The future of Corporate Banking – what do corporate clients expect from banks?
“Banking solutions for corporate treasurers today have to be very much tailored to individual companies’ requirements. Knowledge of the corporate’s business and treasury operations are vital if a bank is to help treasurers fulfil the requirements of their rapidly changing roles.” By Christian Behaghel, Head of Global Transaction Banking, Societe Generale
The role of corporate treasurers is changing; today a treasurer has to manage many new items on the balance sheet of the corporation in order to create new sources of funding across multiple countries, monitor volatility risks and secure the treasury operations. Treasurers have to create, for example, new funding sources because banks are facing constraints due to new capital requirements and may not be able to provide the lending they did in the past. Additionally, going directly to the markets is not always an option because the markets may be closed.
The new sources of funding can be based on the assets of the corporate itself. Corporate treasurers have many assets at their disposal and can create funding, for example, from receivables and trade finance. They are looking at items on their balance sheets and monetising them in order to augment and secure their funding sources.
The larger, multinational companies with sophisticated corporate treasury operations are looking to co-operate and collaborate with their banking partners in order to put in place tailor-made and very sophisticated funding solutions. These solutions are designed specifically for that corporate because it is using its own assets, or it does business in a particular way.
After the financial crisis senior management at corporations began to pay more attention to treasury activities and liquidity management. Corporate treasurers are seeking to diminish and mitigate market volatility, which is a new risk treasurers face. During times of volatility, corporate treasurers have to ensure they had access to liquidity without bearing too much risk. They are seeking to reduce the impact of volatility by seeking new sources of liquidity which they will be able to customise for their specific conditions. Treasurers want funding sources to be under their direct control, rather than under the control of their partner banks or the markets. The role of a bank is to give treasurers access to liquidity even during high volatility times to enable the treasurer to fulfil his role to ensure the treasury can get the liquidity it needs.
The second-tier corporations are still at the stage of understanding what they have on their balance sheets and how they can monetise those assets. For SMEs, alternative sources of funding are simply not on the agenda.
Another change in corporate treasury is an increased focus on the integration of treasury management platforms and systems. The aim of corporates is to develop integrated solutions that will simplify treasury management. They are working with their banks in order to get the best possible coverage of countries and currencies in a consistent way. Integration will deliver visibility on multiple bank accounts in real time. This is a truly collaborative environment, as one bank cannot meet all of the requirements of a corporation. Multi-banking visibility is a requirement now for all bank services to corporates.
A treasurer needs a reference bank to give access to multiple countries and currencies etc. Treasurers want harmonised pricing and formats for payments transactions. Technology can solve many of these problems by enabling harmonisation. However, we are still far from a single, global payment platform. Therefore treasurers have to rely on their reference banks to provide them with the best integrated and single solution to cover the full range of international and local payment and cash management services.
Linking payments with FX, for example, is increasingly being requested by corporate treasurers. Rather than making a payment and then going to another market to undertake the required FX transaction, treasurers would prefer to have both transactions carried out at the same time.
Increases in fraud recently have brought security to the top of the corporate treasurer’s agenda. The high security standard offered by banks will ensure banks continue to play an important role in treasury management and be a trusted platform of the treasurers.