Related News

ETG closes first sustainability-linked credit facility

C2FO strengthens supply chain finance offering with managing director hire

Some banks praised for “rapid progress” on deforestation, but wider action needed

Crédit Agricole and Demica unveil SCF platform for Asia Pacific

IFC joins Taulia as supply chain finance funder

Corporate treasurers expect to continue consolidating the number of banks they use over the next year.

In a poll taken at the International Cash and Treasury Management Conference in Barcelona, 38% said that they would decrease the number of banks used, with the cost of maintaining banking relationships thought to be the main reason behind the trend.

GTR spoke with a treasury manager from a large UK energy company at the event who said that the decision to consolidate in recent years was partly driven by the falling credit ratings of some of the company’s partner banks. The company is currently concerned with the situation at Barclays – its main commercial bank – which is on the verge of downgrade. Having used the bank for many years, upheaval would be arduous. But, she says, financial committees show little sentiment in such cases. If, as is expected, Barclays faces a downgrade, then it’s likely to be one of the banks shown the door.

The development is expected to mainly affect the European market, in which companies are working towards meeting the single European payments area (Sepa) directive.

Sepa is a payments integration directive driven by the European Union, which will standardise cross-border payments, converting the fragmented European credit markets into something more consolidated.

Companies across Europe are struggling to meet Sepa deadlines. Out of the 37 billion transactions eligible, only 35% of credit transfers are Sepa-compliant and just 2% of direct debit payments that need to be migrated have been.

Simon Jones, head of corporate sales and treasury services Emea at JP Morgan told the audience and GTR that an efficient and cost-effective way for companies to migrate their payment processes is to limit the number of banking relationships they have.

Maintaining lots of banking relationships, sometimes with disparate technological platforms for each, can be costly and time consuming, according to Christof Nelischer of Willis Group. He suggested that it’s becoming more difficult to justify expenditure on areas such as documentation when such things can be done using fewer banks, delivering similar results.

He suggested that the trend wouldn’t be replicated in emerging markets, where companies are often keen to have more banking partners, so that they can spread the risk and utilise regional and local skillsets.

Furthermore, given the amount of liquidity in the market, banks are able to take bigger tickets on loans and syndicates. This, argues Alistair McLean, group treasurer of Australian company Metcash, eradicates the need for maintaining so many banking relationships.