WHY ARE BANKS CLOSING BUSINESS BANK ACCOUNTS?
Business banking has never been so difficult in the EU. Not too long ago, time existed when banks were chasing corporate clients. Corporate account not only meant fees for banks but also cash on their balance sheet. Naturally, many corporate businesses not only were good fee earners for banks. The money held in business bank accounts was used by banks in on short term investments. Thus, earning banks even more that simple fees on these Corporate accounts.
However, the times of high interest rates came to an end. Not only did it come to an end, but we now live in a time of negative interest. This cash, that was useful on the balance sheet of banks, is not just an expense. To top it up, regulatory pressure has made these accounts very unprofitable for banks.
This has led to European banks shutting down corporate bank accounts in hoards. It is true, payments remain relatively profitable. However, the amount of AML work that needs to be carried out for each transaction just makes these unfeasible. Naturally, all this holds unless the bank specialises in corporate accounts.
BUT MY BANK DID NOT CLOSE MY BUSINESS ACCOUNT. THIS WILL NOT AFFECT ME.
The reality is that, unless you are banking with a business-friendly bank, your account is on a list. Naturally, banks are not shutting down corporate accounts in one day. Whilst these accounts are not profitable, they still cover a good portion of their overheads. It therefore does not make sense for such institutions to offload all their clients. Instead, they follow a plan that lasts for years. First, they let go of the smaller, less income generating accounts. Following these, they slowly let go of bigger more feasible accounts over time. Banks do this to have time to relocate resources, as well as business focus, to other areas. In this way, they will be minimising losses from transitioning away from company bank account business.
SHOULD I THEREFORE FORGET EVER HAVING A COMPANY BANK ACCOUNT?
The future is not that grim for business banking. In today’s reality, there still exists some scope for banks to service businesses. These banks, however, specialise in business banking. They have moved away from the highly competitive retails banking sector. For many of these corporate banks, this move has paid off. With the correct investment and focus, Business banking is still profitable. The only issue is that these banks, are few and far apart.
WHAT ABOUT FEES ON BUSINESS BANK ACCOUNTS?
Our banking partners specialise in Business banking. This gives you the peace of mind that you can focus on business.