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Bank relationship management: the experienced view on how to use bilateral banking arrangements

Greg Croydon, Director, Treasury and Group Pensions at IMI the UK engineering company, who has been in corporate treasury for nearly 25 years, shared his ideas and experiences on bank relationship management at the ACT's Cash Management conference in February. Some of the really useful nuggets which, as he put it: "Have worked quite well", included:

  • regard banks as partners / stakeholders who provide investment for the balance sheet and growth, and also provide valuable services
  • banks should also be coming up with ideas to help take the business forward – whether in risk management, enhanced services and solutions or introductions to new business partners
  • banks should be seen as an enabler to our business process as well as a provider of liquidity and flexibility
  • at IMI we need banks to meet four attributes:
    • have deep pockets
    • make quick decisions
    • provide great service
    • deliver good products
  • IMI criteria for selecting banks:
    • appropriate geographic spread to range to match our global footprint (need strong "house" bank in each region)
    • complementary product range (across group of banks)
    • long term relationship and understanding
    • ability to support our balance sheet when required
  • split banks into Tier 1 banks (who are committed and provide funding) and Tier 2 banks who provide regional and other services/relationships
  • funding: use bilateral relationships rather than syndicate: ensures both parties are benefitting to the fullest extent from the relationship, and overall it is cost effective. Using a standard document for these arrangements limits the scope of negotiation to pricing, structure and maturity.
  • build trusted partnerships with each bank including: long term links to relationship team; have open attitude; develop good links with decision makers, ensure bank understand your risk profile, and remember to meet each other half way in most situations
  • allocation of business:
    • be open and clear with banks, e.g. tell them where a part of business has been allocated to another bank
    • focus on geographic and product strengths
    • split cash management business amongst lending banks
    • give banks a chance to quote for the main FX business via an internet platform
  • in the financial crisis IMI benefitted from their bilateral banking arrangements:
    • as they had an even spread of facility maturities with close relationship banks and so they weren't reliant on any single maturity
    • unlike those with large syndicated debt who needed to pre-finance early.

 


Sound advice from an experienced, knowledgeable corporate treasurer. The use of bilateral banking arrangements is particularly pertinent in the current financial crisis.


This item appears in the following sections:
Bank Relationship Management & KYC
Evaluating Banks' Overall Performance

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