Great Expectations or Pride & Prejudice?

What do treasurers really want from their banks?

by Helen Sanders, Editor

“If you want to go fast, go alone. If you want to go far, go together” (African proverb) quoted Phil John, EMEA Treasury Director for Mars, concluding the corporate panel at Sibos, and encapsulating many of the key themes discussed during the session. The four panellists, Phil John, Tobias Thiessen (The Global Fund), Betsy Clark (Alliance Data) and Shahrul Azman Mohd Moktar (Felda Global Ventures Capital) emphasised the value of long-term partnerships with their banks. However, they expressed a number of frustrations and areas where they recognised the benefits of greater collaboration and standardisation both within banking organisations, across banks and across the wider financial and regulatory community.

Bank-agnostic channels and formats

Connectivity and visibility was the opening theme of the panel. While banks are often keen to promote proprietary systems, this is unhelpful for multi-banked corporations, who are then forced to maintain multiple systems, interfaces, security tokens and user rights. Instead, panellists emphasised the importance of SWIFT as a bank-agnostic channel. However, adoption amongst banks is still patchy, with far fewer banks in regions such as Latin America, Africa and Asia supporting corporate access to SWIFT than international banks. Furthermore, companies cannot necessarily rely on being able to access all branches of these international banks or use all message types, such as trade finance instruments. Onboarding processes can also be complex, costly and inconsistent across banks.

It is not just fragmented channel strategies that are creating challenges for treasurers, there is often not enough information passed through the transaction process to categorise transactions. This means that a lot of time is taken identifying flows and trying to define rules to automate reconciliation, a problem that is then replicated across banks. As every bank uses diverse formats, integrating every bank is effectively a new implementation, with different mapping, processing and rule-based intelligence. Although XML ISO 20022 formats appear to address this, panellists urged the need for more multi-bank collaboration. Currently, the focus appears to be more on aggregation than compromise: rather than being prepared to change or adapt formats, banks are simply adding more lines to ‘standard’ file formats to accommodate their own variations. Banks need to realise that connectivity and standardised exchange of information is not a differentiator, it is a basic service.

Maintaining bank accounts

While connectivity is a basic service, so too is the ability to open, close and maintain authorised signatories on accounts. Panellists highlighted instances where it has taken two years simply to update signatories, with quite different requirements between banks in the same jurisdiction, leading to significant risk and resource implications. While there have been various initiatives to develop and promote BAM (bank account management) and eBAM (electronic bank account management), progress has been in fits and starts. Some treasury technology vendors have developed BAM tools within their applications which have proved successful, while in other cases, corporations have developed their own; however, there is still no universally accepted platform for conducting basic BAM tasks. The concern expressed by some panel participants was that while automation of BAM will be very valuable, the underlying processes that the bank employs must first be efficient – “you can’t automate a process that doesn’t work”.

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Regulatory compliance

Lack of efficiency and consistency, both across banks and different parts of the same bank, also poses problems when it comes to regulatory compliance. Panellists emphasised that making sure they were fully compliant with local and international regulations was very important to them; however, they are struggling with the amount of documentation that needed to be produced for KYC purposes, over different timescales. In particular, it is difficult to understand why two banks have different compliance requirements in the same country. This was a theme picked up later by John Marshall, Director of Banking Strategy and Solutions at GE Treasury during a debate with Michael Spiegel, Global Head of Trade Finance and Cash Management for Corporates at Deutsche Bank. As Marshall urged, to a ripple of applause from the corporate treasurers in the audience,

“Banks don’t always realise the number of touchpoints a corporate has within a bank – as well as the number of banks…. As a corporate, we need our banks to work with regulators to agree standards for each country so banks would no longer need to come up with their own interpretation of these standards.”

Michael Spiegel acknowledged the difficulties experienced by many banks – and accepted the need for change,

“KYC processes are often fragmented by products and divisions within a bank – therefore, as banks, we need to change behaviours and push this up the chain within the bank in order to be genuinely client-centric and resolve the current fragmentation.”

There was widespread support for collaboration initiatives such as SWIFT’s KYC Registry amongst corporate participants, many of whom were keen to part of these initiatives as they develop.

It is not only KYC that is causing challenges. Organisations that pay to red-flag beneficiaries or counterparties in sensitive countries often face long payment delays, often without explanation or the ability to work through issues. For NGOs, this can have a major impact on key programmes. Some participants raised the concern that an overly cumbersome – and inconsistent - approach to compliance will push some businesses, particularly smaller companies that lack the ability to increase compliance resourcing, to use small local banks or non-bank, unregulated alternatives, which could increase risk.
 

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Organisation and expertise

Panellists were united in their enthusiasm for working proactively and constructively with their banks, but these banks’ organisational structures and variable levels of expertise often presented some complications. Treasurers appreciate long-term relationships with a capable relationship manager who can co-ordinate resources effectively across the bank, and this is an important factor in treasurers’ satisfaction with their banks. However, at times, finding the right resources within a bank can be problematic, with panellists recounting experiences of lengthy periods and wasted meetings in which their banks were trying to work out who needed to be involved, and which departments are responsible for particular activities, such as SWIFT connectivity.

Panellists expressed their interest in banks sharing their experiences based on working with other clients in comparable situations, such as entering new markets, to avoid mistakes and implement best practices. However, banks often appear reluctant to do this. Trust can also be eroded if treasurers get different answers from banks on the same issue in the same country, which makes it very difficult for treasurers to make informed decisions and plan strategies.  Some questioned whether sales activities are being presented as ‘advisory’ services in some cases, which can be frustrating and damaging to relationships. Similarly, while treasurers consider their relationship with a bank as one relationship, across functions and regions, banks operate in silos, which means that each part has only a limited view and understanding of the client’s business, including their activities with other parts of the bank. Therefore, when one part of the bank calls a client to ask for more business, this often ignores the fact that they may have placed substantial business with another part of the bank.

Evolving strategies

Corporate treasurers recognise the challenges that banks are experiencing, particularly meeting the growing compliance burden. This is resulting in some banks choosing to exit market or client segments which inevitably creates difficulties for the clients they support. Panellists recognised the rationale behind this strategy, but implored the banks to be more selective about the business that they bid on in the first place: it is not helpful when a bank bids for new business, often very proactively, only to exit the business immediately it had been implemented. Bank exits are leading to fewer choices for corporate treasurers in some markets, which is inevitably posing strategic and operational challenges.

Overall, the panel concluded that their relationships with banks, and the quality of the dialogue they have with them, would be greatly enhanced if they could focus on delivering basic services efficiently and consistently. This would leave treasurers more time to concentrate on the more innovative offerings that banks and their technology partners are promoting. For larger corporations in particular, bank-agnostic connectivity and standardised formats are essential, which not all banks are yet equipped to support. The most compelling message, however, is the need for collaboration to address the challenges that the financial community as a whole are experiencing. This needs to involve regulators, banks, technology vendors, infrastructure and standards bodies such as SWIFT, and the wider corporate community.