Taiwan house of the year: BNP Paribas

The French bank has built up a formidable onshore presence and made waves this year with pioneering structured note issuance targeted at yield-hungry investors

Yoram Layani, BNP Paribas

In a market changing as rapidly as Taiwan, a bank aspiring to the number one slot must be at its sharpest. BNP Paribas' deep local presence and global reach makes it a strong contender. The investment bank has more than 200 staff in Taiwan and, over its 30-year presence on the island, it has built up a collection of 60 product licences from the local regulator giving it considerable market penetration.

The bank is also nurturing Taiwan's ambition to become a new regional financial hub after obtaining a licence to trade derivatives with regional clients beyond the island's shores.

"We have a two-pronged approach. Maintaining a strong flow of business is very important: servicing clients, pricing competitively and executing at speed," says Yoram Layani, head of institutional sales for Asia ex-Japan at BNP Paribas. "That's how you build relationships. But also we are focusing on bespoke solutions and non-flow business. Testament to this is our obtaining of an advisory licence for offshore derivatives from the regulator this year, allowing us to advise and service institutional investors on the full range of our solutions, from onshore."

On the flow derivatives side, the bank's level of service has received consistent praise from clients.

"The advantage of BNP Paribas rests in its efficiency and how rapidly it comes up with new ideas for products. No matter whether it is corporate or retail, they can always provide ideas that follow the change in the market trends," says one assistant manager at a local bank.

A senior associate at another Taiwan-based bank says BNP Paribas is the "most knowledgeable" of the local market among the international big players.

This expertise came in handy over an 18-month period characterised by rapid regulatory change. Since May 2014, local regulator the Financial Supervisory Commission (FSC) has waged a campaign against the mis-selling of target redemption forwards (Tarfs) - popular structured foreign exchange products gobbled up by Taiwanese corporates until a slide in the renminbi versus the dollar in early 2014 triggered a spate of heavy losses. Banks are now barred from selling Tarfs without an embedded stop-loss feature.

BNP Paribas quickly adapted to the new environment. One client at a Taiwan-based local bank says: "BNP Paribas helped a lot. They were the first to provide us with a Tarf product compliant with the latest regulation that we could show to clients and helped us to explore the new market. Right at the beginning there were not many banks able to do these deals."

BNP Paribas' global footprint has enhanced its internal risk recycling and allowed it to price consistently at competitive levels versus other international banks, says Lillian Su, head of global markets for Taiwan.

"We are able to match investors using Tarfs on the renminbi/US dollar currency pair with investors in other parts of the world looking for protection against renminbi depreciation - such as real money and asset management companies that have exposure to Chinese stock markets or the mainland property market and need to hedge their renminbi positions," Su says.

The bank has also invigorated the structured products market in Taiwan with its issuance of a 15-year US dollar-denominated non-principal-protected note. In a market known for its fondness of capital protection, BNP Paribas took a step into the unknown with this pioneering launch. However, it deemed the shape of the market offered investors an opportunity to earn extra yield without taking on material additional risk.

This is because principal is only depleted for each day of the instrument's duration during which the Euro Stoxx 50 drops below 2,000 and the euro/US dollar surges past 1.55. The index has not ticked below 2,000 once this century, while the last time the euro breached 1.55 dollars, George W Bush was in the White House.

"Since the end of last year, we have seen interest rates across the developed world maintained at low levels but with persistently rallying equity markets," says Lingling Jiang, institutional solution sales at BNP Paribas. "In addition the euro/US dollar has dropped dramatically since the first quarter. Many range accrual products with a euro/US dollar downside barrier of 1.10/1.20 or upside barrier of 1,800 on the S&P 500 would have stopped earning coupons early this year. With this product we saw an opportunity to provide higher coupons without sacrificing the probability of accrual, or maintaining the coupon level with a significantly increased probability of accrual."