FXD Capital are providing all depositors of size and sophistication, with access to the same opportunities that the largest, most knowledgeable cash managers have come to expect. Bobby Jackson, Co-founder & Managing Director explains to high-growth companies why they may not be getting the most out of their cash post a successful fundraise.

It’s now been over a decade of ultra-low interest rates, and in some countries, prolonged periods of negative rates. The impact from the coronavirus pandemic has seen extraordinary measures be taken by central banks and governments globally with unprecedented and coordinated action not been seen since the 2008 financial crisis. Monetary policy loosening was also extensive in 2019 with a total of 71 rate cuts by 49 Central Banks, according to the IMF.

During this time, we have also seen a significant increase in the number of banks in the UK. Currently, there are 345 deposit-taking banks. This includes both the growth of recognised challenger banks as well as many less well-known possibilities that give rise to additional considerations beyond just credit rating to consider – such as the capital and liquidity of the bank. With only one of the largest 10 global banks in the world (by assets) being based in the UK, many of these are UK branches and subsidiaries of larger overseas banks. This leaves additional factors to consider – such as sovereignty and the level of risk in the investment and loan activities the bank undertakes.

What does this mean to a depositor?

For a depositor to understand what their deposit rate should be, they must first obtain rates from comparable counterparties for the same duration. Only then can they truly understand their opportunity cost of using banks offering inferior rates and which, in many cases are deemed a higher credit risk by the major credit rating agencies.

A Financial Controller or Finance Director may feel that identifying new counterparties and opening deposit accounts is an onerous and futile exercise, one that for many is a daunting task often bypassed due to the perception that the benefit doesn’t warrant the effort.

With only a handful of banks appearing accessible and others not making their rates, products or even appetite for cash known, the range of rates for a depositor remain limited relative to the wider market, leading cash managers to compromise on their ‘ideal’ treasury policies in a need to diversify counterparty risk.

The key challenges are clear and at times overwhelming. Risk assessing the current banks beyond standard credit ratings, which are updated periodically and often do not address the near-term risks. Devising a robust investment mandate, continually monitoring existing and new bank names, identifying new banks, opening deposit accounts and negotiating competitive rates all pose a challenge and increase bureaucracy for organisations tasked with managing cash.

Case Study

Company A successfully raised £70m in a Series B funding round. Their cash flow forecast meant £20m was to be used as working capital with the remaining balance not needed for at least 12 months. Their main bank was a large UK clearer who they found to be uncompetitive. This was both in the rates being offered as well as their approach in showing limited deposit products based on their criteria. While they didn’t have a formal treasury policy in place, they did express an interest in diversifying counterparty risk. They recognised that by being more proactive with their cash deposits, they could help strike a comfortable balance with both accessibility and yield, with any additional interest income going to towards their bottom line.

Diversifying counterparty risk


– Their main bank had a credit rating of A1/ P-1 from Moody’s.


– FXD Capital presented Company A with a range of carefully considered counterparties that had minimum credit rating of
A1/ P-1 from Moody’s in order to diversify their exposure to single bank risk. These were selected for many reasons, the
main ones being their credit rating, size, financials, capital and liquidity ratios and ease of onboarding.

Enhancing liquidity & Maximising Yield


– Company A had clear cash flow forecast and expected £20m to be more than enough liquidity for the first 12 months.

– The remaining balance would be needed after this period and they were happy to place this on a longer term deposit. They
preferred different maturities in the unlikely event that they would need access some of the balance sooner than expected.


– AAA rated money market fund. An actively managed alternative to a bank deposit. Funds are inherently diversified and
instantly accessible. This was paying 0.67%

– Aa3/ P-1 rated bank that offered a 12-month fixed term deposit paying 1.55%. This provided the client with protection from a
falling rates market.

– A1/ P-1 rated bank that offered a 95-day notice account paying 1.47%. This provided the client with flexibility and a
variable rate of interest that was paid monthly.

By consulting with FXD Capital, Company A were presented with an effective and efficient solution that was tailored to their counterparty criteria and cash flow. This generated £600k in additional interest income for the year ahead while ensuring they had a prudent approach to diversifying counterparty risk.

To learn more about how FXD Capital could help your business, please get in touch with the team at enquiries@fxdcapital.com or on 02039685150.