Are You Happy With Your Bank?

A recent article with the same title recently appeared in CFO magazine.  The article points out a recent CFO survey that 25% of the respondents describe their relationship with their banker as strictly transactional – that is, their bank thinks of them simply as a source of revenue.

CFOs apparently are motivated by their dissatisfaction with bank’s customer service and are prepared to take some action.  According to Greenwich Associates, in the next year 16% of small businesses will be requesting proposals from competing banks.  Historically, only about 10% of firms swithch banks in any given year.

Other CFOs are taking a different approach.  Switching banks during a weak lending period may indirectly hurt the firm’s creditworthiness.  Some CFOs are trying to improve the relationship with their existing banks and are adopting the following strategies to improve their leverage:

a) Consider the allocation of basic banking services among competing banks.  For example, separate the credit card service from treasury management services.  Also, consider separating the employee retirement and medical reimbursement accounts to competing banks.

b) Step into your bank’s shoes and calculate the value your company brings to the bank.  That includes the value of fees, plus the estimated ‘spread’ on outstanding loans.  Make sure your Relationship Manager knows that you understand this value.

c) Make a point to meet the boss of your relationship manager and discuss specific issues you have with the bank.

Today is a new day in banking relationships.  The new rules are still being written.  However, a CFO should be alert and proactive in making sure his company has the best banking relationship that is possible given today’s economic situation.