While the question of who has the leverage of the corporate-bank relationship has swung back and forth during the financial crisis, many companies are reaching détente with their banks. This has been done by sharing bank scorecard data and share-of-wallet and otherwise getting cozier than they have been.
This was one topic discussed at the NeuGroup’s recent Assistant Treasurers’ Peer Group (AT30), which was hosted by Google and sponsored by Citibank.
Data: share and share alike?
During the meeting members showed they were somewhat divided on whether or not to share their scorecard and other “intimate” information with their banks. Those who do share expect that this action will help deepen and improve those key relationships. In this view, sharing the data communicates that the bank is important enough for the client to go to this trouble, but also communicates that the client is watching and is serious about having strong healthy relationships.
Those banks who value the strategic relationship take it seriously and value the input. One member noted that “some banks are more interested in this input than others,” which in itself can offer insight about your bank partners. But the ultimate goal of sharing this information with banks is to increase the level of transparency between the two organizations.
On the other hand, those who elect not to share the information believe it may weaken their position with their banks or that it may drive undesirable behaviors from the bank. For instance, if a bank knows that it is low down on the list of bank partner, it may increase the pressure for more business or scale back its commitment to the client.
Ask the bank what they want.
Banks have a variety of product offerings which vary by profitability, level of competence and relevance to the client. Members and bankers agree that there should be a discussion about the business banks want most from a client. Elyse Weiner, managing director at Citi, noted, for example, that clients often assume that lockbox services is a desirable piece of business, when in fact it is not for many banks.
What about credit?
It is no surprise to hear a treasury practitioner say, “We award business only to banks in our credit group” or “It is a challenge to keep all of our banks happy with business.” It is for that reason that one member wonder why banks always use credit as a loss leader and then clamor for the real revenue generating business. Why not simply price the credit accordingly and therefore not be so dependent on the other sources of business? This could end up in higher costs for corporates but fewer headaches with managing relationships.
Ultimately, keeping the lines of communication open will have lasting benefits, and perhaps help answer the credit question.