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Changing your Cash Management Bank  

 (First published on the GT News Website in June 2000)

 Why Change your Bank?

There are many reasons why a corporate should want to change its bank, including:

1.     Change of policy by the bank

Occasionally, banks pull out of certain countries or decide to focus on another aspect of banking. (It probably also means that they weren't very good at transaction banking).

2.     Reduction in the bank credit rating

Most corporates set minimum bank credit ratings for their banks, and if their transaction bank slips below that rating, a change of bank should be considered.

3.     Lending requirements

Lending facilities offered by a particular bank may depend on moving transaction banking to them.

4.     Dissatisfaction

This is one of the main reasons for changing banks, and the contrast to 1 - 3 is that it is discretionary. If this is the case, the corporate must recognise that the process is often difficult and the benefits can sometimes be hard to achieve, so that it should only be considered if the dissatisfaction with the existing bank is extreme!

The Tender Process

When selecting a new bank, it is normal to go through a formal tender process. For that, the corporate needs to be clear about its objectives and requirements:

 1.     These objectives may include:

·        Reducing banking costs

·        Reducing liquidity requirements - squeezing unnecessary liquidity out of the system

·        Providing a good transaction banking service

2.     Analyse the requirements

·        It is important to understand how divisions, subsidiaries or departments - both in centralised and decentralised companies, use all of the accounts. This needs to be clear before preparing the Request for a Proposal (RFP).

3.     Identity the potential new banks

·        Contact them beforehand to explain your objectives and to warn them that a tender document is being sent to them, so that it will go to the correct person, who will treat it with sufficient importance, and in a timely manner.

·        Will the existing transaction bank(s) be included. 

  4.     Information

·        Give as much information to the prospective banks as possible, including a description of the corporate's needs, transaction volumes and values.

·        Describe clearly the corporate's objectives.

5.     Set a realistic timetable for the process

·        At least 1 month for the initial response

·        The estimated time for consideration of the proposals, to reach a shortlist, proposed dates for presentations, the decision, and implementation (don't be over-optimistic).

 6.     Specify what the response should include

·        Description of the service the bank is able to provide, including support and Service level Agreement.

·        Details of the pricing they are offering

·        Technical details of their electronic banking system

·        Lending and overdraft facilities available (and interest rates)

·        Money Market and other treasury lines which might be available

·        How they would handle implementation of the transfer of the business

·        Names of similarly sized customers, for reference

 Meeting the Short-listed Banks

To enable a good comparison of the short-listed banks, it is important to compare them under similar conditions, including:

·        A strict timetable and agenda

·        Specifying the areas which are important to the corporate, such as pricing, systems, and service

 It is sometimes revealing to compare who they send to give presentations such as existing or prospective account managers, their level of seniority and experience and whether they bring their implementation team.


Once the decision has been reached, implementation needs to be managed very carefully, involving the operational personnel who will be handling the process.

The process includes

a.   Meeting with the successful bank to plan the implementation.

This covers:

·         A realistic timetable

·        Regular progress reporting

·        Documentary requirements

·        Agreeing a training schedule for any new software being provided

b.   Meeting the outgoing bank to agree the handover procedure

 It needs to be emphasised that implementation can be a major exercise. In addition to the actions to be taken by the bank, the company will need to consider the various issues, including changing payment instructions for existing customers if they credit your bank accounts electronically, and changing internal systems which have been set up to interface with the existing bank. Do not underestimate the potential for things to go wrong and to take longer than expected, as the sales teams from the new bank do have a tendency to promise more than their bank can deliver.


When the new system has been in place for 3 or 6 months, a review needs to be conducted to check that the anticipated savings and benefits are being achieved and that the new systems are working as the bank had promised, and to identify actions to be taken if that is not the case.

April 2007


The UserCare Treasury Consultancy Limited