Pay Attention to Bank Performance

Study suggests that implementing a formal process for monitoring bank relationships brings significant benefits.

Does your organization measure the performance of its banking partners? It should. That’s the key finding of a EuroFinance survey of 214 corporate treasury professionals conducted in late May.

The majority of respondents work for large global enterprises; around 75 percent come from companies with at least $1 billion in annual revenue. Yet 57 percent of these organizations have no formal process for measuring the performance of their banking relationships. Among the 42 percent that do formally measure bank performance, around half (22 percent of all respondents) use metrics in the measurement process. Many of the respondents in companies that do have an established approach for gauging bank performance reported inconsistencies between regions or divisions of the company, and some said that measurement is ad hoc and/or subjective.

The survey also asked respondents about the proportion of their banking partners that deliver “value for money” (VFM)—in other words, whether they think they’re getting their money’s worth from their financial service providers. Few respondents believe that either all their banks (9 percent) or none of their banks (1 percent) deliver value for money. But more than 60 percent believe the majority of their banks meet this standard, and 22 percent think half their banks do.

What’s most interesting about the EuroFinance study is the data at the intersection of these two questions. While 54 percent of companies that don’t measure performance feel that the majority (or all) of their banks deliver VFM, that number jumps to 71 percent among companies that formally measure bank performance without metrics and 88 percent among those that use metrics to gauge their banking relationships. (See Figure 1, below.)

One other noteworthy finding: The survey asked respondents whether they’re concerned that banking regulations such as Basel III and Dodd-Frank will adversely impact the service they get from their banks. Although 28 percent of respondents said they are very concerned, the highest proportion (39 percent) are not concerned at all. Respondents primarily indicated worries that costs will increase and that banks may decide to exit certain lines of business as a result of the regulatory environment.


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