presence that offers certain “retail-oriented” services that some of the big globals cannot offer.
It may seem like an inefficient choice but the cost to build local bank relationships that are more client-oriented and in touch with the market can be worth the investment when you need customized solutions. You also need to add local banks in countries where you are faced with deposit caps, need additional funding, or when they are required for local tax payments. Some companies have established exception policies for such eventualities; others approve local banks on a one-off basis.
Meanwhile, it’s also important to keep the large-bank relationship ship-shape. One of the best ways is communication. It’s important that communication and the paths of escalation are clear. Part of the advantage of smaller local banks is that you know who is supposed to help you if a problem arises. But at larger banks, despite strong relationships with a relationship manager or a regional client sales manager, there can still be instances where these officers are not keeping each other fully apprised of developments; in this regard, one member warned that large banks can sometimes appear to be “a group of silos that interact randomly.”
Silos of course make it hard to go up the chain of command and make sure everyone is in the loop. Further, if your particular person is not well respected in the larger bank organization, it can be even harder to get your business done on time and accurately (and can be a reflection on the relative importance of your business to the bank, a member implied). “Escalate and take it to the top, and let them deal with it internally,” was another recommendation if things get too out of hand. One member said his company has one global relationship manager who could coordinate all country operations, and another said that you need a clear and consistent message that certain people should always be kept in the loop; that is, cc-ing the relevant parties is important in all email communication. And no local finance person is allowed to meet with a bank without at least informing this member, and they make sure to cc the regional relationship manager on all messages.
LatAm banking structures are evolving toward a centralized, global-bank-with-local-bank-support model which may not be seen as ideal but mostly works. However, companies’ mindsets are that they are in the region for the long haul and they don’t like to see their banking partners pick up and leave, at least not without leaving their business in capable hands, and with reasonable notice of pending changes. As with any important relationships, communication matters.
The next LATMPG meeting will be hosted by eBay in San Jose, CA on June 12-13. For more information about the LATMPG, please contact [email protected]