John Read is proving to be right about universal banking, when in November 2015 he wrote,  “universal banking model is inherently unstable & unworkable”. Barclays announcement that they intend to sell their African operations, which provided universal banking across the Sub-Saharan African region, seems to support his theory. Not only this, how unworkable the general universal banking model is, seems to be supported by the fact that Bob Diamond, former Barclays CEO, is considering buying these operations with his new group Atlas Mara which is focusing just on banking opportunities in Africa.

Over the last 3-4 years the international banks have been scaling back their global strategies and coverage. Philip Augar writing in the Financial Times today argues that “a new banking landscape of fewer and smaller universal banks supplemented by product and regional banks is beginning to emerge.” 

As banks adjust to the realities of, as John Read puts it, of, “combining so much in the single bank make services more expensive than if they were instead offered by smaller, specialised players.” They will be forced to change:

• their country and regional coverage
• the type and range of cash management products and services.

RBS and Barclays withdrawals from parts of the cash management business are different, but they have the core theme of having to react to fundamental realities in the banking landscape.

Key questions for corporate treasurers 

For corporate treasurers the key questions include:

• which of your banks are likely to change their cash management country & regional coverage? 
• what backup alternatives do you have, ready to switch on if needed?
• what is the long term viability of your key cash management products and services? what alternatives are available and how soon can they go live?
• how bank and supplier agnostic can you make yourself?

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CTMfile take: The harsh fiscal and regulatory pressures will make this change permanent. The future of cash management is an ever changing mix of smaller more focused universal banks, regional banks and product specialist banks with one or two global network banks. Over the coming decade, most corporates will have to use more banks rather than less.