Since the inception of the credit crisis in 2007 there has been a boom in the number of financial institutions moving into transaction banking or expanding their services and presence within the sector.
In an exclusive interview with Euromoney | Sibos Insider, Matt Tuck, head of financial institutions (FI) at Barclays Capital says that market participants have focused on transaction banking because of its relatively low risk profile.
“Since the credit crisis we have seen a big move from FIs into the transaction banking space due to its stability and longevity,” says Tuck. “The landscape has dramatically changed and although we are still in choppy waters the risk and return relationship is being reassessed globally. As a result, safer and more conservative routes within banking are being implemented worldwide. The FIs that are making transaction banking a priority are local or regional players that have either no transaction banking activity or used to have a small transaction banking silo which they are looking to expand.”
According to a survey of 44 top tier banks conducted by Finextra on behalf of technology group Misys at Sibos this year 77% of those polled revealed that they have, 'created a transaction banking group combining, at a minimum, cash management and trade finance'.
Barclays Capital’s Tuck also says he has witnessed an evolution in the relationship between the FIs and the firm.
“The credit crisis not only pushed more FIs into transaction banking but it has also pushed clients closer to the firms like us,” says Tuck. “The dialogue has become more partnership based, transparent, and the fact that transaction banking in itself is balance sheet based means it has greater longevity. Lower risk has meant that this part of banking has become one of the front runners of banking system stability.
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