Having engaged with multiple banking partners and Trust and Company Service Providers (TCSPs), we want to offer some insights into what a TCSP should consider when managing banking relationships.
Selecting or switching a banking partner is a significant decision, but finding the right panel of banks can transform a TCSP and their client structures.
In this blog, we will cover the following key considerations for TCSPs when selecting panel banks:
• Bank credit ratings
• Account interest rates
• Bank risk appetite towards TCSPs and their client structures
• Technology
• Banking products
• Relationship management
• Onboarding and account opening
We’ll explore each of these factors, keeping in mind that any failure on the banking side directly affects the clients of the TCSP, damaging reputations and potentially leading to loss events or client attrition. Equally, banks can also feel the repercussions of client-side failures, making a solid partnership vital.
Introduction
For Trust and Company Service Providers (TCSPs), strong banking relationships are critical to ensuring operational soundness, efficiency, excellent client service, and fulfilment of fiduciary responsibilities. At Flinq, we refer to banks as ‘Banking Partners’ because the relationship between a Bank and a TCSP should be a partnership rather than a simple vendor-client dynamic. Each party relies on the other to ensure regulatory adherence under their respective licences.
Banks must treat TCSP-managed client accounts with the same care and efficiency as their direct clients. Meanwhile, TCSPs must be transparent about their needs, including book size, diversification requirements, and operational expectations. Lack of transparency can hinder service meetings and complicate pricing discussions.
Toby notes: Having worked on both sides, I’ve previously observed that banks traditionally had a sense of superiority, with TCSPs and clients expected to feel privileged to have access. Thankfully, this attitude is fading. Now, we emphasise the need for a true partnership. Both sides face regulatory risks; for instance, if a TCSP client breaches sanctions, both parties could face consequences. On a positive note, strong relationships and favourable interest rates encourage TCSPs to leave deposits with a bank rather than chasing returns elsewhere.
Selecting a banking partner is rarely straightforward, and TCSPs usually need a panel of banks. It’s highly uncommon for a TCSP to have fewer than three banking partners.
Next up, we dive into why this is necessary and the factors that should be considered when selecting banking partners.
Client Bank Accounts, Risk Profiles, and Credit Ratings
There’s a common misconception that banks will open accounts for anyone. The reality is that banks only provide accounts to clients that meet their target client groups, risk profiles, liquidity requirements, and jurisdictional standards. These considerations are sometimes openly discussed, but in other cases, clients are assessed on a case-by-case basis.
Consideration 1 – Understanding Client Profiles and Matching Banks
It’s important to assess your client book and categorise clients by risk profile. This should already be part of your onboarding process, periodic reviews and or trigger processes. Some banks will only accept low- to standard-risk clients, while others may be willing to accept higher-risk clients.
Next, categorise clients by industry and jurisdiction. Some industries – such as extractive sectors, pharmaceuticals, e-gaming, and crypto – may be too risky for certain banks, even if the clients themselves are categorised as standard risk. Similarly, some countries, aside from sanctioned ones, are considered riskier than others. Understanding where your clients operate will help as you discuss profiles with your banking partners.
It’s also essential to align your risk profile framework with that of your bank. For example, even if you operate under the Obliged Person regime (to be covered in a future blog), the client’s risk profile will influence how often your banking partner will need to review Client Due Diligence (CDD) documentation. Ensuring your review and refresh timelines match your bank’s expectations is crucial.
Consideration 2 – Bank Credit Rating
A bank’s credit rating is a key indicator of its financial health and stability. TCSPs rely on these ratings to ensure client cash is deposited in secure institutions, minimising risks associated with liquidity, regulatory compliance, and reputation, while safeguarding client trust.
Some TCSP clients may be more sensitive to credit ratings than others. However, it’s worth noting that banks with higher credit ratings tend to be more selective, often refraining from accepting higher-risk clients. In contrast, banks with lower credit ratings may be more willing to accept higher-risk clients, but this might come at the cost of lower interest rates.
While banks in well-regulated jurisdictions are generally considered safe, it’s important to recognise that their credit ratings often reflect the parent company rather than the specific branch or service line.
Client and Bank Profiles
Each bank has different target client profiles and restrictions on the types of clients they are willing to accept. Some are more open to higher-risk clients, provided the TCSP performs sufficient due diligence. These banks tend to offer lower interest rates, reflecting the risk they’re taking on. Others are more selective and, as a result, may offer stronger returns. There is a direct correlation between the risk a bank accepts and the interest it is willing to pay. We’ll discuss interest rates in more detail in the next section.
Interest and Products
Typically, TCSPs require current accounts to manage the day-to-day operations of their client structures. These accounts either hold minimal balances for operational purposes or are well-funded to meet the liquidity needs of client structures.
Traditionally, (and in most cases) current accounts for corporate clients haven’t been interest-bearing, especially in the TCSP space. Low-interest rates since 2007/8 meant this wasn’t a major issue. However, in the post-COVID era, major currencies are seeing higher interest rates.
Depending on your approach and the solutions you have in place some banking partners are offering competitive rates, while others retain much of the interest margin.
In addition to current accounts, TCSPs and their clients expect access to Fixed Deposits and Notice Accounts, providing higher returns and predictable liquidity for the bank.
Toby notes: FinTechs like TreasurySpring, EWG, and Flagstone have introduced innovative products and channels with access to whole-market solutions, offering clients improved returns and transparency. TCSPs and Corporate Treasuries are signing up to these, and other providers, looking to access wide ranges of products for themselves and their clients.
Consideration 3 – Open Dialogue with Banking Partners
Banks often present their default offerings, especially if they’ve been long-term partners. When engaging with new banking partners, you might see offers of higher interest rates or more attractive products, but it is important to understand that for a client portfolio to be commercially viable to your banking partner you’ll need to be clear about future intentions. Is the book of clients a growth book? Are you consolidating banks? Are you looking to them for a specific portfolio (high risk, industry specifc, jurisdication specific?).
It’s important to maintain a constant and open dialogue with existing and potential banking partners in your jurisdiction. Banking propositions are moving at a pace (this is relative to historical speed of change to banking propositions!) and market appetite with it. By speaking to the banking community you’ll be aware of these changes, new technologies or products being deployed and outlook expectations from their teams of economists.
Technologies
In recent years we’ve seen a huge wave of innovation and advancement in banking technologies. FinTech, WealthTech and InsurTech companies have hugely impacted the channels available to access banking, wealth and insurance products but haven’t broadly impacted the banking products themselves.
Toby again: specifically in the Corporate banking arena, retail banking has seen a lot more innovation and changes helped by Open Banking and the Revised Payment Services Directive (PSD2) – the solutions in the Corporate space we are seeing are game changing for clients in terms of access to products – as mentioned earlier, propositions from TreasurySpring and Flagstone allow access to a broad range of cash funds and cash deposits via one solution – there are many other providers doing similar but these two are close to home.
What we are starting to see is Banking Partners releasing technological innovations improving their channels for clients to utilise banking products to keep pace with the xxxTech businesses.
Each bank has an online portal for TCSPs to view and download statements, input payments, import batches of payments and manage their own users. Most also provide a mechanism for connectivity between the TCSP and the bank with either Secure File Transfer Protocol (SFTP) or Application Programming Interfaces (API) being available to send and receive statements and payment instructions.
Additionally, new products are starting to come to market, for TCSPs, that have been used in UK and Europe for other client types. Virtual Banking has arrived as a TCSP proposition, traditionally provided to large corporates to support their high volume subsidiary banking requirements (see Banking Circle as a cracking example having launched their virtual IBAN service in 2017). Not yet widely offered, Virtual Banking allows a TCSP to open bank accounts in days rather than the typical 3-6 weeks for a client structure.
As well as direct banking technologies a wave of middle-ware is widely seen. In the TCSP space, this middleware is usually in the form of a Treasury Management System or Payments workflow like TreasuryXpress, BankClarity, FIS, ModernTreasury or Nomentia to name a few. Should you use or are planning to implement such solutions then ensuring your banking partner can work with them and is willing to work with them is critical before spending significant sums to implement them, and allocating the resources to support on an ongoing basis.
Consideration 4 – Know your technology requirements
Again, all part of the transparent discussions with your banking partner. Understand what each bank can provide, who they work with from a middleware perspective and tell them how you envisage working with them – are you inputting directly into their platform? Do you want statements transmitted via SFTP? Will you be providing a batch file of payments? Do you want virtual account capabilities?
Account Opening and Relationship Management
We’ve combined these two aspects because, in many instances, the quality of the relationship can mitigate frustrations related to account opening.
Some banks now offer innovative solutions for improving account opening, management, and payments flow. As mentioned earlier, Virtual bank accounts, once unheard of in the TCSP space, are now enabling TCSPs to manage their own account opening processes—reducing what used to be a 3-6 week process to just a few days.
The Obliged Person regime (if utilised by your jurisdictions regulator and we’ll cover off more detail on this in a future post) saves a huge amount of time but is a significant agreement between you and your banking partner. If your bank is willing to utilise this then again, it’s important to keep regular and consistent service review meetings as well as agreeing a suitable cycle of site visits to validate CDD.
With recent acceptance of digital Identification and Verification solutions (like Onfido, Jumio, IDNow etc) it’s important that you and your banking partner align the acceptance of these into your onboarding flow, especially if there is any reliance on how you onboard your clients.
Finally, you must appreciate that your banking partner has their own policies and regulations to adhere to. They may not align exactly to the level of CDD you request when onboarding your clients. Should a bank request an extra level above or below your client entity on a structure chart, it’s to meet their requirements. If they require a file note on how you’re comfortable with adverse media, it’s to adhere to their policies. It’s worth ensuring that your internal relationship managers and teams understand this to alleviate any frustrations.
Consideration 5 – spend time talking
This consideration is pretty much the golden rule and a thread throughout the post. Spending time talking to your banking partners is key. Educating each other on the processes internally for onboarding clients will make the account opening process easier and in-turn, remove frustrations from your client when new CDD requests come through from your bank.
Being open about your growth targets, product needs, interest requirements, technology roadmap and prospective clients can all help to maintain a strong relationship, admittedly as long as the transparency is reciprocated!
Roundup
There are a lot of facets to banking and TCSP relationships – so many technical needs, regulation adherence, client demands, time and cost pressures.
We’ve tried to outline what we’ve seen as being critical factors to consider but overall a strong relationship is probably the key.
Not every bank will suit your business and you will need more than one partner so do spend time looking around and speaking to the banks (even after selecting banks to work with) helps to build market awareness and develop relationships that should last a long time.
If you think there are other factors we’ve missed or you disagree let us know. We’re always happy to be corrected.
To discuss more about these considerations and how Flinq can help you navigate banking relationships as a TCSP, contact us today.
