This lesson examines the strategic management of banking relationships and the selection of financial service providers .

6.1 The Importance of Bank Relationship Management

Banks are critical counterparties for treasury operations, providing payment services, funding, risk management products, and trade finance. Effective bank relationship management ensures reliable service delivery, competitive pricing, and access to credit when needed .

6.2 Managing the Bank Relationship

Core bank relationship management activities include:

• Service Provider Selection: Using a formal Request for Proposal (RFP) process to select banks based on financial stability, service capabilities, geographic reach, technology, and pricing.

• Performance Monitoring: Regularly reviewing service quality, fee structure, and responsiveness.

• Relationship Reviews: Conducting periodic reviews with key banking partners to discuss service levels and evolving needs.

• Bank Fee Analysis: Analysing bank fee structures to ensure they are competitive and cost-effective .

6.3 Counterparty Risk Management

Managing counterparty risk—the risk that a bank or other financial counterparty could default—is a critical component of bank relationship management. This involves:

• Setting and monitoring credit limits based on credit ratings and financial health.

• Diversifying banking relationships to avoid over-reliance on a single institution.

• Regularly reviewing counterparty exposure and credit quality .