'When the
crisis occurred,
we were
preparea
Dave Nelson, Managing Director,
North American Corporate F&A Bank
Dave Nelson is responsible for corporate
banking clients in Rabobank International's
Chicago office. He believes the availability
and use of institutional money was one of
the factors that destabilised the market,
exacerbating the crisis. "One of the reasons
we got into this mess was because of
the institutional money and other pools
of liquidity, which drove up asset prices.
Unfortunately, a lot of those entities are now
unravelling because they are not as stable
as the banking universe. What we are seeing
is a gradual return to banks being a core
component of the economy."
"Rabobank was fortunate that, thanks to our
strong credit rating, we had better access
to liquidity than many other banks, which
enabled us to continue supporting our
clients. But we had to focus on existing
clients as opposed to prospects. That
strategy was set out before the worst
of the credit crisis unfolded. In the spring of
this year we had already discussed several
scenarios and possible strategies. So when
the crisis occurred we were more-or-less
prepared," Nelson says.
"We have seen a need for extra credit
among many of our corporate banking
customers, for a variety of reasons. Last
summer, for instance, commodity prices
were higher. Companies that handle grains
and oilseeds needed additional capital to
finance their inventories. We understand
the cyclical nature of food and agriculture
extremely well and we picked the winning
companies. We have stayed with them in
the down-cycle, knowing that they would
be long-term survivors. Of course we have
had other companies wanting to do business
with us, but we had to make trade-offs. If
we had brought in too many new clients,
we wouldn't have been able to provide
enough capital to out existing customers.
As a banker you are eager to explore new
opportunities, but you have to be selective.
While other banks have to fight to survive,
we have to be disciplined to maintain our
strong credit rating."
According to Nelson, one of the good
things to come out of the crisis is the general
improvement in pricing levels. "When supply
falls and demand rises, prices go up.
Consequently, credit spreads have widened
significantly. Clients are willing to pay that
price, because capital is scarce and they
need their working capital. The key is good
communication with your clients so that
they understand that the financial markets
have changed, and that the cost of capital
has gone up for everyone. The fact that we
can finance them while other banks cannot
is a huge benefit to them, and to Rabobank.
Our clients know that they can rely on us,
even in difficult times."
issue ia
THE WORD
