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Tuesday, 16th September 2025 |
| Where next for the corporate/bank relationship? |
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| The relationship between the banker and the corporate client has changed significantly over the last 10 years and will continue to evolve and change in the future. Ciaran Kane analyses some of the factors responsible for those changes and examines the likely key influences in the year ahead. |
The dynamics of the corporate / bank relationship have changed radically over the last 10 years, driven by a number of factors:
• In general, the number of relationship banks per corporate has decreased as banking consolidation continues apace and banks increasingly seek ancillary business as a quid pro quo for committing their balance sheet. As corporates become more aware of the factors driving banks’ credit decisions and the importance attaching to a strong business case in addition to a strong credit rating, they are reducing the size of their bank group. This usually means an increased hold level for the successful banks, but also the prospect of additional ancillary business.
• There has been a trend internationally towards industry specialisation among bankers, with a requirement that the relationship banker have an in-depth knowledge of the client company, the industry they operate in and the significant future developments in that industry. Research conducted by Barclays in the U.K. indicates that industry sector expertise is viewed as a critical differentiator among banking providers.
• Corporates are increasingly using banks that can offer solutions across a range of product and geographic areas, particularly in emerging markets that they are looking to expand into. It is no longer sufficient for a bank to have a branch presence in these markets – a complete financial services offering, technological and communications links with a bank wide network and reliable market knowledge are all critical factors.
With current corporate liquidity levels at an all time high, and bank lending appetite far out-stripping borrowing demand, it is a very attractive environment for the corporate treasurer. The argument has been made by some corporate treasurers that they have never needed banks less. However strategic treasurers recognise that the long term nature of bank relationship management and the inevitability of the business and credit cycle mean that they cannot manage their banking relationships in terms of their current needs.
It is clear that one key influence on the corporate/bank relationship going forward will be the ongoing consolidation of the international banking industry, with particular interest in the European banking sector. Compared to the U.S. where a small number of large institutions dominate the market, the European situation remains relatively fragmented. While there are banks that hold a dominant position in their domestic market or region, no bank has greater than 10 per cent penetration of the European market. As the European banking environment becomes increasingly homogenised the level of consolidation will inevitably increase, most likely driven by acquisition of smaller domestic /regional players by global institutions. Once barriers, perceived or otherwise are lowered, this process will accelerate.
It also worth noting the impact of the Basle II Accord in relation to this ongoing consolidation. One of the key issues for corporate borrowers arising from Basle II is that banks will be obliged to set aside more capital (and hence charge more) for riskier loans. This will clearly benefit some borrowers (although it is likely that they are already receiving very keen pricing in the current credit environment) and potentially negatively impact those with lower credit ratings. It is clearly in the interests of the corporate client that these loan pricing decisions are taken as close to home as possible – either by their stand alone Irish bank or a foreign owned subsidiary with considerable local autonomy. What is the likely impact of consolidation on a small peripheral banking market such as Ireland? It is instructive to look at the New Zealand market where none of the top five banks are now domestically owned. A sign of things to come for Irish banks? Ongoing consolidation of relationships between banks and large corporates will also continue as the trend towards centralisation of the management and operation of bank relationships within corporates continues. Where previously subsidiaries (domestic and international) have conducted their own banking business at a distance from head office, the increased use of technology and greater pressure on banks to deliver cross border cash management and liquidity solutions will aid the consolidation of much of this business at the centre, delivering cost savings and efficiency gains.
Corporate clients will become increasingly reliant on their industry aligned relationship bankers to keep them up to date on developments and generate new ideas. As many operational banking products and services become increasingly commoditised, banks will become increasingly focussed on using a solutions led approach to differentiate themselves. There is a greater emphasis from corporates of having relationships with banks who make a genuine effort to understand their business – not just where it is today but also where it is going in the future – and how they as a banking partner can assist in realising those objectives and goals. While changes in the nature and context of the corporate/bank relationship will continue going forward, the key objective for a bank such as Barclays is to focus on the quality of that underlying relationship and to ensure that we are delivering a service and product offering that adds real value to our corporate client base. |
Ciaran Kane is head of treasury at Barclays Bank Ireland plc
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