It has been a busy 12 months for BNP Paribas. What has stood out for you as a highlight?
We have a very clearly defined technology roadmap to ensure we meet the requirements of our clients and remain competitive. That plan is on track and it has indeed been very busy over the last 12 months. New business mandates is a notoriously competitive process, as it should be, and we added a number of new clients to the programme in the last year.
A highlight for me was winning a mandate from an Asian asset management client with a very strong pedigree. It validates that we are providing a programme that resonates with the needs of our clients from a global perspective.
BNP Paribas is extending its interactive reporting solution, Data Navigation Analysis, to its agency clients. What can you tell us about this?
The agency lending programme at BNP Paribas was well equipped in terms of reporting, from data files, to SWIFT messages, to standard fixed reporting, to bespoke reports. We are always looking for improvements and so set about finding a solution that could deliver on three aims.
First was to offer a reporting medium that allows clients to be more hands-on with their data. By that I mean that they should be able to interrogate, filter, question or ultimately draw down subsets of current or historic events. Second was to reduce the burden, on both us and the client, of bespoke reporting. Although bespoke designs have their place, it’s better to offer a simple and efficient solution that empowers clients to manage their own data then keep bespoke as a backup solution.
The third aim was to offer a data and reporting solution that is really competitive with that provided by our peers. With Data Navigation Analysis, which is one of many reporting capabilities within the BNP Paribas group, we exceeded the market standard and have plans to evolve our capabilities further.
BNP Paribas moved into the US market earlier this year. How is that going?
Actually, we launched the project phase in February 2013 and have been diligently setting up the governance both internally and externally, which is a given pre-requisite before activity begins in earnest. Feedback received is that our expansion into the US comes at a time when the market is ripe for an alternate provider with our capital strength. We will introduce the first three clients during the summer and have a well-developed strategy to add to that supply over the coming year.
The market is as competitive as ever and the complexity of requirements has certainly increased but we have anticipated that and feel our product is quite compelling.
What are the advantages of being a part of Euroclear Bank’s Collateral Highway?
This forms part of BNP Paribas’s Collateral Access - Connect architecture, to enable our broker-dealer and bank clients to mobilise sub-custody assets into the triparty collateral programme of infrastructures such as Euroclear and Clearstream. Our clients then benefit from an automated process developed to scan, select and settle available collateral, hence offering an efficient gateway between both worlds.
Are you seeing a shift in collateral trends and is there a big difference between collateral used in the US compared to Europe?
In Europe, we are seeing recognition by those clients with ultra-conservative guidelines that in order to generate revenue when lending certain assets classes, those guidelines had to expand. The demand for high-quality liquid assets has reduced the supply of these government bonds and made it more expensive to post, so where possible we look to take other bonds and certainly equities.
Of course, during the spring, primary index equities, particularly European, are equally scarce. The frequency of requests to receive more varied asset classes such as exchange-traded funds, Spanish covered bonds, mortgage-back securities, asset-back securities and convertible bonds has certainly increased.
The US remains dominated by cash collateral and will continue to do so and that remains the single biggest difference between the two. The subsequent reinvestment of that cash has become more stringent over the years and the number of asset managers that manage the cash themselves is trending higher.
There are similarities in the reinvestment vehicles on both sides of the Atlantic, but the scope of suitably rated products has narrowed.
What do you see as the biggest challenge facing the industry at present?
Regulation is challenging but not necessarily a challenge in itself. Markets have a way of innovating when faced with change, so perhaps the biggest challenge in generic terms is the uncertainty of what the industry will look like in the future, and that leads to more caution over committing resources to innovating product development.
If you could change one thing about the industry, what would it be?
To improve the relationship between stakeholders engaged in the industry to improve understanding and get to the crux of the broader benefits that the industry actually provides. Not just in terms of revenue generated but to the capital markets in general. This has been and still is a highly organised, well managed, low risk and meaningful business to the buy side, and I’d like to see more engagement from them in public debate.
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