A year after record fines put them in the limelight, French banks are reinventing their transaction banking departments, as Melodie Michel finds out.
In November last year, BNP Paribas announced the complete reshuffling of its transaction banking department, a move widely interpreted as a reaction to the almost US$9bn fine imposed on the bank by US regulators for violating sanctions. Three months later, BNP appointed Jacques Levet as head of transaction banking, and with that announcement turned over a new leaf.
Speaking to GTR earlier in the year, Levet explained that the main thing that has changed since the reshuffling is mindset. “Everybody realises there is a need for change, so this governance reshuffling is not just another reorganisation – it’s about reinventing the model and challenging the existing. We need to be more innovative and creative, and we shouldn’t let the past necessarily drive the future,” he said.
The bank made headlines again in early July, this time because of the referral agreement it struck with RBS: As the latter shuts down its international operations to focus on its home market, it is now offering affected global transaction services (GTS) customers a smooth transition to BNP if they choose to move to the French bank. With an estimated 7,000 GTS customers at the peak of RBS’ activity, BNP can expect significant business growth to derive from the deal, and has invested accordingly.
“We’ve been hard at work with RBS to ensure a seamless and simplified process for their customers that would wish to migrate their transaction banking business to BNP Paribas. We have invested in a dedicated onboarding team and a specific programme to facilitate this migration. We are all committed to offering the RBS clients an easy way to migrate,” Levet says.
On top of that, the bank has just formed a new team named ‘Transaction Banking 2.0’, whose role is to imagine the transaction model of tomorrow. According to Levet, the team has been asked to let go of biases and really foster innovation across all departments. For that reason, it is formed of internal recruits from different parts of the bank – not necessarily professional transaction bankers.
“It’s fair to say that if you look at the industry in general, the progress made in the past 20 years has been quite substantial in terms of digitisation, electronic banking, new working capital solutions, etc. But fundamentally the principles of transaction banking haven’t really changed, and they had no reason to change.
“We are now at a time where the exponential growth of technology, which is disrupting most sectors of the economy, will probably disrupt the transaction banking industry as well. So it’s important to study these new technologies and connect with all the new players coming into the market – mainly the fintechs – in order to try and anticipate what the future model of transaction banking will be,” he explains.
Innovation is also a priority for other French banks, such as Société Générale, which started revamping its transaction banking about four years ago, bringing in expertise from the investment banking division and boosting the department’s share of overall revenue up to 6-7%.
“GTB is a growth driver for the bank. It’s also a good asset, due to the extent of our network, particularly in Europe and Africa, where we have a deeply rooted retail presence. We have an advantage in northern Africa, and that’s a differentiator for a tier 2 player like us. As a result, we have invested much more in GTB, both in term of technology and people and are continuing to do so,” Pascal Augé, head of global transaction and payment services, tells GTR.
At Crédit Agricole, the focus is on harmonising platforms across geographies: the bank launched a taskforce last July to define which technologies to invest in, and whether they should be managed internally or externally. “For our corporate clients and large financial institutions, we want to develop all-digital transaction products, with the same onboarding solution, documentation and reporting tools available in each country where we provide cash management services. First of all we want to be fully equipped in the SEPA zone, and later on we want to be able to provide the same range of services and solutions in Asia. Digitisation is the key word in the development of that solution,” says Bruno Bourbonnaud, managing director, head of financial institutions at Crédit Agricole CIB.
Another area where French banks are investing their time and money is the much-needed harmonisation of compliance processes. Société Générale, for example, has increased the size of its compliance team tenfold, and is one of the 12 banks testing Swift’s KYC platform, which will hopefully go live in late 2015.
“As banks, we collectively engaged into the upgrade of compliance systems, centralising more and more, filtering transactions on a real-time basis, centralising Swift platforms, and generally boosting compliance in a vertical axis, for more integrated policies and full alignment. There is also a need to harmonise training and expertise in compliance,” Augé explains.
Crédit Agricole’s Bourbonnaud acknowledges the importance of Sibos and related events to keep in touch with banking partners and maintain communication on compliance and regulatory constraints. Internally, the bank launched a workshop a few quarters ago, with the aim of increasing consistency in regulatory compliance across all entities of the group.
BNP’s Levet also recognise the need for unification in compliance processes, and believes that the discussions taking place between major players in the markets “seem to be quite promising”.
“On the KYC front for instance, one of the legitimate and critical ask of corporates is for banks to ensure the ‘ask only once’ policy – we indeed need to be very diligent to ensure that from day one, when we start collecting documents and information, we only ask once and don’t go back to our clients periodically with a new set of questions.”
When it comes to future developments, all bankers agree that it is consolidation that lies on the horizon – as evidenced by RBS’ decision to focus on home markets, as well as HSBC’s offloading of its Brazil
and Turkey operations.
“The expectation we could have had in the past to compete with global players that can provide the same product to clients all around the world is over – correspondent banking is becoming much more of a tool than the product by itself,” Bourbonnaud tells GTR.
Levet agrees: “We’re probably going to see some further market consolidation in our businesses – scale and industrialisation being the two key priorities. This comes after years where banks were more focused on market share and enriching their product offer, so there is a bit of a shift there.”