Zürcher Kantonalbank
Roger Reist
10 June 2014
Zürcher Kantonalbank’s Roger Reist discusses the restructuring of his unit, business at the moment, and why the FTT should not be ignored
Image: Shutterstock
Why has Zürcher Kantonalbank restructured, with yourself and Ueli von Burg both being promoted?
When Felix Oegerli was promoted to the new head of trading, sales and capital markets at Zürcher Kantonalbank, it was a good opportunity to restructure the unit slightly.
Being responsible for the securities lending and repo business already, and now for CHF STIR and short term funding for the bank, allows us to take advantage of synergies. Due to this new structure, we can offer our clients more products, and decision making processes are even shorter.
How is business at the moment, and how would you compare it to last year?
As we gained a new client recently, our pool of lendable assets increased by about $1.5 billion. As a consequence we could lend some of these assets to the street. Apart from that, we have seen some good demand for long term repos and upgrade trades. However, the volume for corporate bond shorts is lower compared to a year ago, as fixed income trading desks and hedge funds are less active.
What are the most lucrative areas of business for you this year, and what would you attribute this to?
As a AAA-rated bank, we act as a liquidity provider and have seen some good demand for long-term repos and upgrade trades. As mentioned above, we have gained some new clients for our securities lending programme where Zürcher Kantonalbank always acts as a principal, which is an important fact for most of the lenders.
How are the transaction taxes in Italy and France affecting your business in Europe, and what will the EU version mean for you if it is implemented in its current form?
The transaction taxes in Italy and France have hardly affected our business. Since the implementation of the planned EU version has been delayed, the topic seems to not be top priority any more for some market participants. In my opinion, this might be a mistake as the impact of this regulation would be devastating for the securities lending market. The same is true for the repo business.
Which regulations are you paying the most attention to, and why?
The EU Financial Transaction Tax is in my focus because of its big negative impact on our business.
It’s also impossible not to think of Basel III when talking about regulations. Sub-topics of Basel III such as the liquidity coverage ratio (LCR), net stable funding ratio (NSFR), leverage ratio and specific rules of national regulators are key topics, too. All of them have direct and indirect effects on our business.
Funding for trading desks is under discussion, with regulatory requirements likely to put a squeeze on collateral—how are requirements affecting traders on the front line?
In recent years, much focus has been laid on regulations with regards to funding and liquidity requirements. Such regulations have to been taken into account especially when it comes to term trades. Depending on the internal models and policies of the different institutes, the charges are higher or lower for such trades. As a consequence, trades that were profitable in the past might not be any more in the future. The landscape of liquidity providers and takers has changed much in the past couple of years due to new regulations.
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