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Partnering with Treasurers for Domestic and International Success While counterparty risk has become a particular issue since the financial crisis, in many cases the needs of treasurers in Germany are quite different from those in other European countries because of differences in local payment formats, connectivity mechanisms and cultural diversity.

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.

The advantages of a primary bank partnership

Working with one, or a small number of strategic partner banks, to support both domestic and international cash management requirements, brings considerable benefits in areas such as liquidity optimisation. Treasurers and finance managers can gain visibility over global cash more easily, and implement liquidity management techniques such as physical or notional cash pooling. The right banking partner is essential to the success of these initiatives. For example, not only does the bank need to have the technology and solutions to deliver the most appropriate liquidity management solutions across the company’s footprint, but they must also have the local presence and expertise to deliver innovative liquidity management solutions in highly regulated markets to avoid trapped cash and reduce borrowings across the group.

One of the reasons that I joined BNP Paribas at the start of 2012 was the bank’s capability to support corporate customers’ domestic needs in Germany, such as mass payments, whilst also facilitating their cash management requirements further afield, across Europe and into Asia and the Americas. This will perhaps come as a surprise in some cases: while BNP Paribas is well-known as an international bank, not everyone was aware of our domestic capabilities in Germany. In addition to having the skills and solutions that our customers in Germany require, we have a strong local presence, with six business centres in the major cities, providing on-the-ground, German-language support. While technology advances would appear to suggest that a local presence is no longer necessary to provide a high quality of customer service, we appreciate that personal contact and in-depth knowledge of our customers’ business is very valuable. We are continuing to invest in dedicated customer servicing in Germany to develop closer relationships, build trust, identify opportunities to support customers’ business more effectively and manage the impact of evolving market conditions.

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