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How to get the most from your Bank Fee Negotiations

This Checklist covers how to prepare for bank fee negotiations with your banker.

1. Don’t be afraid to ask for a fee reduction

  • If you received a raise every other time you asked for one, how many times would you ask? In a 2012 Redbridge study of over 250 large corporations, 48% of corporations said that their bank gave them everything they asked for the last time they negotiated, and yet, 21% of corporations had never even asked. Admittedly, negotiating does not always work, and in 10% of the cases the bank didn’t budge on the fees. However, 69% of treasurers had at least some success when they sat down at the negotiating table. 
  • Remember that:
    • fear should not a factor when choosing whether or not to negotiate pricing with the banks 
    • Lack of time and confidence in what to ask for remain the biggest reasons most companies shy away for fee reductions.

2. Try to understand pricing from the bank’s perspective

  • The success of your negotiation may be determined by how ‘attractive’ your bank views your business.  These appetites can change based on the economy, your industry, and your company’s risk profile in context of their overall risk appetite. 
  • Here are some common factors that can impact how your bank views your relationship and how they may respond to a request to reduce fees. 
    • Source & Copyright©2018 - Redbridge Analytics 

3. Enter a negotiation with something to offer such as ancillary business

  • Banks view profit gained from a cash management relationship as one piece in the overall profitability of the relationship and usually take a RAROC (Risk Adjusted Return On Capital) approach. RAROC is a tool used by banks to create and protect value based on their Internal Rate of Return (IRR) requirements.  
  • When a bank is involved in your credit facility with no ancillary business, they may actually be earning a negative return when factoring in important factors like maturity, probability of default, loss given default, exposure at default, and your internal bank rating.  Ancillary business helps offset this risk and increases the bank’s overall rate of return. Therefore, banks in your credit facility may be more likely to discount services in a negotiation because of the overall impact the cash management revenue has to its bottom line.

4. Work for the long-term relationship and view the arrangement as a partnership

  • Some clients will negotiate pricing every year and continue to drive their prices lower and lower but at the risk of damaging the relationship. 
  • Banks that offer to reduce pricing for 12 months may seem ideal to the bank because the next year they will have the ability to increase prices without complaint.  
  • Bankers will actually prefer to freeze pricing for 3 – 5 years if asked because they know the client is less likely to run an RFP or come back annually for similar requests.  By taking the longer-term view, the bank and the client save time, money, and resources while guaranteeing revenue for the bank for that period?

5. Don’t take the first offer – push a little harder

  • In all of the negotiations Redbridge Debt & Treasury Advisory have conducted, 95% of the time a second round pays off so play those odds. Identify your targeted fee reduction at the beginning and think ahead about how much you are willing to settle for.  
  • In order to identify that target, however, you may need to do some benchmarking first.  Benchmarking requires more than just a database of industry best prices – while that is a decent start.  
  • Every bank has a different style when pricing deals so to look at a single line item and compare it to a database may not account for the discounts elsewhere.

6. Keep monitoring fees and let the bank know you are doing so

  • Bankers who know you are watching will be less likely to increase your prices annually and be more receptive to long-term agreements. 
  • Leverage your quarterly bank reviews and come prepared with bank fee billing errors, service and account rationalisations, and questions for your bank on how to improve your treasury operations.  
  • Send the findings to the bank in advance and allow them time to research and come prepared with their response.  
  • You will open the lines of the communication for a negotiation and eliminate unnecessary services and fees.  Why waste time negotiating the price of a service you don’t even need?

7. Never go more than five years without a review

  • It goes without saying that even though banks may appear to move slowly, the industry changes rapidly. How banks charge for services changes even more so.  
  • BANKS generally make changes to their billing systems annually and usually add and/or merge service fees during this process.  
  • Remember that this is not just a tale of prices incrementally increasing over time because they were not kept in check. There are cultural differences that can influence pricing changes too:
    • In the US, fraud protection services generate significant revenue for banks and customers will pay to be on the ‘safe side’
    • banks in Europe know they cannot charge directly for fraud services because corporates have always seen banks as duty-bound to protect their clients’ interests and assets.

8. Conclusion

Overall - whether engaging in an RFP or bilateral negotiation - remember that if you are prepared with information, consider the long-term relationship, work to understand the bankers’ perspective, this will give you the tools needed to seek and achieve rates that serve both parties well.


This Checklist will save you money and also preserve your relationship with your banker.


This item appears in the following sections:
Bank Relationship Management & KYC
Bank Fees Reconciliation & Negotiation
electronic Bank Account Management
Evaluating Banks' Overall Performance

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