Nature of Banking Relationship | Finalysis



The nature of banking relationships is a critical component in corporate finance, often playing a key role in a company's financial trajectory. This article focuses on the evolution, structure, and strategic importance of these relationships. We examine how they begin as simple service agreements and evolve into complex partnerships essential for managing debt, investments, and treasury services.


We will also discuss the roles and responsibilities of key players in these relationships, including banks, auditors, and corporate treasuries. Our goal is to provide insights into effective management and optimization of banking relationships, helping corporations make informed decisions that enhance their financial stability and growth.


Join us in this exploration of corporate banking relationships, where we uncover practical strategies for turning these financial partnerships into valuable assets for your business.




The corporate banking relationship has undergone significant transformation over centuries. Initially, these relationships served basic transactional needs, like managing debtors and creditors. As businesses expanded, so did the scope of banking services, evolving to include deposits, cash security, investments, currency exchange, and comprehensive treasury services.


This evolution reflects a shift from simple transactional interactions to complex, strategic partnerships. Understanding this historical context is crucial for corporations to appreciate the depth and potential of their banking relationships. It underscores the need for businesses to adapt and manage these relationships proactively as their own corporate needs and the financial landscape continue to change.


The Fatal Silo-Based Approach


In the corporate world, as businesses grow, their financial operations often become compartmentalised into distinct 'silos' such as borrowings, account operations, deposits, cash management, and currency transactions. This silo-based approach, while seemingly organised, can lead to inefficiencies and a lack of cohesive strategy in managing banking relationships.


Banks, responding to these diversified needs, have developed specialised departments to handle each service. This specialisation reinforces the silo structure, potentially leading to missed opportunities for integrated financial strategies and overall cost savings. For instance, a company might manage its loans and currency hedging separately, overlooking how these elements could be strategically aligned for better financial outcomes.


This fragmentation can result in a loss of the bigger financial picture, making it challenging for corporations to leverage their banking relationships fully. Recognizing and addressing the limitations of the silo-based approach is a crucial step towards developing a more integrated and effective banking strategy.


Role of the Bank


Banks, in their role as financial intermediaries, have a hierarchy of responsibilities. Their primary duty is regulatory compliance, ensuring all operations adhere to financial laws and standards. Following this, their allegiance lies with their shareholders, focusing on profitability and shareholder value.


For corporate clients, this means that while banks provide essential services, their offerings are often aligned more with the bank's interests than with optimising benefits for clients. For example, a bank may not proactively suggest the most cost-efficient loan options or reveal more advantageous hedging strategies, as these might not align with the bank's goal of maximising profits.


This dynamic necessitates that corporations approach banking relationships with a critical eye, understanding that banks may not always present the most financially beneficial options upfront. It underscores the importance for corporations to actively manage and assess their banking relationships to align them with their own financial goals and needs.


Role of the Auditors


Auditors play a critical role in ensuring the financial accuracy and compliance of a corporation. However, their scope is primarily focused on verifying the correctness of financial statements and ensuring adherence to accounting standards and regulations. This focus means they do not typically assess the cost-effectiveness or strategic alignment of a corporation's banking relationships.


While auditors ensure that financial records are accurate and compliant, they do not delve into whether a corporation is utilising its banking relationships in the most financially advantageous way. This gap highlights the need for corporations to independently evaluate their banking partnerships beyond mere compliance and accuracy, considering factors like cost efficiency, service quality, and strategic alignment with corporate goals.


Role of Corporate Treasury


Corporate treasuries are vital in managing a company's financial resources, but they often face challenges in navigating complex banking relationships. Typically staffed by highly qualified accountants, corporate treasuries might not possess the specialised banking expertise necessary to fully understand the intricacies of loan pricing, currency fluctuations, and the nuances of money transmission.


This gap in specialised banking knowledge means that corporate treasuries may not always be aware if they are receiving the most advantageous terms or if they could negotiate better rates and services. Without access to comprehensive market benchmarks, it becomes difficult for them to ascertain whether their banking arrangements are competitive and aligned with best practices.


The role of corporate treasuries, therefore, extends beyond managing day-to-day financial operations. It involves a continuous process of learning, assessing, and negotiating to ensure that the corporation's banking relationships are not only functional but also strategically advantageous.


Role of the Corporate Treasury System


The corporate treasury system is designed to provide a real-time overview of a company's financial status across different accounts, locations, and currencies. While these systems are integral for daily financial tracking, they often have limitations that can impact the broader strategic management of banking relationships.


A common limitation is that some systems may be confined to a single bank, location, or currency, which can obscure a corporation's overall financial position. This narrow focus can lead to a fragmented view of the company's financial health and hinder strategic decision-making. For instance, a system that does not integrate data across various banks might overlook opportunities for consolidating funds or optimising currency management.


Additionally, while these systems excel at reporting current financial positions, they often do not offer strategic insights or recommendations for future financial actions. Corporations, therefore, need to complement these systems with strategic analysis and decision-making to fully capitalise on their banking relationships.


Role of the Independent Banking and Treasury Consultant


Independent banking and treasury consultants play a pivotal role in optimising corporate finance strategies. Unbound by affiliations with specific banks or financial institutions, these consultants bring a level of impartiality and expertise that is crucial for corporations seeking to enhance their banking relationships.


Their expertise extends to understanding complex funding issues, cash management intricacies, and the nuances of loan maturities and pricing. Consultants are well-versed in the latest trends and best practices in currency risks, swaps, options, and other financial instruments. This knowledge allows them to identify areas where corporations may be incurring unnecessary costs or missing out on more efficient financial strategies.


One key advantage of working with these consultants is their access to industry benchmarks. They can provide comparative data on bank charges and service quality, offering corporations a clear perspective on how their banking arrangements stack up against market standards. This insight is invaluable when negotiating with banks, ensuring that corporations secure terms that are not only competitive but also aligned with their specific financial goals.


Independent consultants can also offer strategic advice during significant financial negotiations, such as acquiring new loans or restructuring existing ones. Their understanding of the banking landscape enables them to recommend banks best suited to a corporation’s specific needs, whether it’s for short-term facilities, long-term loans, or specialised financial services.




The nature of banking relationships in the corporate world is both complex and critical. Throughout this article, we've explored various facets of these relationships, from the historical evolution to the specific roles of banks, auditors, corporate treasuries, and treasury systems. We've seen the challenges of silo-based approaches and the importance of strategic management and oversight in optimising these relationships for your corporation's benefit.


At this juncture, the role of an independent banking and treasury consultant becomes indispensable. Finalysis, with its deep expertise and extensive experience in the field, stands as a leader in this arena. As Ireland's first and most experienced banking and treasury consultant, Finalysis offers unparalleled insights and strategies to corporates and multinationals across Ireland and the UK.


With a comprehensive understanding of banking and treasury dynamics and access to critical benchmarks, Finalysis is uniquely positioned to optimise your banking and treasury arrangements. Whether it’s negotiating with banks, advising on loan structures, or identifying cost-saving opportunities, Finalysis brings a wealth of knowledge and experience to ensure that your banking relationships are not just functional, but strategically advantageous.


For corporations looking to navigate the complexities of banking relationships and seeking to enhance their financial strategies, Finalysis offers the expertise and guidance needed to make informed decisions and achieve optimal financial outcomes.


Get in touch with our team today.