Corporates are shifting to multi-bank platforms – and taking all the credit

Large corporate organisations engaged in international trade often face an array of difficulties when managing credit lines and guarantees provided by multiple banks. Costs and fees can soon mount up as central visibility and control over thousands of instruments are lost in a quickly growing maze of processes and proprietary systems. A corporate with international …

by | September 27, 2016 | Bolero

Large corporate organisations engaged in international trade often face an array of difficulties when managing credit lines and guarantees provided by multiple banks.

Costs and fees can soon mount up as central visibility and control over thousands of instruments are lost in a quickly growing maze of processes and proprietary systems. A corporate with international involvement may have many credit lines and thousands of guarantees open at any one time.

Keeping them updated and effectively managing them to avoid incurring any unnecessary bank fees, costs and duplication becomes extremely difficult in the absence of a consolidated overview provided by a single platform interfacing with all required banks.

However, there are many valid and highly beneficial reasons for an organisation to have multiple bank relationships. 

First of all, banks have different areas of expertise, whether in products, trading zones or particular countries and home jurisdictions, which corporates need to make regular use of. Secondly, having commercial relationships with several banks gives a corporate the opportunity to negotiate the optimum terms and conditions for a transaction. Thirdly, the involvement of several banks spreads the risk and reduces premiums when financing high-value transactions.

These are some of the advantages – but there are also a number distinct disadvantages of dealing with banks through traditional methods.

For a start, each bank will have its own distinct IT system in place, requiring corporate customers to go through the tedious, time-consuming and potentially confusing process of logging into a different portal and going through security checks and passwords in each case.

More significantly, when there are potentially thousands of documentary credits and guarantees involved, it becomes incredibly difficult for a corporate to keep on top of every instrument at all times – to be able to see them and ensure that they are updated and employed in the most cost-effective manner possible. 

A large organisation, for example, may have local offices or subsidiaries that obtain their own bank guarantees, which can make it very difficult for treasuries to see and manage centrally. 

It is still the case that in many large corporates, spreadsheets continue to be employed for this function in order to operate effectively. Yet even where organisations have their own treasury management systems, reconciliation and establishing degrees of exposure can prove to be very problematic when there may be so many different instruments behind deals that could be worth billions of pounds. Interfacing with bank systems is often fraught with difficulty and can be very demanding in terms of both time and labour.

However, a growing number of corporates are now consolidating their handling of all these processes and instruments on to a single third-party platform, enabling themselves to make huge gains in man-hours, visibility and perhaps most importantly – substantial savings in bank fees and costs.

Achieving an increased visibility of credit lines, documentary credits and guarantees on a web-based platform gives a consistent view regardless of location. The result is the more efficient use of credit lines and big savings, to a degree that can never be achieved by any other means.

It also means that organisations can enable quick and seamless electronic communication with their banking partners, a vital commodity for any enterprise maintaining and taking advantage of relationships with multiple banks. By utilising electronic forms of communication, these organisations can also further reduce the costs and strengthen the security of their operations. It gives a treasury the chance to call down credit much earlier than otherwise possible, potentially benefiting the organisation by as many as 10 or even 20 basis-points – a significant saving considering the large numbers. The clear level of visibility provided by a multi-bank platform also means existing credit lines can be utilised without all the costly fees and time-consuming processes typically required to set up new ones.

Full or even partial integration with back-office systems, seamless communication with panel banks and an effective system of alerts, all make the single multi-bank platform the future for hard-pressed treasuries toiling to improve cash-flow management and the efficient deployment of working capital.

As the global banking network expands, the treasury of any successful corporate involved in major trade transactions will have to shift to a single, multi-bank platform supplied by a third-party provider with an established and proven reputation for total reliability, security and efficiency in international trade finance and banking.

The advantages in a globalised world of round-the-clock operations are simply going to be too obvious for any large corporate to ignore.

By Simon Streat, VP Product Strategy, Bolero International.

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