Basel III is going to put significant pressure
on far-flung activities all over the world 9
REGION SPECIAL SOUTH AMERICA
Guillermo Bilbao
Opportunities
Guillermo Bilbao, Head of South America:
The key regions and focus countries were not chosen because
they offer excellent funding opportunities, but because of their
position in the food supply chain. In that value chain Asia is a key
region for consumption, while South America is labelled as a key
region for production. Since the strategy was adjusted to include
self-funding, however, the main question is how to fund growth
in those regions.
Bilbao: 'The approach we have taken on the Rural Retail side has
been to really look at a diversified portfolio around the world, and
try to optimise what kind of funding each can get. The pressure
to develop funding has been building on our businesses over
the last six to nine months, and it will continue to increase. That
said, there is realism about the ability of some businesses in some
countries to be able to obtain that kind of funding. We are looking
at it both on an individual and collective basis, to make sure that
the Rural Retail side is able to fund itself appropriately, but not
necessarily in a way that each country has to stand on its own
two feet."
Dick Klaasse, Head of Global Financial Markets in Utrecht and
Treasurer for Rabobank International, agrees partly. "Self-funding
criteria might be applied differently to different regions or even
activities. Our locations have more aggressive or less aggressive
growth plans on the asset side, and that will have to be catered
for by plans on the liability side. It is part of the nature of our
business in South America that there has been a rather high
degree of offshore funding. For now that means that any growth
plan will have to be seriously considered in terms of funding."
Upcoming regulation will force Rl to make decisions on eitherthe
asset side or the liability side, or both, explains Klaasse. "And guess
what: we are not alone. Our competitors are facing the same issues
and will be considering similar options. So we have to act wisely.
But the choices are limited. Either we decide on asset shrinkage
or we go for asset growth accompanied by long-term wholesale
funding or cliënt funding, which we have defïned as self-funding.
There is a limit to our capacity to generate long-term wholesale
funding, but there is also a limit to the amount of cliënt funding we
can raise - especially in the light of increasing competition as the
whole competitive environment has to make similar choices."
Erik Peek in Brazil thinks the new regulations also create oppor
tunities. "My hope is very much that within Rl we can create an
internal market for funding. Because then we could say that
internet direct bank offers a little bit of extra interest on deposits and
we will pay that premium. That approach would enable Rabobank,
as an international bank with access to different funding sources, to
differentiate itself from local banks. It could give us a competitive
advantage. Our scale would make a difference. When we fragment
our funding efforts, we lose the advantage of our global footprint."
Peek does not like the idea of fragmentation. "We are effectively
saying: Chile, sort out your own funding. California, do it yourself.
Australia, you are on your own. That is partly caused by Basel lil
and partly a choice of Rl, which is now pushing all its local entities
Rl WORLD
