Correspondent RELATIONS 8 networking WHAT'S News Issue 9 September 1996 The arrival of the Euro, the single European currency, is just around the corner, and Rabobank's correspondent banking operations are gearing up to meet the challenge and extend their global markets. Worldwide correspondent banking partners are entwined with a growing number of products and services, ranging from forex to deposits to off-balance sheet instruments. However, the majority of the business still revolves around the process of banks managing and clearing payments for each other, explains Correspondent Banking's Elisabeth Noot. BIG IN GUILDERS Rabobank came into this international clearing market - long dominated by ABN Amro - comparatively recently. Once it decided to make its move, in 1993, it found that the experience of managing its own complex cooperative structure, combined with an attractive Triple-A credit rating, made for a surprisingly smooth entree. 'Volume-wise, we are actually the biggest bank in guilder-denominated transactions worldwide,' says Huib van der Burg, who handles Financial Institutions. 'Banks in Germany, the US, as well as most other non-European players regard our correspondent banking people as partners rather than competitors. Already, seven out of the top 10 US banks organize their guilder payments via Rabobank. The reasons include the high priority that we put on quality service, and the fact that we are backed by one of the most advanced payments systems in the world.' Huib van der Burg CORRESPONDING CLIENTS With the advent of the single EU currency, the competitive situation will radically intensify. Rabobank's key competitors will no longer be domestic but European players. And although there will be fewer interbank payments within Europe, there will also be a larger potential market serving as a clearing house for non-EU clients. 'All the Dutch banks as well as their foreign counterparts will be offering Euroservices,' says van der Burg. 'To win a share of this bigger market, our system, our pricing, and our product will have to be the best on offer.' Van der Burg's wording signals an important point: that clearing is seen as a product in its own right - one that potentially generates other business including liquidity support and forex for correspondent banks. This is why these banks are treated as clients - just as corporate customers are - whose needs must be understood and met. For example, Rabobank has pioneered a fee-based clearing product under which correspondent banks receive interest on balances in their Dutch guilder accounts. (Previously, there were no fees but their balances went interest-free.) WINNING REPUTATION Spurred by the swelling volume of guilder payments traffic, Rabobank has also invested heavily in efficiënt, state-of-the-art systems which have enabled it to operate on a lower cost base, and thus to offer lower fees to corporate, banking, and retail customers. The result of all of this innovation is that the payments clearing system, which was operating on a break even basis when it began, reported a tidy profit of NLG 2.8 million last year and will probably earn doublé that in 1997. More importantly, it is making progress in winning over influential non-EU clients. Both Noot and Van der Burg point to a recent deal under which Rabobank won a mandate to handle all of the guilder- denominated payments transactions for Bankers' Trust, the large US bank which was a traditional ABN Amro cliënt. 'We want to do more of this kind of business,' says Noot. 'The fact that we were chosen by Bankers' Trust - an institution which is globally seen as the ultimate 'bankers' bank' - is an indication of the kind of recognition we are winning on a wider market.' NEW STRUCTURE Meanwhile, as part of the bank's overall strategie restructuring, the sales management Correspondent Banking unit is being shifted over to Rabobank Elisabeth Noot with colleague Kees van de Beek. Nederland, where they will become part of a new, integrated international payments directorate. Meanwhile, the account management team for financial institutions will move over to become part of the investment banking arm within Rabobank International, reflecting the higher profile of those activities. 'One of the reasons for shifting the payments is that it will be closer to the operations side of the bank, which is responsible for product development and efficiënt payment execution,' explains Noot. 'Customers are increasingly demanding tailor-made products which require that we be able to quickly and smoothly adapt our automatic systems to accommodate them. This makes close ties to the operations side essential.' INTERNATIONAL INTERACTION Correspondent Banking will continue to work with the branches within the international network and leverage the power of the entire organization to obtain better service and lower pricing for such necessary services as, for example US dollar accounts with another corresponden^^ bank. Despite the reorganization, the strong overlap between credit management and payments systems mean that there will still be continuous contacts maintained between correspondent banking and the international account managers, Van der Burg says. CORRESPONDENT BANKING Correspondent Banking onderhoudt wereldwijd contacten met andere banken voor de afwikkeling van financiële transacties. Op dit moment zijn wij de grootste bank op het gebied van de clearing van NLG-transacties. Naast onze triple A-rating spelen onze zeer geavanceerde systemen en de hoge service een cruciale rol. De komst van de Euro zal aan de NLG-clearing een einde maken. Naar verwachting zal echter een behoorlijk marktaandeel bereikt kunnen worden in de Euro-clearing voor niet EU-landen.

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