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Selecting a cash management bank
#1 Posted : 25 September 2012 16:07:36
Rank: Member

Joined: 2011-03-31
Posts: 23



"We are in the process of selecting a cash management bank and I would like to know which particular criteria one should focus upon most and the reasons why?"



a) Financial strength.
b) Long-term relationship.
c) Provision of credit facilities.
d) Geographic presence.
e) Breadth of treasury management capabilities.
f) Quality of technology/internet services.
g) Credit Ratings.
h) eBAM capabilities.





In some sense all of the above are relevant, however, if you are looking for either a regional or global cash management banking partner, ensuring/testing that the bank truly has global or regional control over its branches is imperative. For example, in setting up a cash pool in Europe, and working through the central team of the bank, it is highly destructive to find that the local branch, is still acting autonomously and agreeing actions with your local finance manager. All decisions and activities should be managed by the central project team and to a large extent local bank relationships between your business and the bank should be discouraged.

To specifically answer the above though:

a.       Financial strength is important and may impact your banks’ ability to provide daylight limits, which can be an issue if you have large outgoing payment files that you want processed and paid before funding your account either by expected credit sweeps or cash redemptions either from Money Market Funds or Repos..

b.      Long-term relationship is again important. If you have a banking panel providing balance sheet support to you, this is a large piece of business and the relationship will ‘buy’ the two way commitment to the project, there is a lot to lose and that gives you leverage over the ongoing operational aspects of cash and banking.

c.       Credit facilities are marginally important for the centre (I do not refer to daylight limits which are another matter) if you rely on this instead of true daily liquidity management. With regard to business units that do not for various legal/fiscal or exchange control reasons operate with a zero balancing structure, it’s important if this bank is your only access to credit.  If you have a panel of banks that can be used, this becomes less important, you do however need to ensure that each non-zero balancing account has an overdraft. The worst case scenario is for a payment file to be rejected due to insufficient funds.

d.      Geographic presence is important in terms of global or regional needs, however, some banks have recently offered virtual bank accounts which is a structure whereby your  bank can provide domestic payables and accept collections through their nostro account in country meaning that the main account will be in the country of your cash pool and be connected to the nostro. Very simple and very effective and eliminates the need for partner bank relationships which doesn’t always provide the optimal solution

e.       Breadth of treasury management capabilities. This depends on how you want to use your bank.  I expect my cash and banking partner to understand all payment and receivable methods and the background to them, system protocols and in particular, timing

f.       Technology is the lynchpin of an excellent cash management bank, if the system is cobbled together then problems will always occur.  The bank should continually invest in this space, they should be able to provide internet access, connectivity to your accounting platform and their techies should be able to design an end-to-end solution that is highly automated.

g.      Credit ratings. This isn’t really in the cash management space.

h.      eBAM is extremely important in allowing you access to all account information however, I would look to the technology piece and tie the two up in one structure...





#2 Posted : 15 October 2012 11:32:03
Rank: Member

Joined: 2011-03-31
Posts: 23



All the criteria suggested are important in selecting a relationship bank. However their relative importance depends on the individual details of both the treasury unit and the business. The focus for us treasurers should come before the selection process in the self-assessment of needs stage; identifying what, how and when the unit needs to achieve as its cash management goals; and how these match with other critical business needs.

The selection is important, even if it only occurs once every few years the decision obviously has ongoing impacts. Some points to bear in mind about bank selection in general.

1)      1)  Caveat emptor. It is the responsibility of the treasurers to select the right bank for their needs. If these needs are wrongly identified or communicated to the banks under consideration the focus will be wrong from the start of the process.

2)      2) There is information asymmetry in this process affecting both sides. Research, analysis and planning are vital to level the information asymmetry on the playing field. The bank will certainly have done theirs – if not that should count against them.

3)      3) The bankers go through selection processes more frequently than the treasurers. Expect smartly dressed visitors and well-crafted presentations. Rather than risk being intimidated recognize this indicates the bankers are under more pressure than you at this stage of the relationship.

4)      4) It is a sales process. Each bank under consideration will make an effort to present itself in the best possible light. Treasurers should make sure their questions are probing, specific and relevant. Do not be distracted by attractive features of limited relevance to your needs.

5)      5) If a bank puts more effort into running down a competitor than explaining what they can do, it’s a plus point for the competitor. Similarly a denial of problems within the bank, before it has been raised, is a warning light.

Banks and bankers are our counter-parties and service providers, so selecting the right ones can be a massive help to our function, and hence our businesses. That makes the process worth our time, effort and professional attention. 


#3 Posted : 27 February 2014 13:45:12
Rank: New member

Joined: 2014-02-27
Posts: 5

This reply comes a little bit late, but I guess this topic is still a current issue.


The listed criterias are all valid and as Andrew correclty mentioned, there are more than just a view static parameters. The perfect bank should match in all relevent required subjects. So, every group has their own priorities. Hence, there can't be this one and only best bank available. It is often a mix of some of them. Some play major roles, some just a kind of clearing function.

How to select the right Bank?

1) Analyze carefully what your groups needs are,
2) Put them in a Request for Proposal to some potential Banks

3) Make a qualitative and quantitative analysis of the answers -> see http://www.treasury-consulting.ch/e/bankrating.htm

4) Invite the best 3, start negotiations
5) Re-negotiate
6) Introduce the new bank(s) in a separate project

Best regards

Thomas Stahr

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