by Carole Berndt, Global Corporate Banking, Head of Global Treasury Solutions EMEA, Bank of America Merrill Lynch, and Ivo Distelbrink, Global Corporate Banking, Head of Global Treasury Solutions Asia Pacific, Bank of America Merrill Lynch
It is now almost two years since the merger between Bank of America and Merrill Lynch. What was the initial market response, and what has the reality been?
When the merger was first announced, many people took quite a cynical view of the new organisation. In particular, they questioned the logic of an entity formed of two companies with such different cultures and focus, and found it difficult to identify potential synergies.
In today's market, with significant commoditisation of treasury management products, a bank's differentiation is defined less by the products it delivers than in the approach it takes to delivering them from providing solutions to servicing.
Bank of America had been very US-centric in the recent past, despite several attempts to expand internationally and attract a more diverse global client base. Its strength, however, was in the scope, depth and resilience of its core transaction banking capabilities. In Asia, for example, the bank maintained branches in every major country with direct access to domestic clearing systems, both high and low value, to support the needs of clients across the region. Yet the bank was not actively promoting or expanding this service offering. Merrill Lynch, on the other hand, had developed considerable global expertise and leadership over many years, distinguishing itself through the depth and seniority of its client relationships with the world’s leading corporations and financial institutions, and governments.
Bank of America’s strength in transaction processing, together with Merrill Lynch’s track record in building advisory relationships based on long-standing client partnerships, quickly proved a powerful amalgamation. The combined organisation is able to deliver a far richer global service to our US clients and similarly, provide a unique value proposition to European and Asian corporates who would not necessarily have been attracted to Bank of America’s services in the past.
As a global bank, how does Bank of America Merrill Lynch distinguish itself from other banks with global capabilities?
The combination of Bank of America and Merrill Lynch presents to our clients new geographic and best-in-class product capabilities across corporate and investment banking, enabling them to build a strong, global partnership with a single bank on a single platform. While there are other banks operating globally, there is often a lack of cohesion in the services that they are able to offer. By taking advantage of our global platform and integrated corporate and investment banking coverage model, Bank of America Merrill Lynch can deliver seamless local, regional and global services to clients, providing a more relevant service offering that addresses a diversity of requirements.
In what ways is the bank embracing innovation to benefit corporate clients?
Bank of America Merrill Lynch has a unique ability to manage our clients’ needs on a holistic basis, with a single global processing platform, broad international experience and a strong commitment to support clients’ global needs across advisory, capital raising and financing, investment, risk management and transactional processing. By embracing the entire spectrum of clients’ banking needs through our integrated model, we are in a unique position to deliver highly innovative, bespoke solutions.
In today’s market, with significant commoditisation of treasury management products, a bank’s differentiation is defined less by the products it delivers than in the approach it takes to delivering them, from providing solutions to servicing. For example, by taking a complete view of a company’s financial position, an objective such as working capital optimisation is not treated as an end in itself. Bank of America Merrill Lynch’s aim is to optimise the overall balance sheet and capital structure of our clients, helping to ensure a company has the funds it requires, when and where they are most needed, at the least possible cost. [[[PAGE]]]
The complexity and diversity of the global regulatory landscape, the different business models and the rapid growth rates that many of our clients are experiencing in markets from China to Brazil, make this a dynamic exercise. Best practices in treasury management are often a misnomer when exported across borders and industries. Success is not guaranteed unless a customised approach is taken to implementing prevailing concepts of centralisation, automation and supply chain optimisation.
As an example, with production in Asia Pacific, consumer markets worldwide and a variety of distribution models, one of our sports manufacturer clients has a highly complex supply chain. It was vital for the company to secure its supply chain, from supplier through to customer, as well as protecting its own liquidity position. By introducing a combined supplier finance and trade solution provided by Bank of America Merrill Lynch, the company could minimise its borrowing requirements while supporting its suppliers’ and distributors’ working capital needs.
Banks are often inclined to look at their clients’ business in terms of payables, receivables and liquidity management, reflecting their internal product offering, whereas a client is focused on optimising shareholder value through its manufacturing, distribution and sales activities etc. Consequently, a transaction bank should be tasked not simply to facilitate financial processing, but to provide tools and solutions that redefine business models to maximise benefits. As we innovate, we need to focus on excellence in our people, our processes and our platform, ensuring we remain relevant to our clients.
You mention regulation: how is Bank of America Merrill Lynch supporting clients’ migration to SEPA?
Despite the benefits that SEPA offers to corporates operating cross-border, or with high payment or collection volumes, there has been little momentum towards migration so far. This is partly because companies’ existing cash management banks have rarely provided a strong lead towards migration. For example, many major corporations have sophisticated cash management structures in place with a large number of bank accounts. SEPA takes away the need for much of this infrastructure and enables companies to rationalise their euro bank accounts considerably. Consequently, unless actively encouraged by a client to support its SEPA migration project, there is little incentive for an incumbent bank to do so. Bank of America Merrill Lynch has a significant role to play in this respect. We can leverage our extensive international and transactional expertise to help clients leverage the advantages that SEPA presents as part of a broader European payments opportunity, and implement innovative, transparent cash management structures that fit their current and future needs.
For example, we have worked with one client to implement a single global payments processing centre as part of a centralised treasury and in-house banking infrastructure. This payments factory is the largest in the world, and therefore took time and effort to implement. However, with the client’s vision and Bank of America Merrill Lynch’s experience, cash management services and transaction processing capabilities, the project has proved a huge success and achieved the company’s global objectives, at a time when many companies are still struggling to implement regional financial shared services.
What about regulatory change in regions such as Asia?
While Europe and North America were hit hard by the global financial crisis, Asia weathered the storm very well. In fact, national economies, corporations and financial institutions in the region are generally on a stronger footing than they were two or three years ago, with more stability and fiscal flexibility, and therefore greater appetite for growth and continued reform. This position of strength and renewed confidence is leading to continued deregulation across the region. We indeed see a strong and accelerating commitment to ongoing reform from China to India to governments and central banks across South East Asia.
In China, for example, progress towards the RMB becoming an international trade currency is gathering pace, with a significant positive impact on our clients. Bank of America Merrill Lynch is closely engaged with these developing regulations and has the on-the-ground presence and expertise to help companies take advantage of new opportunities. The bank is increasingly recognised as the bank of choice both for multinational clients seeking to optimise their operations in Asia and for Asian companies seeking to leverage opportunities outside the region.
How have corporate treasurers reacted to the holistic approach to financial services that Bank of America Merrill Lynch is able to offer?
The response from both clients and prospects has been phenomenal, evidencing the compelling nature of our value proposition. For example, we had been the house bank for a leading US-headquartered telecommunications company for a number of years, but the company awarded its EMEA and Asia business to a competitor through an RFP process. However, the new relationship proved challenging and with the new value proposition that Bank of America Merrill Lynch was able to offer, the company reaffirmed and revalidated its relationship with us.
A transaction bank should be tasked not simply to facilitate financial processing, but to provide tool and solutions that redefine business models to maximise benefits.
Bank of America had had a relationship with a large German chemical firm for a number of years, but with a limited scope of activities. The firm’s treasury, based in Europe, recently awarded Bank of America Merrill Lynch its global cash management business, including global payments and local, in-country cash management services.
In Asia, while we were always confident that our value proposition, based on our extensive geographic reach, comprehensive range of services, expertise and robust infrastructure, was attractive, we were surprised at just how positive the market reaction has been to our renewed focus on the region. Clients across the region are desperate for choice, for banking partners that can service their needs in a consistent way across the region and across a complete range of advisory services. Until now, this choice has been limited, and Bank of America Merrill Lynch is increasingly recognised as being uniquely positioned to fulfil clients’ requirements across corporate, transaction and investment banking. We have a rapidly growing portfolio of clients, leaders in their respective industries, who have recognised the value of our approach to their business. [[[PAGE]]]
How do you manage clients’ in-country cash management requirements where Bank of America Merrill Lynch does not have a direct presence?
Historically, in order to deliver an efficient cash management service in a particular country, a bank had to establish a branch presence and become a direct member of the local clearing system. This was an expensive and time-consuming strategy, and it did not necessarily serve clients’ best interests because of the cost of delivering local services in this way. The reality is that a bank can excel in its core markets, but cannot be an expert or provide full services in every country in which its clients operate. However, by adopting leading-edge technology, a bank can still service its clients’ needs globally, even when a lack of critical mass does not justify a physical presence in a country. At Bank of America Merrill Lynch, we work with the best in-country local or regional bank so that our clients benefit from leading products, whilst leveraging our global platform and service levels to achieve a consistent and cohesive global solution. Our clients select Bank of America Merrill Lynch based on the quality of information we provide, our integration capabilities and the confidence that we can inspire. The partnership approach enables us to deliver on these expectations while still accessing in-country payments and collections products.
How will you continue to deliver on the success that Bank of America Merrill Lynch has achieved so far?
Key to Bank of America Merrill Lynch’s ongoing success is the investment in our people, our processes and our platform. It is vital to pursue excellence across each of these, which often includes thinking beyond the constraints of legacy banking models. For example, investing in people with the right experience and international expertise is of limited value if the structure of the organisation does not allow them to be effective. We are therefore decentralising authority within the bank to empower our people to deliver the best solutions possible that contribute to our clients’ success.