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What Is Relationship Management?

May 15, 2012 | Comments: 0 | Views: 139

Relationship Banking is a concept commonly used by banks to increase their wallet sizes. It entails cross-selling financial products and services to capture and lock-in all of a customer's banking business and thus enhance customer loyalty. Customers are usually offered a broad array of financial products and services over and above the traditional checking, savings and loan accounts.

Relationship-banking products may include investment products, certificates of deposit, credit cards safe deposit boxes, wealth management, insurance, investments,, loans,, financial advisory services, credit card and payroll processing. Customers are normally allocated their own relationship managers, who are their point of contact for financial needs. The relationship managers are well trained to sell or deal with basic queries on an array of bank products.

This is a win-win situation. Customers take advantage of banks' ambition to develop relationship banking and increase earnings from customers. Firstly, customers obtain more favorable terms on most bank products and secondly, they enjoy higher level of service. Banks benefit too. They enhance their earnings per customer, reduce information gathering cost, improve on monitoring of credit risk of borrowers and achieve customer royalty.

As a bank customer here is what you should do to benefit more;

• If your banking is split among two or more, this may well be a good and a bad thing. It is a good thing because you can get those banks competing against each other and most likely improve your terms. The downside is, if you are banking is not big enough, competing lenders may not be interested in giving incentives for a tiny return. So stay with one bank

• Make a list of all your banking services with your current banker then arrange to meet your banker. In the meeting, point out that you think that you are giving the bank good business but at a cost that you can no longer afford. Negotiate each product/ service separately. For example, suggest that your rate of interest be lowered in line with the market (offer proof if possible). Ask for a better rate on your deposits, transaction charges, cash management etc. Ask for interest on overnight cash balances in your checking account.

• Your banker will obviously prefer to negotiate on relationship basis so as to squeeze more revenue for the bank and lock-in collateral to prevent you from split banking. Therefore, during the negotiations with your banker, ensure that your banker does not take excessive collateral. Sometimes bankers ask for additional collateral if the debt service ratio falls short of the required minimum. This is not prudent banking because additional collateral is not the same as additional cash flow unless the additional collateral is also a generator of cash flow. The minimum debt service ratio varies from bank to bank starting from 1.20 times, upwards. Some banks may require debt service of less than 1.20 times based on special circumstances, for example, relationship banking.

Franc Jo is a Senior Underwriter at, the leading provider of outsourced Commercial Credit/ Underwriting support to lenders and funding solutions to small businesses throughout USA. Find similar articles and tips on money matters at

Source: EzineArticles
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