Head2Head: Taking a Leap - A New Era of Banking Relationships
by Jennifer Boussuge, Head of Global Transaction Services, EMEA in conversation with Bruce Meuli & Jonathon Traer-Clark, Global Business Solutions executives, GTS at Bank of America Merrill Lynch
Bruce Meuli & Jonathon Traer-Clark, Bank of America Merrill Lynch have become familiar to readers of TMI with their ‘head to head’ feature. In this edition, we are delighted to welcome Jennifer Boussuge, Head of GTS EMEA, who joins Bruce and Jonathon to discuss the changing nature of corporate – bank relationships, what both sides can bring to the relationship, and the potential value.
JTC Bruce and I debate many topics, but one thing we agree on is that the role of treasury has changed significantly over the last decade. Individuals and companies think and act internationally. In many cases, treasury’s remit has expanded with many treasurers taking a more collaborative role within their organisations. As a result, some treasurers need a different type of support from their banks and partners than in the past. The relationship is changing and for the better.
JB It’s a new world; not just for treasurers but also their banks. They are businesses in their own right and are evolving too. Take Basel III for instance: increasing scrutiny of the cost and return on capital for banks directly impacts the depth and breadth of transaction services that banks are able to deliver to clients. Some people think this leads to a one-way conversation, with banks telling clients what services they are able to offer. But treasurers may be surprised at the extent to which corporates can benefit from a new value-focused relationship. Many banks are actively seeking a dialogue with their clients, and for feedback and input into their products and services. By engaging in that process, treasurers ultimately benefit from solutions that are more tailored to their needs.
BM Take the trend towards internationalisation for example. While treasurers’ roles may have been regional, or covering a handful of countries in the past, they have become global in many cases. A treasurer based in Europe may be responsible for a team in Hong Kong and work with a shared service centre in India. No longer is it simply a case that treasurers define a single set of treasury policies and processes, they now have to manage and influence across borders, gather and disseminate information, and instil common standards and practices in often diverse locations. In this environment, treasurers rely on their bank partners to be present on the ground in the countries in which they operate, sharing intelligence whilst supporting the wider global strategy. As a result, this new type of relationship between treasurers and their banks can be highly effective.
JB There are definite advantages when treasurers get to know their banks better – and vice versa. Of course your bank is there to provide solutions, services and advice, and act as a source of information on market trends too. It is worth thinking about the kind of data and market intelligence your bank might have however, and how to leverage these insights. Banks have multiple relationships with vendors across their client base, which gives them information about how they behave, their payment preferences as well as their likes and dislikes. Harnessing this intelligence to inform how companies do business is set to become a big strategic growth area in the future, often described as predictive analytics.
JTC So you are saying there is a case for deeper mutual understanding between corporates and their banks? But it’s interesting that you’ve mentioned data. I find that sometimes better understanding comes from more personal communication, rather than more standardised corporate correspondence, usually via email. For me, it's actually about talking to someone; picking up the phone proactively, getting in front of each other, whether in person or virtually and openly discussing matters. Banks and corporates have many forms of capital at their disposal; not just financial but human, too. In my experience that’s where real solutions and impactful advice comes from.
BM Let’s not forget the role of the consultant as someone who can facilitate this understanding. It’s easy to start a request for proposal (RFP) or bank evaluation as a fact-finding process with a tick box list: can the bank provide X or Y service to this corporate, yes or no. Yet given the increasing complexity of the treasury role, they are no longer relying on their banks simply for a series of stand-alone products, but just as importantly, for value, advice and less tangible types of support and counsel. It’s crucial therefore, that the bank review and selection processes account for these issues. It’s very difficult to assess this new type of relationship using quantitative metrics and Y/N responses alone.
JB The take-away for all parties is that what has worked in the past won’t necessarily work now. The good news is that there can be value for both sides by re-examining and deepening the bank-corporate relationship. Value isn’t just a buzzword, it’s a culture. Maximising banking relationships rests on transparent communication. As treasurers’ priorities change, so do their banks’. Making this change together can be a very powerful force.
The TMI Verdict - by Helen Sanders, Editor
There can be few treasurers who do not agree with Jennifer’s assessment that the corporate-bank relationship is changing, and needs to be based on mutual value and understanding. This is not always easy to achieve in practice, and as Bruce rightly notes, it is often the result of the relationship starting off on the wrong footing in the first place. I have seen many RFPs that read as a shopping list of products and services that a company needs now, may need in the future, and sometimes that they are unlikely ever to need. This is not necessarily a useful way to embark on a new relationship, as apart from being able to recite a product brochure by the end of the evaluation process, corporates often do not know the bank a great deal better than before they started; similarly, the bank does not necessarily know the company’s operational and strategic priorities either.
Beyond the initial bank selection or evaluation process, it is often easier to maintain the existing status quo rather than investing in, and developing these relationships over time to respond to the changing market or regulatory conditions that exist, and both partners’ changing strategies and priorities. The better the quality of this dialogue, which as Jonathon comments, is best achieved through personal relationships and interactions, the better equipped both parties are to deal with unanticipated as well as planned changes. For example, the recent announcements by some banks that they are terminating services in certain countries or more widely has significant ramifications for corporate treasurers. The better their relationships with their wider banking panel, the better equipped they are to transfer the relevant activities quickly and without risk or disruption to their business.