Since the beginning of this year, I have read three articles and viewed one video that have focused on negotiating technology agreements.  To say this topic is trending up is an understatement.  Even the ABA has published its recommendations Principles for Strong Bank-Core Provider Relationships and several related articles on this subject as part of its Core Platforms Committee.

There is just reason for this focus.  Contracts have become, in many cases, overly precise and quite often extremely protective of the vendor.   In other words, the agreements have become less beneficial to the customer.  All the while, business conditions continue to emerge that were never considered years ago and obviously are not addressed in agreements in force.  And vendors have been known to modify contractual terms in renewal agreements making them even less beneficial to the client.

In addition, the FDIC has recognized the exposure many institutions have with poorly negotiated agreements in FIL-19-2019 which appears to be a result of the FDIC Office of Inspector General study Technology Service Provider Contracts with FDIC-Supervised Institutions.

In my engagements, I see dozens of technology agreements each year.  ProBank Austin is also the 6th largest firm in the number of whole bank acquisitions since 2005 according to S&P Global Market Intelligence.  To support that activity, I am often asked to review acquired institution agreements to determine contract liquidated damages fees and deconversion charges.  I, unfortunately, see too many contracts that provide little if any protection to the institution, increasing their risk and possibly significantly increasing expense.  Much of this can be avoided with a beneficially negotiated agreement.  Even in a simple renewal, the terms of the agreement must be reviewed and negotiated.

There are “do it yourself” guides such as what the ABA has provided and several third party sources available (including ProBank Austin) to assist your institution in negotiating these agreements.  But where should an institution start?  How do you know if your existing agreements are deficient?  The best first step is to identify current weaknesses in the present agreements.  To support that, ProBank Austin offers a Technology Agreement Business Issues Review, in which our experienced professionals review the business issues contained in your technology agreements and provide a report on the status of each.  We then discuss the findings with the institution, focusing on areas that need improvement.  This prepares you to move forward with an understanding of the most important issues on which to focus.  If ProBank Austin is eventually retained to manage subsequent vendor activity, the charge for this service will be deducted from the resulting engagement fees.  The cost of the service is slight; the cost of not being prepared could be substantial.

Contact me today for a quick discussion on this service.

 

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