The leading banking institutions across
America and across the world have
built their businesses and their reputations on their ability to serve all customers, big and small. When dealing with
government entities, both as depositors
and borrowers, the same thing holds true.
Government banking involves working
with all types of customers that have different kinds of needs.
“They certainly have different guidelines
that they have to follow,” says Tim Kreitzer,
principal relationship manager with Wells
Fargo Bank in Houston. “Sometimes they
are more demanding of a relationship manager’s time because of the audits they have
to go through, the budget process and the
state regulations.”
Smart Business asked Kreitzer about the
differences between traditional and government banking and how a bank can better serve its governmental clients.
How can a bank start a government banking
program?
The opportunity that exists within a
group is greatly benefited by the strategic
partners the bank already has in place. In
Houston, treasury management is a wonderful partner to work with in regard to
government banking. When cities and
school districts see the program, they’re
just amazed at what they can do with it.
public finance has the ability to be a lead-in
with the entities, and it can ease concerns
over bond issues. Institutional Brokerage is
very important as well. We have these
strategic alliances already built in so it’s
kind of a natural fit to utilize them. And it’s
important to start with a great team from
the beginning.
What’s the key to moving forward when just
starting out with a government banking program?
The key is to understand the industry and
that starts with understanding the entity.
What does it do? Who are the decision
makers? How are their roles impacted by
changes in accounting rules or changes in
state legislation? You have to account for things a little differently when you’re a city.
The co-mingling of funds is highly discouraged. You don’t want to put one bond
issuance with money from another bond
issuance, because it would get a little complicated as far as determining if the proceeds were dispersed properly. On the
financial side, when they’re looking to borrow money, is it a tax-exempt deal or is it
nontax-exempt? And that’s where public
finance would be able to help out.
Is government banking conducted on a larger
scale than traditional banking?
One of the great things about our market
is that we have very small entities tucked
away in the corners of the market and
there are large, complex entities as well.
We’ve got them on both sides. It’s all a great
revenue-generating business and the word-of-mouth that comes back when you work
well with an entity is very rewarding.
What is the biggest difference in need
between government banking and other
types of banking?
Most of it has to do with understanding
what people involved in government banking are required to do, how they’re required to do it and when they’re required to do it,
because their accounting rules are different. Their balance sheets look different.
We’re used to looking at an entity in regular banking and seeing how much money
it’s making. In government banking, you
have to make sure that it’s allocating its
resources in the proper channels. It is not
necessarily making money. You have to
look at a budget that says ‘income equals
expenses,’ not necessarily one where
you’re showing a profit, which is the way it
should be.
And with accounting and auditing procedures, you have to be responsive because it
will have auditors in annually as required
by state statute and you have to be responsive to those needs. When it needs confirmation of collateralization or balance or
interest rates, you need to have that information available in a timely fashion.
Is government banking regulated by state or
federal government?
This is something that’s statewide and so
we keep an eye out for legislative changes.
Texas legislation is currently in session so
by June there will be new laws that impact
municipalities by the fall, so we need to
stay on top of that.
Anything else?
Selling depositories is a sales cycle that
can last between one and five years. Our
local management recognizes that. We
have to become a resource to an entity that
might not be our client. You need to make
sure you do it right. There may well be an
opportunity for business with them down
the road.
TIM KREITZER is principal relationship manager with Wells
Fargo Bank in Houston. Reach him at (713) 383-1608 or
[email protected].