Clearing bank of the year: BNP Paribas

Asia Risk Awards 2020

BNP Paribas may not be the biggest or even the best-known provider of clearing services in Asia, but in terms of customer service and the holistic solutions it provides it is light years ahead – and that is why it has been named clearing bank of the year.

Its client-centric strategy has had noticeable successes this year, with one client remarking that its focus on customer needs – rather than pure product push – has seen it nipping at the heels of its larger competitors in some of the key markets in Asia.

One securities firm, which has a long-term relationship with the bank, started using BNP Paribas 12 months ago to help it as it expanded beyond its home market. The securities firm was working to a very tight timetable and needed to find a provider that could deliver within this window. BNP Paribas delivered where its competitors were not able to.

“Our whole interaction with them was very positive, and they really put their clients first compared to [some of their competitors],” says the firm’s chief operating officer (COO). “When dealing with established players their interaction with us is more of a product push, but we feel that BNP really brings its listening skills to the table and wants to understand what our needs are and how their capabilities in particular markets can help us.”

The client particularly appreciated the senior-level attention they received from BNP Paribas in Hong Kong, as well as the resources that were made available to them from Europe.

“It has certainly been a very supportive and constructive relationship across the globe, and now we are looking at how we can work together in other markets,” the client says.

Paul Saubestre

BNP Paribas first started offering clearing services to its clients in Asia 10 years ago. Since then the firm has built up a loyal following, largely through focusing on a high level of customer service and seeking out those opportunities that were not being adequately explored by the more established players.

“We came to Asia-Pacific with a lot of ambition, but also with the necessity to be different and to bring something different to the market – to find our niche rather than go head-to-head with the firms that were already here,” says Luc Renard, head of financial intermediaries for Apac.

BNP Paribas’ clients also appreciate the fact that the firm is not as siloed as some of their competitors. When they tap into the clearing services, they are given much broader access to the bank.

“If you look at the products we manage, these require solutions and abilities across the spectrum, from global markets all the way to fund administration and custody,” says the COO of another large firm in Asia. “When I deal with other banks, they tend to approach me as a business unit rather than a franchise. This is the strength that BNP Paribas shows.”

Paul Saubestre, head of derivatives execution and clearing for Apac, says: “By building on a fully integrated model, we can deliver innovative solutions to meet the individual needs of our clients. These scalable, efficient solutions have proved successful with many clients in Apac.”

Having an established presence in Europe also persuades Asian clients to use the clearing bank’s service.

“Because of our pedigree in Europe, which we have built up over the decades, we are in a good position to help our Asian clients with all the rules and regulations that are reducing the risk for the market,” says Renard. “Clients don’t just need a strong provider with a good balance sheet. They also need some perspective and guidance.”

Due to heightened capital charges, combined by greater competition brought about by digital technology, many firms in Asia are reassessing their operating models. Some have even had to withdraw from certain markets due to high clearing fees and regulatory costs, but BNP Paribas has worked hard to offer alternative solutions rather than wholesale withdrawal.

“[For example], we have managed to create a solution that allows global brokers to re-enter the local Australian market as a market participant via an offshore hub, using our local presence as an intermediary,” says Renard.

Regional differences

Every market is different, though, so while this solution worked well in a place such as Australia, it wasn’t appropriate for a place like Hong Kong, which doesn’t allow a remote broker model. This is where BNP Paribas’ understanding of local markets plays an important role.

“In Hong Kong you have to have a local entity as an executing member,” says Gary O’Brien, head of clearing and custody product in Asia. “This means that in order to service these clients many international brokers had to set up a shell company – but then the capital requirements were going through the roof.”

O’Brien says that capital requirements were being double-counted, once by the home regulator and once by the Hong Kong regulator. BNP Paribas got around this problem by introducing a unique third-party clearing model.

“From a contracting perspective we enter into a triparty agreement with the executing broker and their offshore affiliate, which allows us to move the settlement obligation from the local executing member to the offshore affiliate,” says O’Brien. “Our solution allows the executing broker to step out of the settlement chain, which means we directly deliver to the offshore affiliate or underlying, and they get capital savings this way.”

What’s really important about this solution, says O’Brien, is that the bank has managed to roll it out across a wide variety of market participants: agency brokers; prime brokers; market-makers; and so forth.

“So it’s not just fitting a single broker type that works across the entire market,” says O’Brien. “We’re the only provider that’s in the market across the region with that solution, and it has helped us to create a cross-border solution across the different market places for our clients.”

The combination of BNP Paribas’ remote broker model and its third-party clearing model allows clients to remotely access new markets cost-effectively and quickly. The French bank is now eyeing other markets that it could roll the solution out to. New Zealand, where BNP Paribas has been involved for some years, could be next on the list.