The Clash for Cash

Competing for corporate liquidity without a transaction banking franchise.

A decade-long run of bumper profits, coupled with reduced capital spending in response to uncertain macroeconomic conditions, has seen corporates in Asia Pacific amass record cash reserves in recent years. With banks continuing to deleverage and on-going economic uncertainty, these cash holdings are likely to remain elevated in the medium-term.

With so much excess corporate cash in the market, banks have entered a battle for corporate liquidity. This battle has been intensified by the Net Stable Funding Ratio (NSFR) requirement of Basel III, which will create sizeable shortfalls in deposit funding for many institutions.

This report examines how banks with no or subscale transaction banking offerings compete for excess cash, primarily by leveraging their corporate advisory relationships to introduce structured deposit products or asset management capabilities to corporates sitting on sizeable cash stockpiles. This applies primarily to the traditional investment banks but also a range of Asian banks without meaningful transaction banking capabilities. The current dynamics of subdued core investment banking revenues, significant excess cash on corporates’ balance sheets and a low yield environment creates an ideal opportunity for advisory teams to engage corporate treasurers in such cash management dialogue.

The Clash for Cash