4 International New strategy for China International private banking restructured After over five years of negotiations befween 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 fmancial centre. Infrastructure has been put in place, but even more im- portantly, the government has introduced new financial legis- APRIL 1994 r M' 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 by mid-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'11 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. He 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 Hong 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 find 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,' he 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.'

Rabobank Bronnenarchief

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