As banks looked at how to restructure their product offering in line with tighter legal and regulatory constraints in Belgium, it was leveraging off the success of its tailor-made back-to-basic structures that enabled BNP Paribas to dominate the market with an unscathed market share of 25%.
"Innovation is not always about complexity and mechanisms. Our innovation comes from optimising an existing solution that was born from a clear understanding of our clients' needs," says Gilles Staquet, head of sales for Belgium and the Netherlands at BNP Paribas in Brussels.
The French bank grabbed the opportunity to remarket its existing line of equity and fixed-income products at a time when the future of the equity derivatives business and specifically the structured products retail segment in Belgium was being brought into question. The bank sold more than €410 million in fixed-income structured products, and issued €3,496 million of equity and commodity-based structures.
One effect of the Financial Services and Markets Authority (FSMA) moratorium is that distributors must disclose the name of the issuer when marketing structures. For foreign banks, this is difficult because some banks have to market the products using the name of competitors.
This year, BNP Paribas launched its SecurAsset issuance programme in the region in conjunction with various counterparties, including Argenta Bank, allowing investors to address the regulatory issue by enabling them to collateralise their certificates with the assets of their choice and to pre-define the specific credit risk - in this case using a zero-coupon Belgian government bond. This moved the credit risk away from BNP Paribas to the Belgian state.
"This is in fact the first time that a bank has been able to use structured products linked to the Belgian state as a form of capital protection," says the Belgian distributor. "Since then, we have seen other players board the bandwagon, but BNP Paribas was the first."
"BNP has helped us design a wide range of innovative products that have consistently met our expectations and our clients' needs and this has proven to be even truer this year," says Gaert de Haes, a member of the executive committee at Argenta Bank in Brussels. "The bank has enabled us to smoothly adapt our structured product offering to the challenging Belgian regulatory environment. They have been more a partner than just a mere provider for us."
With fixed income, BNP Paribas has been offering investment products linked to the evolution of interest rates, with a minimum return guaranteed but with a maximum return, that is capped-floored products. The bank's added feature benefits the client in a rising interest rates context but also in a falling interest-rate environment. The Euribor dual floater note is a direct alternative to a traditional savings account and guarantees a minimum 1% annual coupon even if interest rates fall below 1%.
Geoffroy Blaiteau, part of the structured products sales team at BNP Paribas in Brussels, says retail clients are reluctant to invest in equity and commodity markets. They are not willing to take any risks but still seek higher returns than those offered by traditional savings products. "Most of the value comes from the underlying and the wrapping," says Blaiteau. "We are working on concepts that constitute value added. What matters to investors is attractive returns relative to the risk that they are taking."
"Once again they succeeded in offering a product in line with our clients' needs and which perfectly suits the current market conditions," says Stefan Van Geyt, part of the structuring team at BNP Paribas Fortis Investment Solutions Private Bank in Brussels. "This product is not only compliant with the new FSMA moratorium rules, but also introduces an innovative feature that I am convinced will be followed by competitors."
BNP Paribas has also had success in taking the MyIndex solution to Benelux. The index allows investors to create tailor-made indexes and to choose asset classes across different geographical regions and themes.
The bank developed an emerging markets index that would cover both the equity and sovereign debt markets. The campaign worked, with three public offerings and more than €70 million raised.
Benelux has always been a strategic market for BNP Paribas, and, since its takeover of Fortis, the landscape has changed dramatically. "What's interesting is that we have been able to increase our success this year despite our affiliation with Fortis. We have continued to work in conjunction with other clients and have relationships with clients that may even be considered our direct competitors, and it is the best proof of our first-class service and innovation," says Staquet.
The bank has developed a training programme that explains product offerings, updates clients on recent economic trends and helps investors stay in tune with the latest regulatory changes. "We are required to carefully explain our products through the three-steps mechanism, emphasising explanations of accessibility, investment strategies' payouts and transparency," says Staquet.
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The week on Risk.net, December 2–8, 2016Receive this by email