'Bankers have a great responsibility in society We are dealing with a crisis ofconfidence REGION SPECIAL NORTH AMERICA Cor Broekhuyse, Regional Head, RI-Americas Jim Lokey, President, Rabobank, N.A. Based in New York, Cor Broekhuyse oversees all of Rabobank International's activities in the Americas. He was surprised to witness something that hasn't happened for a few generations: an authentic bank run in Western economies. "I have been in the banking industry for thirty-five years, but this is completely new to me. The financial crisis did not come from outside - it has its roots in banks that lacked caution when they put certain investments, loans and credits on their balance sheets. That has led to major losses at the banks involved. It also prevented banks from fulfilling their primary function as credit suppliers, creating a shock wave in the economy that triggered the recession." Broekhuyse believes the current crisis highlights the great responsibility banks shoulder in society. 'This is a responsibility that some have not lived up to over the past few years. Banks that are supposed to stabilise the economy, suddenly turned out to be destabilising it. That needs to be corrected. In the whole turmoil, Rabobank has not come out too badly. But we can't be complacent. We have to be alert not to make the mistakes others have made." "Here in the US, Rabobank has been adjusting its strategy continuously since the beginning of this year. We were aware early on that we had to react flexibly to whatever surprises the market might reveal. We prepared our account managers in spring and discussed ways to deal with the credit crunch. The recession will affect our corporate agribusiness clients, so our account managers and credit departments need to be extra alert. We have to manage our credit risks as much as possible. At the same time we have to remember that Rabobank, as a cooperative bank, has an obligation to its clients to support them when the going gets rough. A recession is always a phase in the economy when the survival of the fittest becomes apparent. Banks will continue to supply credit, but only if that makes business sense." 'Luckily we only have Food and Agribusiness on our corporate book, so we don't have to retractfrom non-food and other industries," says Broekhuyse. "In Europe and Asia we have exposure to other industries, so the board of Rabobank has decided to withdraw from these domains. Our focus needs to be on Food and Agribusiness. Other banks make different choices. They tend to move away from agribusiness, so the dynamics of a recession also presents Rabobank with new opportunities. Rabobank knows how farmers think and we are aware that they will remember who was supporting them when times were bad. That is in our DNA. So our focus on Food and Agribusiness in a downturn will be to our advantage in the long term. We will emerge stronger." Jim Lokey, based in California, helps lead Rabobank's retail activities in 'the sunny state'. Rabobank operates more than ninety retail offices and financial centers in California, and has around 150,000 customers and $9 billion in assets. Roughly one-third of the customer base consists of farmers and ranchers, one- third are small and medium enterprises and consumers, while the remaining third are real estate developers or investors. This dynamic is slowly changing, Lokey says. "Our focus now is on agricultural lending plus small- and medium-sized businesses. Real estate investors have been important to us, but in the current environment we are not looking to expand in that domain." "While the current crisis is painted as a banking crisis, it was a few institutions in the industry that really went outside sound banking practices. They got involved in making very high loan-to-value home equity loans. They also invented sub-prime and exotic negative amortization loans, which were far outside normal fundamental ways of banking. Our credit culture and our role as a trusted financial advisor prevented Rabobank, N.A. from getting involved." While it was a limited number of institutions that were involved in creating the crisis, the entire industry has been tarnished. As the financial crisis surfaced and continues to unfold, Rabobank's N.A. officers in California are spending a lot of time talking to the media and to customers. "Our officers are explaining the cause and effect of the crisis and have used the occasion to present Rabobank as a safe, sound and secure bank. This has attracted new customers, mainly businesses and wealthy individuals," he says. Looking ahead, Lokey believes we arefacing a difficult financial and economie environment that will last at least twelve to eighteen months. As a result, many smaller banks will merge or be taken over by larger institutions. "Most banks will orchestrate this by themselves and in some cases the government will probably have to step in. This whole development means there are going to be opportunities for well-capitalised larger banks. In my opinion that is a good thing for the industry in the long run. In the US, we have a very high number of banks per capita, compared to the rest of the industrialized world." ISSUE 18 THE WORD

Rabobank Bronnenarchief

blad 'RI The Word / The Word' (EN) | 2009 | | pagina 26