Tough Questions You Could Ask Your Corporate Banker

How many people in finance are getting the most out of their corporate banking relationships? The question couldn't be more relevant today, with an economic downturn on the horizon and lingering banking industry stress.

Bankers should be a source of financial stability and trusted partners. They should be helping companies reduce risk in their balance sheets, free up capital, and seize future opportunities. But we recognize that's not always the case; there's often room for improvement.

Many in corporate finance are probably approaching their bankers these days with questions about their bank's credit ratings or uninsured deposits. They should. But are there other questions to ask that could help improve a long-term relationship?

We checked in with one of our clients, Chris Smither, Global Assistant Treasurer at agricultural machinery manufacturer AGCO, about his experience working with other banks.* The nature of a corporate banking relationship can be different for companies of varying sizes and complexity. Nevertheless, here are five tough questions for any finance department to consider asking their banker.

* AGCO is a Bank of the West client. BMO acquired Bank of the West in February 2023. Learn more.

This is a question about communication style, as well as structure.

When AGCO let one of its bankers know that its credit rating would temporarily drop below investment grade while it completed a pending acquisition, the banker didn't express much concern. That's why Smither was caught off guard just a month later when the bank exited the relationship citing the rating change.

Discussing challenging situations in a financial relationship not only makes it easier to have those tough discussions when needed, it also sets a standard for an honest relationship no matter what.

Smither said he places a high priority on upfront communication with his organization's bankers. "If you think there might be a problem, head it off by walking straight toward it," he says. "When a problem comes up, the best bankers have always come straight to me and said, 'We have some time, but right now, we're not making the returns we need.'

"Then we know where they stand—and it's fine. It's okay to exit a relationship that's not working for both parties. We know it has to be mutually beneficial. The best bankers are very honest about that."

Having a regular schedule of banker-client check-in calls could be a good way to ensure your bankers have ample opportunities to share good or bad news.

If business slows and there is less need for new financing, will your banker just fade away? Or will there continue to be regular touchpoints with fresh insights?

This question is timely, of course, because benchmark interest rates have risen 10 times to the highest since 2007 before the Federal Reserve paused in June. The Richmond Fed's latest quarterly CFO survey showed the expected pace of expenditures on structures and equipment in the next six months slowed notably since the previous poll. Furthermore, an increasing share of firms said "unfavorable financing" and a "lack of funding" were among the main reasons for not planning new capital investments.

But a corporate banking relationship shouldn't be put on hold until financing conditions become more favorable. See if your banker can offer differentiated examples of supporting other customers through downturns, even when immediate financing needs seemingly dry up.

"As the technology side of the business has become more complicated, we've recognized that we can't keep up with everything, so we rely heavily on our bankers to help us understand what is available," says Smither.

The pace of technological innovation in payments, risk management, credit, and other areas has been dizzying. And bankers with a digital-first mindset deliver real value to their corporate customers.

Those same customers have high expectations for their bank's product innovation, too. In the next three to five years, corporate financial decision makers surveyed by Deloitte in 2022 said they were expecting banks to be bringing innovation to corporate clients in the areas of real-time payments, crypto payments, and AI-powered cash management and application tools, among other things.

Smither said a challenge he's had in the past with bankers is when he has to provide them with publicly available company information. Not only does that show a lack of preparedness from a banker, but it's a waste of a client's time, too.

The best corporate bankers aren't just familiar with every aspect of a client's company. They should also be able to tap deep industry and capital markets expertise, research insights, and the custom ideas that can elevate a relationship to a partnership.

To be sure, it's a high bar. Only 26 percent of corporate executives surveyed by Deloitte said they considered their bank's specialized industry knowledge and insights "very good" or "excellent," and 73 percent said being proactive about client needs and communication was the top attribute in a banker-client relationship.

Smither said he welcomes differentiated points of view and solutions. Indeed, 70% of respondents in the Deloitte survey cited "a solutions mindset to resolve our issues," as a top quality in a relationship banker.

He just didn't want his team at AGCO spending time with products that bankers already know aren't the best solution. If a banker seems more focused on selling a product than whether or not it's the strongest solution for your company, it can cause a real breakdown in trust.

"I understand that the bank has to make their return," Smither says, "But when I hear the term 'wallet share,' it shows me that your focus is not in helping us find solutions for our business, but how much of our business you can take—regardless of whether it's best for my company or not."

The most productive banking relationships should also give your organization access to an array of bank expertise and capabilities concerning your industry and function. That's why nearly half of CFOs surveyed by Deloitte said that industry knowledge was among their top qualities in a relationship banker.

While your banker will probably be your primary contact, you should still be able to leverage specialists, whether you're talking to experts in treasury payments, capital markets, or even growing niche areas such as sustainable finance. Experience with those segments, especially as they relate to your industry, can bring new ideas and solutions. "The best bankers that I have worked with have had very close relationships with their credit team," says Smither.

But for those solutions to be well-suited to your company, those relationship bankers need to prepare those specialists to come to you informed and ready. "Most of the bigger issues we've encountered have been with the credit team not understanding the situation we talked about with our banker," he says.

Challenges and unexpected issues are inevitable in finance. How can bankers provide the most effective support to corporate clients when they do arise? That question led to our conversation with AGCO. What we found is that a corporate banker who is open to tough questions about future problems can prevent their bank from becoming one of them.

At BMO, we invite tough questions from clients as a way to build lasting relationships. With a focus on covering our clients' whole balance sheet with a full-range of services, we know that the more we understand our clients' needs, the better.

Start a conversation with us today, tough or otherwise.