Corporations that want to be sure their banks are making the grade could take a lesson from Charles Schwab & Co.
The brokerage firm is so intent on monitoring its banking relationships that it hands out annual report cards. After conducting a comprehensive review of each bank's credit and operational services, Schwab assigns grades on an A-to-D scale.
A Schwab executive, describing the program last week during the Treasury Management Association's annual convention here, said the reviews have helped the San Francisco-based company get a grip on multiple banking relationships.
"We've had excellent results," said Gregory A. Schwartz, finance manager in Schwab's banking and treasury services department.
In the five years since Schwab initiated the reviews, he said, it has negotiated better fees with its banks and reduced its bank group by one- third, to fewer than 10 major vendors. While bank mergers helped trim the ranks, Schwab also dismissed some banks after their reviews pinpointed serious problems, Mr. Schwartz said.
He declined to say how much Schwab spends on banking services each year, but in his speech he mentioned $4.5 million as one bank's tab.
Corporations often provide their banks with feedback on operational services, such as monthly reports on whether targets for disbursing payments and processing checks were met. But bankers and treasurers in the audience said it was unusual for corporations to take such a comprehensive look at banks' performance.
"We do quasi-reviews with our larger relationships," said Craig Christenson, western region manager for corporate banking at U.S. National Bank, Portland, Ore. Schwab's formal approach would be "a great way to put things in perspective," he added.
Diane Harrell, a treasury analyst at Nike Inc., Beaverton, Ore., said her company doesn't conduct annual reviews of its bank vendors. But with more than 50 banking relationships to manage, she said, Nike - a maker of athletic shoes and sportswear - might consider emulating Schwab.
Schwab, whose banks include Citicorp, BankAmerica Corp., and PNC Bank Corp., rates such factors as customer service, product quality, fees, and creditworthiness.
Mr. Schwartz said customer service gets by far the heaviest weighting, accounting for 40% of the bank's final grade. "Banks with very, very good customer service are much easier to work with, even if their products aren't the best," he said.
Creditworthiness is part of the score, although it hasn't been a problem for many banks in recent years, he added. "We keep including this line to let our banks know their financial condition is important to us."
