Basel III and Bank Relationship Management
Basel III imposes major new requirements for bank balance sheets that will have a significant effect on the cost and availability of credit and treasury services.
Corporates who plan to stay in charge of their banking relationships will also need to take action as the effects of Basel III work their way through.
Treasury Alliances believe there are two complementary approaches which offer the best answer to this question:
- maintain good two-way communications. Earlier articles have suggested a number of questions that corporates should be asking members of their banking groups. The communication should not end there. Do banks understand your general treasury management strategy and where they fit into the overall scheme? Are you planning any tactical changes in cash concentration or liquid- ity management as a result of Basel III? Tell them, it may save you some money or generate a few suggestions on how to do so.
- know the value of your relationship to the bank. RAROC—Risk Adjusted Return on Capital—is a tool that banks and regulators have been using for many years in evaluating a given bank’s book of business. This is convenient because as banks reallocate or change capital structures in response to Basel III they have a rational basis for their decisions. We believe that RAROC can also be a valuable tool for corporates—for the same reasons.
For the full paper, see.
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