The Bank Holding Treasury’s Cash is Optimised to Keep it, Not Move it

Published: August 25, 2026

What happens when the economic incentives of the FI holding a firm's funds do not fully align with the firm's own liquidity and treasury needs? George Davis, CEO and Founder, Lorum, investigates.

When a corporate treasury team places operating cash with a bank, the relationship appears straightforward. The bank holds the money; the treasurer decides when and where it moves. Economically, however, the same cash has two different roles.

For the company, it is liquidity reserved for payroll, suppliers, tax, debt service, or investment. For the bank, it is a liability that also supports funding, liquidity management, and lending. The bank values stability; the treasurer values certainty of access. Those interests overlap, but they are not identical.

That mismatch does not mean a bank will refuse to execute a payment. It means treasurers should not treat the institution holding their cash as economically neutral. The practical question is how much liquidity a company keeps idle or fragmented because it cannot be moved with the same confidence with which it can be seen.

What a bank sees in a deposit

Corporate balances can be particularly valuable to a bank because they are often large, recurring, and relatively predictable. Payroll balances await distribution, tax reserves accumulate ahead of deadlines, acquisition funds sit until completion, and cash is positioned across markets before obligations fall due. While those balances remain, they strengthen the funding base of the institution holding them.

The Basel III liquidity coverage framework makes this distinction explicit. It requires banks to hold sufficient high-quality liquid assets to meet assumed net cash outflows over a 30-day stress period. Qualifying operational deposits may receive a 25% run-off assumption, while non-operational unsecured funding from non-financial corporates generally receives 40%, subject to qualifying exceptions and national implementation. In other words, the regulatory treatment depends partly on how stable and operationally necessary a balance is expected to be.

This does not show that banks delay payments. It shows that a corporate deposit is assessed according to its stability and economic value to the bank before the treasurer experiences the result as a rate, fee, or service package. The treasurer assesses the same balance according to whether it will meet the company’s obligations on time. Those are different calculations.

The working-capital cost of uncertain access

Consider a multinational collecting revenue and meeting obligations across several markets. Cash may arrive days or weeks before it is needed for payroll, suppliers, tax, or debt service. During that period, treasury must preserve capital, manage currency exposure, and ensure the right entity has the right currency before the relevant cut-off.

If movement depends on bundled FX, local operating windows, manual approvals, or infrastructure and risk controls that vary by market, the rational response is to build resilience elsewhere. Subsidiaries retain local buffers, accounts are pre-funded earlier, additional banking relationships are maintained, and cash remains distributed across more locations than the underlying obligations require.

That is defensive liquidity. Its cost is not limited to the difference between a good and a poor deposit rate. It appears as idle working capital, unnecessary prefunding, duplicated operational capacity, and reduced confidence in centralised cash. A modest improvement in deposit yield can be immaterial beside the value of cash held solely because same-day deployment cannot be relied upon.

Better terms and better tools only go so far

Negotiation still matters. Large corporates can secure better rates, tighter FX pricing, extended cut-offs, and more responsive service. Those improvements reduce the cost of the relationship, but they do not change its legal or economic foundation: the bank continues to fund itself with deposits, while the corporate needs to deploy them.

Technology matters too, but visibility and mobility are not the same thing. A TMS can show where cash is, and an API can make an instruction easier to send. Neither determines the legal status of the balance, the operating hours of the payment chain, or the incentives of the institution holding it.

Treasurers already separate stationary cash

When cash is not required immediately, many treasurers move it from bank deposits into MMFs. The comparison with custody is not exact: the company owns fund shares, the portfolio is held separately, and the manager is commonly paid according to AUM. The choice is nevertheless instructive. Portfolio composition, liquidity terms, yield and fees are disclosed, enabling treasury to assess the service independently of its transactional banking relationship.

An MMF addresses what to do with cash while it is stationary. It does not solve the operating challenge for balances that must convert, move between entities, settle in local markets, and meet obligations on a certain date. Those balances remain in the banking system precisely because that is where payments occur. The unfinished work is applying the same discipline and transparency to money that moves.

Custody and lending do not need to be bundled

A conventional bank deposit appears as a liability of the bank. The company has a claim for repayment and, subject to local law and the particular account structure, is generally an unsecured creditor. Although eligible companies may receive statutory deposit protection, its scale is usually immaterial against substantial operating balances: the UK Financial Services Compensation Scheme covers up to £120,000 per eligible person or entity per banking group, while EU deposit-guarantee schemes generally protect up to €100,000 per depositor. The failures of 2023 brought the resulting concentration and counterparty exposure back into treasury discussions.

Custody starts from a different legal and economic premise, but the label alone proves little. The outcome depends on the documentation, account title, segregation arrangements, jurisdiction, and where the underlying assets are ultimately held. Properly structured, a named custody arrangement can identify the client’s interest in the assets and separate those assets from the institution’s lending activities.

This is not an argument for abandoning deposit-taking banks. Deposits and lending are essential to the financial system, and bank accounts remain appropriate for many corporate cash pools. The question is whether the same institution must always hold the cash, monetise the balance, control currency conversion, and determine how liquidity moves.

Once those functions are separated, their economics become easier to assess. Safekeeping, administration, and movement can be priced as services. FX can be evaluated independently. Yield can be selected according to the duration and risk of the cash rather than emerging from an opaque internal deposit strategy. Alignment comes from the structure, not only from a better negotiation.

The benchmark is deployable cash

The next generation of corporate liquidity infrastructure should not be judged primarily by the number of accounts a provider can open or the quality of its dashboard. It should be judged by how much cash treasury can deploy with confidence.

A treasurer assessing an operating-cash structure should ask four questions:

• What is the company’s legal relationship to the balance?
• Where are the underlying funds or assets ultimately held?
• How does the provider earn when the money remains still, and how does it earn when the money moves?
• How much cash is retained in local buffers solely because same-day delivery cannot be relied upon?

The practical benchmark is the amount of defensive liquidity the business can release without increasing operational risk. That converts an abstract debate about bank incentives into a working-capital measure that every treasury team can test.

A bank is not behaving badly when it values stable deposits; it is behaving as its institutional design requires. The mistake is treating deposit-taking as neutral infrastructure for every type of corporate cash. Once treasury separates the need to earn, safeguard, convert, and move money, it can choose the right structure for each and reduce the cash held merely just in case it is needed.

Lorum provides programmable access to global clearing, named accounts and treasury infrastructure through a non-lending, 100% reserve model.