Financial i, February 2011 – “Regulation is threatening the overseas offices of international banks”

Bob Lyddon, managing director of the IBOS Association, says regulation is threatening the overseas offices of international banks. He says corporates will need to build relationships with indigenous banks.

The recent raft of banking regulatory changes has altered the banking landscape for companies looking to expand internationally. The overseas offices of international banks are now under threat from recently introduced increased capital adequacy requirements and a proposed separation of “risky” and “non-risky” activities, as these offices have tended to rely for their existence on a contribution from activities such as venture capital and proprietary trading, to cover their local costs

The new rules around “unstable deposits” will also be hitting international banks the hardest, as these tend to be bought-money banks without a retail deposit base. International banks are therefore now reducing their client lists and their focus on “foreign corporates” and concentrating instead on their home customers and markets

The result is far less choice of international services for expanding businesses, and a real difficulty in accessing services in markets where the customer’s house banks are not represented or cannot deliver the required services themselves

The solution is firstly to identify major indigenous banks that have the right service range and a sustainable presence in each of your markets. Then secondly to access efficient inter-bank cash management services, whether you want to manage these centrally or through locally based finance staff.

Corporates should therefore concentrate their efforts on building relationships with indigenous banks that are members of banking associations which offer channels into one another’s services under one roof. Such associations are stable growth partners because each component bank has its own deposit base and their collaboration means they can deliver a wide range of services, enabling you to achieve your growth plans.