Strategic Treasury

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Corporate Banking in Germany - but which bank to bank on? Every two years Schwabe, Ley & Greiner (SLG), the leading treasury consulting company, conducts the most comprehensive survey in Germany on banking relationships and corporate treasury management. It asks all corpora- tions with sales between EUR 50 million and 10 billion and serves as an anonymous ‘multi-client study’ supported by major banks. It provides a lot of ‘food for thought’ and ideas for the banks´ product developments, organisational improvements and marketing strategies to offer what corporates are really looking for.

Corporate Banking in Germany - but which bank to bank on?

by Georg Ehrhart, Partner, SLG

Every two years Schwabe, Ley & Greiner (SLG), the leading treasury consulting company, conducts the most comprehensive survey in Germany on banking relationships and corporate treasury management. It asks all corporations with sales between EUR 50 million and 10 billion and serves as an anonymous ‘multi-client study’ supported by major banks. It provides a lot of ‘food for thought’ and ideas for the banks´ product developments, organisational improvements and marketing strategies to offer what corporates are really looking for.

For the first time in a decade the number of banking relationships has remained unchanged compared to the previous studies.

The following article focuses on some banking aspects of those corporations with sales exceeding EUR 125 million. From this level onwards treasury management traditionally starts to ‘emancipate’ itself from the accounting department and justifies its own, more effective structures and responsibilities within the company to address the treasury affairs.

In Germany, about 75% of corporate treasury departments of this segment only have between one and three employees. This implies a high pressure on efficiency since the number of subsidiaries (usually handled centrally) has been constantly increasing due to increasing globalisation - but the number of employees in group treasury has scarcely risen. So where do savings or capacity gains come from? As well as increasing automation, the amount of time and money to be spent on banking relations is a key area.

The mix that counts

In order to analyse this we first need to take a brief look behind the scenes in the field of financing and depositing on behalf of corporate treasurers. What are the trends in where corporate funds are coming from or where their liquidity is going?

The importance of financing or depositing internal funds has reduced slightly as compared to 2005 due to increasing internal use of funds in order to support expansion or group investments. This accounts for about 20% of total funding volume and is expected to remain at this level until 2009. Short- and long-term financing accounts for, in total, 71% of funds while capital market and other financing instruments account for the remainder.

When it comes to excess liquidity less funds (22%) are deposited within the group as compared to 2005. The vast remainder (62%) accounts for money market deposits and 12% for capital market products. Until 2009 no real change is expected with respect to this composition.

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