Nowadays, most companies with a larger domestic footprint or international activities have quite a few banks covering all their financing needs. The number of banks has increased due to several factors: notably globalization of corporates, regionalization of the banks and importantly, the distribution of risk over several banks. The effect on the treasury function is a challenge with regards to managing these relationships and ensuring good service, fair pricing and proper control over the banking activities. Any treasury will try to make sure they have a proper understanding of all these factors and discuss them with their core banks on a regular basis.

A specific area of concern for many treasurers are the fees for cash management. These might “only” represent 20% of the total expenditure with regards to banks, but they typically represent 80% of treasurers’ work as there are so many different cash management fees, and the invoice formats are numerous and difficult to understand. Over the last few years there has been a significant drive towards standardizing the format of banks’ cash management invoices: the TWIST initiative, which was started almost 15 years ago by a few larger German corporates like Lufthansa and Siemens, in cooperation with a few larger banks. Today,we are now at a point where there is an ISO certified invoice format, the CAMT.086 format, and 15 banks supporting this format in some form and in some regions.

The proof of the pudding is in the eating though, and being a Bank Relationship Management specialist myself I can confirm that while the TWIST initiative is a step forward, you cannot yet rely on it as a format for all your bank fee management. The biggest hurdle that treasuries have found in bank fee management is the sheer number of billable items and the disconnect between the price agreement signed and the billing items invoiced. The reality is that banks try to be more user friendly in their wording of fee types but still struggle with billing systems that are difficult to change in the back office. I often feel like I need a bank fee translator, for instance the USA already has 2,000 different billing items (AFP Codes) and these differ per bank. The benefits of managing your bank fees frequently are substantial though, as a typical corporate may pay up to 15 bps or more of their revenues on cash management fees, e.g. a corporate with €1 bn. revenue may pay €1.5 m in cash management fees. By automating your fees and controlling them properly you can easily save 10-15%. These are numbers that make it highly appealing to be proactive about bank fee management.

But don’t think that banks make mistakes on purpose: most errors are human errors on the side of both bank and corporate, misunderstandings with regards to billed items, inconsistent pricing because of old agreements etc. etc. Banks do their best, but it is difficult and very expensive for them to improve their billing systems and as such to keep up with the higher demand for transparency and globalized business. And on top of that; it needs two to tango, so treasuries also have the responsibility to monitor and negotiate fair pricing for their cash management fees. My advice would therefore always be to automate with caution. This involves automating completely where possible (TWIST) and automate as much as possible where there are still Excel and text files in use. Be flexible when it comes to bank fee management, as many changes are yet to come. But do start a bank fee management project as there is simply too much to gain - both in terms of savings and in terms of improved, transparent and informed relationships with your banks.

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