Important docs for current bank accts: “Acct. Resolution”
the basic acct. or svc. authorization, passed by the board; empowers a representative to enter into agreements for fin. svcs. on behalf of the firm; may be general or specific with regard to actions the FSP may take on behalf of the firm.
Important docs for current bank accts: “Svc. Agreement”
outlines Ts&Cs of the acct. or svc. (contract length, info on funds avail., timeframes for reporting errors, etc.)
many FSPs have a MSA plus separate svc. agreements for each svc. area (e.g. lockboxes, deposit accts., card svcs., etc.)
Important docs for current bank accts: “SLAs”
may be part of the svc. agreement or a separate doc
addresses 3 primary concerns:
- definition of specific svcs.
- operating metrics
- any penalties for failure to comply
2 most common techniques to measure FSP performance:
- scorecards
- relationship reviews
Request for Info (RFI)
firm formally describes needs; asks select FSPs for general info about how they could meet the needs
Request for Quotation (RFQ)
firm invites FSPs to bid on specific products/svcs that are essentially standardized (easy to quote and compare)
3 things required, before Treasury dept. designs and administers an RFP to banks/FSPs
- define objectives/identify key drivers
- determine business requirements (must have, nice to have, neutral)
- develop project plan
2 basic elements of an RFP design
substance-
- firm describes its basic operating structure
- list RFP objectives
- describes expected activity info by prod/svc.
- states desired RFP outcome
- specifies administrative requirements
form-
- how potential FSPs will receive the RFP
- ways firm will compare responses
Basic steps to administer an RFP
- develop long list (and inform potential FSPs)
- issue RFP, share timeline, answer questions (share answers with all FSPs RFPed)
- evaluate responses and create short list (score/weigh responses, SWOT analyze)
- mttgs./demos (discuss implementation)
- select and negotiate contracts
- implement and post-project review
Transaction Workflow Innovation Standards Team (TWIST)
NFP industry group formed to rationalize fin. industry standards by creating user-driven, nonproprietary, and internally consistent XML-based standards for the financial supply chain
- TWIST BSB (bank svcs. billing) format is incorporated into the ISO 20022 standard.
- AFP global codes- 800+ standardized banking svcs. codes compliant w/ TWIST BSB format; EMEA adopted
Value dating
Mostly non-US banking practice of using alternative VDs for transaction processing as a means to generate bank fees.
- bank sets a future VD to credit deposits, and a
- back VD to debit withdrawls.
reduces interest owed to customers on deposit balances, or generates negative balances on which the customer is charged OD fees.
AFP Service Codes
6 character, alphanumeric codes used by banks to standardize fees for client analysis statements
“Acct. Analysis Transaction Set 822”
a standardized format for FIs to use when electronically transmitting acct. analysis stmts to clients
developed by American National Standards Institute (ANSI)
Avg. Ledger Balance
= daily ending ledger bals (net of any current-period adjustments) / # of days in analysis period
Avg. Deposit Float
= sum of daily $ amt of items in process of collection / # of days* in analysis period
*can be calendar or business days)
avg. collected balance
= sum of daily ending collected bals. / # of days in analysis period
usually…
= avg. ledger bal - avg. deposit float
counterparty risk
risk a counterparty will not meet its outstanding, contractual obligations
sovereignrisk
risk that a govt. defaults on its debt
political risks
potential govt. actions w/ negative impact on firm’s ops. or value
- nationalization - govt. takesover all firms in a specific industry
- expropriation - govt. takesover a firm w/ or w/o compensation
- blocked currencies - cannot convert profits from LCY into a major trading CCY.
- forced reinvestment - limited/prohibited xfer of funds out of the country
- required majority ownership (by resident nat’nls)
govt and NFP entities
- issue only debt securities (no stock)
- provide docs for their municipal bond issuances on EMMA (Electronic Municipal Market Access)
