ABA Banking Journal - July 2008 - (Page 34)
CORRESPONDENT BANKING Correspondent revival: no longer just a handshake business W hen pressed, Randy Shelden says the most definitive change in the correspondent banking business at Cornerstone Bank, York, Neb., occurred with the advent, nearly five years ago now, of image exchange. “Historically, we’d developed relationships that were rooted in geography, but image took away those boundaries and made it possible to work anywhere. That was when you started to see a longer more formal process around contracts,” says Shelden, who is senior vice-president for the $680 million assets, familyowned bank with 29 banking locations in 20 communities. Not that the practice of banks doing payments-, cash management-, or lending-related work on behalf of other banks hadn’t been a maze of operational details by tradition. It was just that, in the case of item processing work done by Cornerstone for a slew of banks throughout the state as well as clients in neighboring Wyoming and Colorado, a handshake alone would no longer suffice. Imaging as a technique requires extensive service level agreements (SLAs) that have to be evaluated several times before the work is handed over. Additional quality controls are required. “This business is more formal now,” Sheldon observes. While different niches in the complicated, interconnected universe of correspondent banking have been affected by disparate drivers, the payments and operations sector, which is the historical backbone of the business, has seen significant change in the past five years. Activity in this area alone has alerted the industry to the fact that banks doing work for other banks won’t be dying any time soon, notes Cathy Glassman, senior principal global payments solutions, Fiserv, Coral Springs, Fla. Glassman, who wrote a white paper on the subject of correspondent revival in payments a few years ago, continues to observe activity and a kind of entrepreneurial zeal in the sector. Image has shaken up the regional nature of the business, opening up the domestic map for banks and pitting once unlikely competitors against each other in regions where neither used to operate before, typically via white-labeled services. In other areas of correspondent work, from treasury services, to asset and liability management, to capital markets, increased automation has also tended to erase the importance of literally being the bank next door. Given that, bankers say, you often have to start discretely, from one point of entry in a niche service. This is because, on the surface, many banks increasingly By Lauren Bielski, senior editor have a similar story to tell. Really, the proof is in the work—and work done well over time. Know the client Mark Heugly, senior vice-president, Correspondent Banking Group, at $53 billion assets Zions Bank, Salt Lake City, Utah, agrees that correspondent work has both matured and reinvented itself in step with new business processes, and has expanded from payments into other valuable services on the funding side, and consequently, has taken itself more seriously. And, with the new vision and extensive service menu, comes a more formalized set-up. However, the Zions executive also thinks that the personal relationship is still the floor that holds big contracts and allows them to prosper over time. Understanding the client’s operational profile certainly counts in his organization, where, from 34 JULY 2008/ABA BANKING JOURNAL Subscribe at www.ababj.com
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