HITTING A ROUGH PATCH in Your Banking Relationship.

• Author: Jaskulak, Stefan

A good banking relationship takes work and commitment from the bank as well as the government entity (i.e., the customer). Without these commitments, along with clear communication, innovative collaboration, and transparent pricing, a banking relationship will not deliver what you had expected and is likely to falter or even fail.

Over the past few years, there have been reports of banks cancelling existing, sometimes long-standing, relationships and providing a very short timeframe for their customer to find a different bank. If this happened to you, or if the relationship has become stale, it is critical that you remain in the driver's seat, especially when it involves a transition. Many of us have long-standing relationships with our main banks, often longer than 10 or 20 years. Change is not easy, but there are ways to make it a win-win situation.

REVIEW YOUR RELATIONSHIP

It is always a good idea to sit down with your banker regularly and review the relationship. Look at the balances and at the services used (or not used). Also ask the banker about new services that might improve your current process. These periodic meetings will help you manage the relationship and signal any issues before they become significant problems that could sour the relationship. Several banking services deserve special attention because they quickly affect the bank's cost-benefit analysis of its relationship with your government:

* Deposit Balances. Balances are expensive for banks to maintain because they have to be collateralized with high-quality liquid assets. One alternative is to invest the balances elsewhere (in certificates of deposit, local government investment pools, or direct investment), or to negotiate with the bank to use a letter of credit (drawn on a different bank) in lieu of collateralizing your deposits.

* Branch Activity. This usually consists of cash and check deposits, as well as check-cashing by non-bank customers. Remote deposit capture and electronic payments can reduce this expensive, high-touch service significantly.

* Technology. Governments can be slow to adopt new technologies, but doing so is necessary to be more efficient and effective. There is an inverse relationship between branch activity and the adoption of new technology --that is, branch activity tends to decline as new technology (e.g., reporting, remote deposit, electronic payments) is implemented.

* Customer Service. Service is very important, but make sure the level of service you're using is appropriate. Properly training staff members will ensure that calls to customer service can be reduced to a minimum and be reserved for urgent and unusual issues.

After taking these steps, you might still have concerns about your banking relationship. You may have received the bad...