Dealing with the regulatory complexities faced by their larger peers and without some of the flexibility of their smaller brethren, US regional transaction banks are building international partnerships and investing in best-of-breed technology platforms in order to win, and hold on to, corporate clients.
COMPETITION IS INCREASING ACROSS THE UNIVERSAL BANKING VALUE CHAIN
Multibank solutions that were once a key differentiator of global banks are now increasingly offered by next-tier institutions. This is key, as customer service on its own no longer is enough to attract and retain corporate clients, no matter the size of the bank, Thompson says. “You need products and technology.”
Indeed, best-of-breed systems and solutions are now expected by corporate clients. Nanette Crocker, executive director, corporate and investment banking, corporate treasury management, with BBVA Compass, notes: “Four years ago they might [have been] surprised at what we had. Now they recognize we’re committed to the market, and we continue to develop what they need.”
Many regional banks are also building their global networks. In some cases, they have a corporate presence in other countries—for example, BBVA Compass benefits from its affiliation with Spanish parent BBVA’s European and Latin American operations.
Even when a regional bank doesn’t have its own employees on the ground in a specific country, it often establishes partnerships or correspondent relationships with banks in the region. Through their partner banks, many regional firms can conduct transactions that a bank headquartered outside the country, even if it has global operations, might not be able to do, Sattarian says.
U.S. Bank works through networks of banks, such as IBOS, an international network that provides local banking services across the globe. Each bank within the network uses standardized operating procedures to, for instance, open an account. That streamlines the process for companies, Jones points out. The banks also adhere to service level agreements.
At the same time, each bank knows the regulations and policies within its country. “They have significant expertise on the ground,” Jones says. Companies who aren’t based in the region gain access to this expertise.
Regional banks also are benefiting from several broader shifts in the market. Many global banks are finding that “trying to be all things to all men in all markets is not viable long-term,” Lodge says. At the same time, a growing number of companies appear to be giving regional banks a new look. Crocker notes: “I think they’ve realized it doesn’t require a top-three [in size] bank to do business” around the globe. If you have the capabilities and have a relationship, they give you an opportunity.”
Regional banks that can meet the challenges can succeed. “I’m optimistic, although it’s a tough market,” Isaacs says, adding, “the industry has a place in the financial system.”