4 International
New strategy
for China
International
private banking
restriMtured
After over five years of
negotiations between the
People's Bank of China and
Rabobank, on January 20 it
was finally announced that
the proposed joint venture
would not be pursued. The
reason was the fact that
during the five-year period,
the potential partners had
developed in very different
directions and an agreement
acceptable to both parties was
no longer feasible. The
Chinese market is far too
important to neglect, so what
is the bank planning to do
now? Sjouke Postma
explains.
'When we realized a joint ven
ture was not possible, we had to
rethink how we were going to
approach this market,' says Post
ma from his hotel in the heart of
the People's Republic of China's
ISSUE 28/25
capital of Bejing. 'There were a
number of options open to us.
We could seek a new jv partner
and start the negotiation process
all over again. Or we could apply
for a representative licence and
begin to build up an operation in
the PRC in the same way we do
elsewhere. In other words, start
small, explore the market (and
it's an immense market) and
then expand our activities by
applying for a full banking li
cence.'
The bank opted for the latter. A
representative licence was im-
mediately applied for and Post
ma expects to receive approval
from the Chinese authorities in
June. 'The licence will be for an
office in Shanghai,' he continues.
'The government here has been
pumping a lot of investment into
the city because the aim is to
make it the Chinese financial
centre. Infrastructure has been
put in place, but even more im-
portantly, the government has
introduced new financial legis-
APRIL 1994
Postma-Shanghai licence.
lation which makes location in
the city an attractive proposition
for foreign banks.'
Postma says Rabobank could
also have set up a rep office in
Bejing, 'but Shanghai is certain-
ly the place to be in this country.
We've already found office space.
It's still under construction, but
we expect it will be completed
bymid-summer.'The 130-square
metre office in the J.F. Tower in
downtown Shanghai will even-
tually house a representative, an
assistant and a secretary. 'And
we may need a couple of other
people later,' adds Postma. T'll
be in Shanghai talking to pros-
pective candidates for the posi-
tion of representative next week.
We have to have someone who is
fluent in the Chinese languages
that are used most frequently
in business - Mandarin, Shang-
haiese, and so on.'
Much has still to be done before
Rabobank's representative office
is up and running, but Postma
expects the Shanghai operation
will be open for business by
October, giving the bank a real
foothold in one of the largest
untapped markets in the world.
At the end of 1993, the
management committee
decided to transform current
IPB activities into a Strategie
Business Unit (SBU) headed by
Thomas van Rijckevorsel. He
outlines the thinking behind
this move and the aims of the
new IPB SBU.
The bank's IPB goals, as laid
down in the Strategie Action
Plan, are to expand this profitable
activity and to add new market
segments to the portfolio. Private
banking is essentially a low-risk
activity. If the appropriate sys-
tems and management are in
place, then it requires little sol-
vency while generating fee in-
come and adding to the bank's
existing scope of activities.
Private banking can be defined
as the provision of normal bank
ing services to wealthy persons,
or 'high net worth individuals',
as they are known in the trade.
The relationship between cliënt
and private banker is usually
very personal and based on trust.
More than in any other area of
banking, this personal relation
ship tends to play a decisive role
in retaining the client's account.
'There is an essential difference
between corporate and private
banking,' says Van Rijckevorsel.
'In private banking you always
talk about providing services,
rather than products. With a
corporate cliënt, you're usually
dealing with a professional, like
the treasurer, who knows what
he wants and you supply him
with products. For private bank
ing clients, you're the profes
sional who advises the cliënt on
what his options are.
A private banker goes to the
cliënt and develops a relation
ship with him. Fle knows what
the client's investment goals are,
what his family situation is,
where he wants to go with his
portfolio. And he then shows the
cliënt what the bank can offer to
help him achieve those goals. It's
very cliënt and service oriented
and you're actually as much a
representative of the cliënt as
you are of the bank. You have to
gain the confidence and the trust
of the cliënt before you will ever
be able to provide any service.'.
The bank already has a number
of IPB operations - Curacao,
Germany, Guernsey, Luxem-
bourg, Singapore and Switzer-
land - and a number of so-called
originating offices, such as Flong
Kong and Sao Paulo. Although
each is relatively successful in its
own right, a unified policy that
could draw the individual oper
ations into a closely-knit net-
work had not yet been formulat-
Van Rijckevorsel-avoiding
overlap.
ed. Nor does the bank have a
high IPB profile.
'These are just two of the factors
that led to the creation of the IPB
SBU,' Van Rijckevorsel explains.
'If we look at the first factor,
then we fmd that to date, each
operation has been acting indi-
vidually. There was little real
communication between offices
and that meant overlaps. So the
main reasons existing activities
have been put together in one
unit are coordination, to bring
more focus to the efforts and re
source allocation of each office,
and to provide at central level a
number of support services,
especially with regard to the
management of investment
products. We are going to create
a Rabo Asset Management
where we will define policies for
the investments, and we will
start development of mutual
funds, under the Rabobank
label. But most of all, we need to
ensure this all gets off the
ground.
'The private banking market is
potentially huge,' be stresses,
'but its very size means it has to
be approached in a systematic
way. By linking each of the op
erations into the SBU, we can
prevent overlaps and establish a
streamlined strategy for achiev-
ing our private banking aims.'