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European Banks and the Assessment of Potential Corporate Clients
European Banks and the Assessment of Potential Corporate Clients
When you apply for a corporate bank account at a European bank the results of the bank’s assessment of your company will influence how your account will be defined; the fees you will pay and the level of scrutiny given to each of your transactions. If a European bank deems your company as medium or high risk they may monitor your payments – who do you send payments to; are the payments supported by all necessary documents and is there logic to your payment patterns. Also your receipt of funds will be watched – who do you receive funds from; how often do you receive funds; are there invoices for each transfer and do your incoming funds make sense. The higher your level of risk is deemed to be the more your corporate account will be restricted, monitored and assessed regularly.
Some of the Factors Used by Banks to Assess a New Corporate Account Application
- Company industry – does your business operate in a high-risk industry like gaming.
- Business license and regulation – Does your type of business require a license and do you have one. Is your company in an industry that requires regulation and are you regulated?
- Company ownership structure – What is the company ownership structure; are there multiple holding companies; multiple jurisdictions involved; offshore registration; who are the shareholders and directors and where do they come from.
- Company establishment – When was the company established and does it have a track record. New companies often have no previous banking history, no reviews or records in public databases and so they cannot be verified easily and get a high risk rating.
- Company turnover – What is the company’s monthly turnover. A higher turnover usually means a higher risk.
- Company size – How many employees are involved in the company. Large companies have legal departments, accounting departments and some form of internal regulation but small companies have no company employees to answer to and are a higher risk.
- Company Address – Does the business have a physical address where employees work. Banks require proof of address in the form of utility bills etc.
In addition to the above mentioned factors there are many more aspects of a company that are assessed when banks are reviewing an application for a corporate bank account. The financial institutions final evaluation of the potential customer’s risk will determine their account’s fees, restrictions and ongoing bank supervision.
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