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Partnering with Treasurers for Domestic and International Success

by Andrej Ankerst, Head of Cash Management Germany, BNP Paribas

As the effects of globalisation continue to extend, corporate treasurers in Germany are facing similar challenges to their peers in other parts of Europe: the need to optimise liquidity, monitor and manage risk, and maximise operational efficiency. Counterparty risk has become a particular issue since the global financial crisis, as companies seek to ensure that their counterparty banks have the financial strength, geographic reach, product depth and commitment to long term relationships that they require. However, while there are similarities between the needs of treasurers in Germany compared with those in other parts of Europe, the context is often quite different, in terms of local payment formats, connectivity mechanisms and cultural diversity. Consequently, treasurers face a dilemma: how do they ensure that they meet their domestic, pan-European and global cash and treasury management requirements whilst avoiding fragmentation of bank relationships and increasing counterparty risk?

Local and international banking

German treasurers, and treasurers of companies overseas with German subsidiaries, have been accustomed to working with domestic banks to meet their local needs, and international banks to support their cash management requirements outside Germany. Often these domestic banks are small, however, with a lower credit standing than the company’s counterparty credit policy would require, and may not be part of the company’s strategic banking panel. Furthermore, as these companies’ international ambitions increase, whether a large multinational or a mid-cap corporate, they often need to rely on alternative banks to meet their cash management requirements outside Germany, potentially resulting in fragmentation of cash and information, and replication of electronic banking systems.