Three Simple Questions to Make the Bank-Parent Relationship More Rewarding

Monitor 100 recently featured Rick Remiker’s expert advice on the relationship between an equipment finance business and its bank parent. It isn’t always easy, but Remiker believes the relationship can become more rewarding by asking three simple questions: (1) How do you define your relationship with the bank? (2) Do you understand the bank parents’ needs?  (3) Are you prepared to educate the bank on residual risk?

It’s an especially prescient piece as residual risk and the needs of bank parents have changed immensely in the last year due to the COVID-19 pandemic. In fact, this year’s Monitor 100 showed us the impact of the COVID-19 pandemic on the top equipment finance companies in the U.S. Although there were reported declines in both assets and volume on a year-over-year basis, the expectations for 2021 are bright.

Along with explaining the industry’s current state, Remiker, vice chairman of The Alta Group, provides perspective with his insight in the piece. He explains that he’s had the unique opportunity to be on both sides of this relationship, having successfully built and run several large equipment finance organizations, having worked in both regulated bank and non-regulated commercial finance environments, and as one of the few equipment finance executives to have also run a large commercial bank.

“I’ve served in these roles in challenging and diverse economic climates and from my experience, the parent company relationship is one that needs to be regularly nurtured,” he writes.

His regulatory, risk management and investor relations experience provide valuable insight to Alta’s clients. Remiker previously served as chief commercial banking executive and senior executive vice president of Huntington National Bank, where he led its equipment finance business earlier in his career. His experience also includes launching Merrill Lynch Capital’s commercial equipment finance business, serving as president and chief operating officer of Key Equipment Finance’s middle-market and large-ticket business, and holding top leadership positions in the ELFA.

He explains in the magazine article how having a good, healthy relationship with those to whom you report is essential for long term success, and survival. Each step boils down to two key words: understanding and communication. Awareness of your position within the bank parent organization, and open communication, especially about their needs is essential.

One of these points of communication should be around the topic of residual risk. It is a significant differentiator from other lending areas, and often, the equipment executives and their team are the only ones who truly and fully understand residual risk within the bank.

Perhaps the most important element of managing residual risk with the parent bank is demystifying it through regular, transparent communication.

Holding annual or semi-annual meetings with the commercial banking executive, CEO, CFO and the board is essential to show how residuals are set, monitored and managed. To do that, bringing in an external equipment finance industry expert without a stake in the overall business can make your parent bank (and regulators) more comfortable with the unique risks your business is taking. Sometimes there are also new regulators and internal and external auditors to add to the mix. Remain transparent and ready to educate them, as well.

Equipment finance business lines have always been counted on to help the bank parent achieve loan and lease growth. In today’s world, equipment finance executives must be even more nimble by aligning to the changing needs of the bank parent.

“Remember: stay agile, and be prepared,” he says.

With this kind of focus and  preparation, even unforeseen events like the COVID-19 pandemic, which happened so fast and intensely, are easier to manage. And expanding that preparedness to the whole bank parent means a systemic shock doesn’t need to be so shocking, because the whole business family can work together toward success.