If the bank is quoting youEasy

A treasurer, a finance director, an investor relations team: the shortest route through this site when you are the one being sold to rather than the one selling.

4 min read · 725 words

Every desk described on this site is, at some point in its week, selling something to a company. This page is for the person on the other side of that call. Nothing here is advice about your own financing — it is what the seat opposite you is doing, in the same words they use.

The asymmetry, named

The bank quoting you does this several times a day and you do it a few times a year. That is the whole of the asymmetry and almost none of it is about intelligence: it is repetition, and the way to close it is to know in advance which three numbers decide the outcome and where they hide.

• The cost is usually inside the rate, not beside it. Who gets paid traces where a spread actually sits on each kind of transaction, and every asset-class page carries a section called Where the spread is, and who earns it.
• The document decides, not the conversation. Which is why the playbooks below matter more than any summary of them.
• What the bank is optimising is not what you are. Not a criticism — a fact worth holding, and the desk pages say what each one is measured on.

Your own seat, first

• Corporate treasury — funding it, hedging it, keeping it liquid, and what that seat is judged on.
• Investor relations — where the constraint is disclosure law rather than messaging.

Who is on the other side of each call

• Borrowing: corporate lending for the relationship loan, debt capital markets for a bond, leveraged finance when the leverage is the point.
• Raising equity: equity capital markets.
• Buying or selling a business: M&A, and valuation for the number everybody will argue about.
• Hedging: sales takes the call, structuring builds anything that is not standard, and trading owns what is left.
• Day-to-day money: transaction banking and trade finance.

The three questions worth asking about any quote

1. What is this hedging, exactly, and what happens if the underlying exposure changes? A hedge is bought to make a plan hold, not to make money — hedging works through where that breaks.
2. Where is the margin in this price? On a forward it is inside the points; on a swap it is inside the rate; on a structured product it is inside the option you sold. Reading a term sheet is one method that works on all of them: find the option you sold and price it separately.
3. What does this oblige us to do later? Collateral, covenants, reporting, an early-repayment charge. The obligations outlive the conversation.

The documents

• A credit agreement — where the covenants are and when a lender gets to the table.
• A term sheet — the method that works on every structure.
• A sale and purchase agreement — if you are selling anything.
• An information memorandum — what a lender is being shown about you.
• A payment confirmation — why the amount received is smaller, and which of three dates matters.
• A credit rating — one opinion about one narrow question, and what a threshold does to your buyer base.

The mechanics behind the products you will be offered

• Interest rate swap and cap and floor — fixing a rate, or capping it.
• FX forward and FX option — and the forward points that are an interest differential with a margin inside them.
• Commercial paper and Schuldschein — short and quiet, against a bond's public process.
• Factoring and trade finance — getting paid earlier, and what the credit risk does.
• Why a lender says no — what a credit decision is actually testing, and why the answer is rarely about the borrower alone.

Where it has gone wrong for companies before

• 1993 — a hedge that was economically defensible and a margin timetable that was not.
• 2015 — what happens to a currency hedge when a policy assumption everybody shared stops holding.
• 2019 — the gap between a story and a filing, read by people who only had the filing.