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In a Pandemic, Bank Relationships Are Critical for Treasury

  • By Andrew Deichler
  • Published: 10/6/2020

As the COVID-19 pandemic has unfolded, organizations have reached out to their banks to help reconfigure business processes and to access liquidity. As a result, many companies have built trust in their banking partners as they rely on them to help establish new approaches for day-to-day operations. The latest Executive Guide, underwritten by CIT, explores the ways in which bank relationships have proven to be critical for treasury departments in the current environment.


According to the 2020 AFP Liquidity Survey, underwritten by Invesco, 51% of treasury and finance professionals increased their short-term investments in banks throughout 2019 and into early 2020. This was the highest percentage in three years, up from 46% in 2019 and 49% in 2018 and a reversal of a downward trend that began in 2015. Although the survey was taken before the impact of the COVID-19 outbreak had set in, this flight to caution likely reflects concerns that the pandemic poses a critical threat to the global economy.

While 93% of respondents to the Liquidity Survey consider the overall relationship with their banks to be the primary driver in bank selection, 73% indicated the credit quality of a bank is also a deciding factor, suggesting they’re prudent when looking at the long term.

Indeed, a recent discussion on the AFP Collaborate practitioner community revealed that banks’ responsiveness and attentiveness can make or break treasury/bank relationships.

A treasury professional who wished to remain anonymous explained that they are going through an RFP for their company's treasury management services. Given the company's size, the treasury department determined that it needed a top-tier bank to provide technology and services. However, the company's incumbent bank—a major one with whom the organization has worked with for about 15 years—has been lacking a bit in terms of service. On the other hand, the bank has everything the company needs from a technology standpoint.

“Their technology has all of the capabilities we need, our team knows it well, and they are responsive enough,” the practitioner said. “But they don't seem to go the extra mile to make sure we're always taking advantage of the latest technology offerings or optimizing our fees. Perfect example—as a result of the RFP, they suddenly found savings of about 10% off our annual fees.”

Several other practitioners responded that this is a typical experience with a lot of major banks. And while some shared positive stories about this particular bank, at least one other user agreed that it “typically provides the minimum service level and rarely goes the extra mile.” They added that some of the bank's employees do not appear properly trained and “it is often up to the client/customer to push or lead them.”

Even so, some practitioners recommended considering the current environment when pursuing the RFP and only switching banks if it is absolutely necessary. “An RFP during a pandemic will have its own challenges,” noted one user, who recommended completing a pro/con/considerations list before moving away from the incumbent. Another user noted that, “in an economy like today's, a partner that won't get spooked easily seems very important.”


Like most banks, CIT has seen many companies draw downs on credit since the pandemic began. “That's been primarily defensive in nature; clients wanted to ensure they had enough liquidity to get through the crisis,” said Bob McElyea, managing director of sales for CIT’s Treasury and Payment Services business. “Initially, it was for a few weeks. But as we've all seen, this has gone on further as the shutdowns and COVID proliferation just continued.”

Most clients held their cash rather than investing in internal projects. To see some returns on that cash would be ideal, but the goal was really to remain fiscally solvent. “The rate environment got very crazy, and so I think clients quickly understood that if they could earn something on those dollars, great, but they weren't fighting for the top rate,” McElyea said. “I think that goes back to safety and soundness; the banks that were offering super high rates were not being viewed as necessarily sound enough for corporate clients to move large amounts.”

Another trend some banks are seeing is an inflow of dollars from drawdowns at other banks. The reason? Relationships. “Clients were looking at who their strategic partners were and shifting deposits to sit with the partners that were strongest with them,” McElyea said.

It’s important to note that those clients weren’t necessarily ending their relationships with other banks. Instead, they’ve been shifting the wallet share toward the partners they believe are the strongest to work with now and in the future. Any bank that has been reaching out to clients and having detailed discussions about how it is revamping internal processes to be more efficient is likely to see more of those inflows.

Furthermore, with the cascade of new programs from central banks and governments to support businesses, many banks have been working with their clients to help them understand the options they have and which will work best. “I think what clients wanted to know is that we would help them synthesize those programs while they were trying to understand the availability of credit,” said Scott Satriano, CFA, head of financing and risk solutions at NatWest. “We spent a lot of time, really line-by-line with every client, to help them understand their needs from a liquidity perspective.”

Satriano has also been working with his clients to instill confidence the banking system will be resilient and helping them understand why this event is not like 2008. This is a health crisis that is severely disrupting business operations, rather than a banking crisis created within the financial system.

Fred Schacknies, CTP, former senior vice president and treasurer for Hilton and a member of AFP’s Board of Directors, agreed. “Whereas the financial sector was at the center of the crisis in 2008, in this situation, its involvement has so far been indirect; I don't see it profoundly impacting the banks' abilities,” he said.

He believes that it’s important for corporate treasury departments to understand that distinction. “You need to understand that the risks here, while they're structural and long-term, they're chiefly commercial and not broadly financial,” he said. “The primary risks are very specific to certain industries. Then of course, there's a secondary, general GDP drag, which affects everybody to some degree. But the brunt of it is hitting certain industries very heavily, and others less so.”

For more insights, download Rethinking Bank Relationships in a Dynamic Environment.

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