Treasurers should be stressing the importance of discussing account analysis statements when looking at a new non-U.S. bank relationship, write Tamir Shafer and Stephan Ireland.

Historical Perspective

When electronic Account Analysis statements (EDI 822s) were first created in the United States during the mid-1980s, the large corporations leading the charge approached the Association for Financial Professionals (AFP) – then known as the Treasury Management Association (TMA) – for a standard unified billing code to facilitate automated reporting. To ensure adoption of the new standard code, the American National Standard Institute (ANSI) required a ‘TMA code’ to be assigned for each bank service included on the electronic statement.

Fast-forward 30 years, and EDI 822s are still the standard for electronic delivery of domestic US bank fee activity. However, the TMA codes (renamed since as AFP codes), have not drastically changed since their original mapping. To their credit, the AFP has traditionally updated their standard every 3-5 years. Despite this refreshing, many banks are still using the 2004 or 2007 versions of the AFP codes.  The outdated code lists are further complicated by bank acquisitions, reduced budgets and resources in bank back-offices, and the constant shift in banks’ priorities due to ever evolving regulations.

Obfuscation vs. Transparency

As interest rates hover at historic lows and lending capabilities remain constrained, banks are now turning more to alternative areas to generate fee income (e.g., cash management fees). The number of service line items and average dollar amounts being billed to corporations for cash management services is higher than ever. Billing transparency is even more difficult to manage. Not only are the service line item descriptions confusing and the nomenclature different from bank to bank, the AFP codes that are mapped and assigned (if assigned at all) by banks are mapped at only a 40% accuracy rate; the exception being the eight banks whose service codes mapping have been accredited and approved by the AFP. The inaccuracy not only frustrates the corporate end users who want to be able to perform an apples-to-apples comparison of services and fees across their banks, it also creates problems for the bank relationship managers who try in vain to use what should be correct codes to help them respond to RFP pricing schedules sent by corporate treasury departments.

Tom Wolfe, Senior Director of Global Treasury at Marriott Vacations Worldwide chose a pragmatic middle ground to monitor cash management fees. His company, a former subsidiary of Marriott International, manages over 60 resorts globally under the brands Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. With operations in more than ten countries, Marriott Vacations’ corporate treasury department deals with about fifteen banks.

Regarding domestic U.S. activity, as account analysis statements and the services & fees data contained within are obtained rather easily, corporate treasurers often download these files and then populate data into a spreadsheet. At a minimum, this data typically includes average collected balance, the earnings credit rate, gross fees charged and net fees paid. “The objective is to determine how each bank calculates the average collected balance, to make sure that the ECR is the one we negotiated, and to determine how much we must hold on deposit at the bank to offset our cash management fees. These days, with the ECR being as low as it is, we analyze the breakeven point very carefully,” says Tom Wolfe. “It might not be the most comprehensive approach, but it allows me to get key information quickly to my management.”  Moreover, for its three largest bank relationships, Marriott Vacations Worldwide has hired a third-party to assist in monitoring the details contained within their monthly account analyses, for its domestic U.S. cash management activity.

Given the many imperfections, monitoring bank fees is a viable and value-add process in the U.S.  Going forward, banks must establish a clear process for ensuring consistency in their assignment of the AFP codes at the stage of adoption across all billing platforms (as several of the larger banks have more than one billing platform). Just as important, however, is to ensure that on an annual basis, the AFP code mapping is relevant and accurate, and that new services implemented by each bank are mapped with the same care.

International Fees is the New Wild West

Even with the imperfections that exist domestically, the situation is far less evolved at an international level. “In most cases, we do not receive account analysis statements for international activity like we do in the United States. The only way we can analyze our bank fees in a meaningful way is to look at the bank statement and filter out for a specific code. While this tells me how much we are paying in fees, it unfortunately does not necessarily indicate which bank service it relates to”, explains Tom Wolfe.

To overcome this challenge, Marriott Vacations Worldwide relies heavily on global banks that can provide an account analysis statement on a consistent basis, and who also have domestic bank relationship managers that can easily step in and manage communication breakdowns with local bankers in other countries. “The one-off banking relationships in other countries are time consuming. They require a lot of communication. We have to get them to help us understand their central bank’s requirements, restrictions on movements of cash, etc. We also have to drive the communication to make sure they understand our needs, and that we understand what they are going to be able to provide, including the costs,” says Wolfe.

Setting a Global Standard

Treasurers should be stressing the importance of discussing account analysis statements when looking at a new non-U.S. bank relationship. “The formats offered and their availability is definitely something to ask banks as part of an RFP. If I could wave a magic wand, I would like to see a global standard for bank fees,” Wolfe adds.

Thus, we are at the exact point in time where the global banks will either learn from the U.S. and solidify their commitment to setting up and implementing a standard (and the accuracy of their mapping), or they will fall into the old trap.  The Bank Service Billing (BSB) format does not require a standard code nor does it specify which standard should be used. The Common Global Implementation (CGI-MP) bank participants have mutually agreed to adopt the AFP Global Codes as the unified standard used as part of the BSB, but there are still some who are not satisfied.

No matter which standard is adopted, global banks must establish a clear process for ensuring consistency in their assignment of the AFP Global codes at the stage of adoption, across all of their billing platforms. Similar to the US in the 1980s, Corporate Treasurers can play an important role in the adoption of a global standard. If enough Treasurers ask for it, their banks will provide it. Ask and ye shall receive…

Tamir Shafer is a Senior Director and Stephan Ireland is a Managing Director, both with Redbridge Debt & Treasury Advisory.

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