International Bank Fees:

The Next Frontier

Stephan Ireland

Managing Director

Redbridge DTA

Kris Filipkowski, CTP

Director of Global Treasury Initiatives

Henry Schein, Inc

Agenda

• Challenges of international bank relationships

Collection of information

Negotiation strategies

Benchmarking

• Client Case Study

• How to optimize the process: BSB

Why? What is it?

Who is providing it?

Update from the CGI-MP Taskforce

Global Transactions Market

• A Diverse Landscape

• United States and Canada

Fragmented and heterogeneous market

Cash and Check collection issues

Complexity of the bank services billing

Global Transactions Market

• A Diverse Landscape

• Europe

Countries' local specificities: "Commission de Mouvement" (France), RID/RIBA

(Italy), "Bunchungposten" (Germany), BACS and CHAPS payments (UK),

Boletino (Brazil), Stipandi (Italy)

SEPA and cross-border payments: SEPA harmonized prices vs. non- SEPA

payments (CCY transactions, intercompany payments)

Electronic banking: many subscriptions to electronic banking needed in Europe

due to numerous banks, optimizations possible

Global Transactions Market

• A Diverse Landscape

• APAC

Countries' local specificities: limited number of banks in

Australia/New-Zealand: few pricing efficiencies. Specific payment

instruments in Asia, especially in China where some payment

instruments are widely spread, such as Bank Acceptance Drafts

Complexity of the liquidity management: tailor-made cash pooling

structures needed, many tax issues

Restrictive regulations: cash and liquidity management regulated by

SAFE and PBOC in China but some regulations eased recently

It’s Project Management

• Communication is Key!

• Coordination & leadership

• Monitoring and Supporting

• Need of local expertise ( Team / banks / 3rd party…)

Collection of information

Gathering Data

• Before you can compare global banks, you must first gather all

the data

No consolidated statements – Ask for the BSB!

Data entry is very manual

Extracting volumes from TMS is tricky

Multiple currencies

etc.

Gathering Data

• Preparation is Key

ENTITIES

BANKS

Bank 1 Bank 2 Bank 3 Bank 4 Bank5…..Bank14 Bank 15

Canada Division 1 X X

Division 2 X

Mexico

Division 1 X

Division 2 X

Division 3 X

United States

Division 1 X X X

Division 2

Division 3 X

Western Europe

Division 1 X X

Division 2 X X

Division 3 X

Division 4 X X

Division 5 X

APAC

Division 1 X

Division 2

Division 3

Division 4 X

Division 5

If/When You Have Data

• Normalize currencies

• Sort fees into comparable Product Families by bank and by

country

Wire Fees

Payment Fees

Depository Fees, etc.

Electronic Banking, etc.

Understanding Local Markets

Example With Italy

Italian Service Name Industry Standard

Cambiali Draft

RID Direct Debit

RIBA Payment Announcement

Spese di Scrittura Fee Per Line

Stipandi ACH

Proportional Fee &

Transaction Fee Transaction fee

Float (not anymore??)

Aggregate the Data

EFT0 ELECTRONIC FUNDS TRANSFER MAINTENANCE

EFT00000 Funds Transfer System (RTGS) Maintenance

EFT00001 General Domestic ACH Maintenance

EFT00002 Payment Initiation Portal Maintenance - Automated

EFT00004 SEPA Maintenance

EFT00005 General Crossborder Maintenance

How to Benchmark?

• No database available outside US

• Do it yourself: RFP?

• Use 3rd party?

Henry Schein

World's largest provider of health care products and services

to office-based dental, animal health and medical

practitioners.

• Fortune 500® Company

• Member of the S&P 500® and the NASDAQ 100® indexes,

• Employs more than 18,000 Team Schein Members

• Serves more than one million customers.

• The Company has operations or affiliates in 33 countries.

• The Company's sales reached a record $10.4 billion in 2014.

Henry Schein Case Study

• Henry Schein operated in 24 countries with $8.9 billion in sales

in 2012

• Around $3 million of fees to banks to manage its payments &

collection operations, excluding credit cards.

• North America accounted for 2/3 of the global banking profit

pool and 1/3 was widely spread in many foreign countries such

as UK, Germany, Australia, France…

Objectives Of The Engagement

1. Measure the total costs of its

cash management operations

in the world

2. Identify major areas for

improvement

3. Decide how to achieve them

Execution

1. Map out banking relationships

worldwide

2. Focus on the highest stake:

UK, Germany, Canada, USA

3. Prepare dedicated questionnaires &

provide all necessary support to fill

them in

4. Compare Banks

5. Benchmark

Execution

• Prepare

Create steering committee

Map bank/entity into a matrix

Identify key contacts per entity or country

• Communicate

Present project to key contacts

Provide data collection file per country

Review with each contact to ensure understanding and identify missing

info

Execution

• Collection and Qualification

Single ‘hotline’ at headquarters for questions

Check consistency and quality of the data

Identify International Cash Management Cost

Cash management cost in % of local domestic volumes

North America & Canada

UK

Germany

Australia New-Zealand France

Austria

The Netherlands

Belgium

Asia (China, Thailand, Malaysia)

Spain Portugal

Italy

Czech Republic

Israel

Switzerland

0,00%

0,02%

0,04%

0,06%

0,08%

0,10%

0,12%

0,14%

0,16%

Understand Price Trends

Main Pricing Trend in Europe: PSD & SEPA Impact

0

0,01

0,02

0,03

0,04

0,05

0,06

0,07

0,08

0,09

2005 2006 2007 2008 2009 2010 2011 2012 2013

France

Italie

Espagne

Allemagne

Findings

-20% to -40%

-20% to -40% -36% to -51%

-24% to -36% -20% to -35%

Findings

Scope Audit & benchmark key findings

UK 10 entities

1 bank

The benchmark shows a range of - 22% (classic) to -

42% (aggressive) of achievable savings

GERM 16 entities

3 banks

The benchmark ranges from -33% to -50% of easily

achievable savings (almost entirely from Bank 1)

CAN 1 entity

1 bank

Lockboxes and paper disbursements represent 81% of

the current annual bank charges and 78% of the

identified savings

USA 32 entities

1 bank

Almost half of the current cost comes from lockbox

services. The most important areas of savings come from

lockboxes, ACH and EDI services

TOTAL ($ equivalent)

4 countries

59 entities

6 banks

Action Plan

High Low

Low

High

Before Negotiation, Define Your Strategy

• If you don’t ask, you don’t get

Recommandation Global

Negotiation

UK

Bilateral negotiations on:

- domestic and SEPA transfers (Faster Payments, SCT…)

- cash concentration fees

Decrease the number of additional users and accounts for the Eb tool Pan European RFP can

be considered to

maximize savings and

streamline European

banking relationships

Germany

Renegotiate terms and conditions insisting on:

- booking fees on credit of transfers

- SEPA transactions

- migrating all international transfers in EUR in the EU to SEPA format

(quick win)

Keep the current flat fee with bank 1

Canada Bilateral negotiation on Lockbox and paper disbursement services,

RFP can also be considered

North American RFP

can be considered.

USA

Bilateral negotiations may not be sufficient since savings are scattered

across a large number of services

RFP to consider

Conclusion

• All countries had a saving objective to realize (part of the

performance management too)

• Global return for the Group was >15% savings all-in

• Savings could have been much more important but they

have been limited on purpose (Taking into consideration

Bank’s profitability / RAROC)

• 3-5 yr bank pricing commitments

• No change in banking relationships

• No alteration of banking relationships

BSB Update

TWIST/Camt086

• Corporations do not know with any degree of accuracy what

is being paid to international banks for treasury services

because:

Current billing provides little or no transparency

Analysis of bank fees is labor intensive

Bank relationships are locally managed

BSB – Why?

• If you do not know what you are paying, you cannot:

Provide management with global bank relationship metrics

Accurately verify international bank fees (vendor due diligence)

Control costs

BSB – Why?

• ISO 20022 standard, electronic bank ‘bill’ format known as

camt.086

• Transmits bank balance, service charge, tax, currency &

adjustment data

• Designed to be US 822 equivalent on global scale with the

addition of tax & currency data

• Uses billing codes (Global AFP Service Codes) to

standardize identification of bank services.

What is the BSB?

The Latest Standards 2015

SWIFT CGI MP Taskforce began January 2015 to

harmonize implementation of the TWIST or

Camt.086 Version of the Bank Services Billing

statement for global bank fee reporting.

CGI-MP: Common Global Implementation – Market Practice

CGI is driven by customer demand for multibank coordination of implementations

Objectives – Corporate View

• Focus on finding potential gaps in the AFP Global Service

Codes®

• Enable banks to provide corporates with a 1:1 mapping

• Enhance BSB/camt.086 reporting to be used as e-invoice

• Define and implement standardized nomenclature/xml schema

• Motivate the banks to realize that a standardized billing

landscape and comprehensive billing for corporates (and other

FI) also generates bank internal benefits (business case)

Corporate Voice

• Corporations are frustrated by lack of progress.

Petitions

One was sent 2 years ago to global bank management. Time for

another?

• RFPs

Banks noticing increased requests through RFPs.

• Laws

Germany passed a law requiring electronic invoicing by 2018.

Global Banks Providing BSB: Ask them!

RBS,

Bank of America Merrill Lynch,

Barclays,

BNP Paribas,

Citi,

Danske Bank,

Deutsche Bank,

HSBC,

Intesa Sanpaolo,

JPMorgan,

SEB (Skandinaviska Enskilda Banken),

Société Générale,

Standard Chartered Bank,

UniCredit

What you can do?

Join the CGI-MP Task Force

Ask your bank Electronic Files

Join LinkedIn Discussion Group (coming very soon)

Participate in industry surveys

Raise your voice!!