Why do many community banks lack a dedicated Treasury or Cash Management Team? From what I’ve observed, commercial lenders often encourage guarantors to bank with the same institution once a loan is approved.
Given the varying complexities of businesses, there’s a clear need for appropriate Treasury Management Solutions and products to address these requirements.
While my perspective is based on my region, I’m curious to know why so many community banks don’t have a dedicated Treasury Management Team or offer Treasury Management Products. I have a few theories, but I’d love to hear your thoughts and insights on this topic.
One response
You raise a valid point about the presence or absence of dedicated Treasury/Cash Management teams in community banks. Here are some insights that might explain this trend:
Size and Scale: Community banks often operate on a smaller scale compared to larger institutions. This can limit their resources, making it challenging to justify the expense of a dedicated treasury team. They may find that their client base does not demand sophisticated treasury solutions to the extent that larger corporations do.
Focus on Lending: Many community banks prioritize commercial lending and relationship management. As you noted, lenders often encourage guarantors to bank with them to strengthen the client relationship. The focus on loan growth can sideline the development of treasury management products, which may not be seen as immediate priorities for their core business.
Resource Allocation: Given limited budgets and staffing, community banks may allocate resources primarily to essential services like deposit taking and loan processing. As a result, they might not have the bandwidth for a specialized team dedicated to treasury management.
Client Demographics: Community banks typically serve smaller businesses or local consumers who may not require or be able to afford extensive treasury management services. The demand for sophisticated cash management products may be less prevalent, leading banks to offer simpler, more straightforward solutions.
Partnerships and Vendor Solutions: Instead of building an in-house treasury team, some community banks may partner with third-party providers or utilize vendor solutions to offer necessary services without the overhead of a dedicated staff.
Regulatory Environment: Community banks operate under a different set of regulations that might not incentivize the development of a robust treasury management framework. Their primary focus may be on compliance and risk management in lending and deposits rather than in cash management.
It’s important to keep in mind that the needs and strategies of community banks can vary significantly based on their specific market conditions, client base, and organizational goals. Discussions about expanding treasury management services could provide valuable insights into how community banks can evolve to meet the changing demands of their clientele.