Derivatives house of the year, Singapore: OCBC Bank

Asia Risk Awards 2023

Wee Wei Min, OCBC Bank

Spooked by the collapse of Credit Suisse and a handful of US regional bank failures, private banks in Asia have been busily diversifying. OCBC Bank has been there to pick up those flows.

Those institutions that manage the money of high-net-worth individuals typically purchase structured products from large global investment banks such as JP Morgan and Nomura. Increasingly these institutions are including OCBC within the panel of banks they select, according to Wee Wei Min, global head of sales and structuring, global treasury at OCBC.

“Private banks need to diversify the investment risk for their clients. As a double-A rated institution, OCBC can provide assurance to these investors that in the event of a banking collapse their money is safe, because behind it stands a well-capitalised fiduciary bank,” says Wei Min.

Wei Min says that, over the past 12 months, OCBC has onboarded 15 new private banks. The bank’s highly rated status is only one part of the reason. A broad product suite is also helping to win new business.

“We are now able to provide clients with a range of structured flow products with a wide range of memory knockouts, safety buffers, European kick-ins. There are lots of options available,” says Wei Min.

Pricing is also competitive and speedy, thanks to automation offered by OCBC’s platform, Wei Min adds.

“We have automated a lot of this on our platform. When private banks ask us to price these structures, these requests are piped into an AI robot, which then sends out the requests to our traders and other banks to fetch the best pricing. This all happens in the space of less than a minute.”

Geopolitical tensions have also helped channel new private wealth flows into the Singaporean bank as some private bank clients have sought to diversify away from Hong Kong, says Wei Min. China is OCBC’s biggest market outside of South-east Asia.

Growing e-FX

OCBC has managed to capture a lot of new FX business over the past 12 months, with volumes growing more than 50% year on year. Part of this has been to do with the global reopening of markets as Covid-19 is consigned to history. But another part has been down to OCBC’s own tenacity, including a dedicated campaign to persuade more than 130,000 customers to start trading online.

“This is a phenomenal achievement. You can’t just call thousands of customers one by one to get them to sign up for the new trading platform,” says Wei Min. “You need to have a well thought-out campaign to show them the benefits trading online can bring.”

Some of the campaigns were somewhat gimmicky – OCBC might offer a free cinema ticket for the first three online transactions, for example. Other examples, though, include videos that explained the greater efficiency trading online could bring. Good data analytics came into play as well.

“We identified those clients that regularly trade FX with us and scanned for any trades they might have missed. If we spotted a missed trade then we can advise the client about this and suggest they might like to trade electronically,” says Wei Min.

Over the past year or so, OCBC has also been expanding the number of currencies that clients are able to transact in, moving beyond its more traditional G-10 and Asian pairings.

“We have now enabled more exotic currencies such as the Polish zloty, the Czech korona, the Qatari riyal, the Hungarian forint, the Israeli shekel, the Mexican peso, the Turkish lira,” says Wei Min.

Wei Min says OCBC was able to avoid the pain of onboarding these currencies one by one by working with another third-party bank in order to leverage its data technology. Wei Min says 10 of these currencies were onboarded in 2022, with a further 17 planned by the end of 2023.

The strength of OCBC’s FX franchise in the region has also allowed the Singaporean bank to execute some more unusual transactions. One such example is a cross-currency swap between the Indonesian rupiah and Chinese renminbi currencies and interest rates.

“Both of these currencies are controlled currencies, where you need to have all the right documentation in place before you can trade them,” says Wei Min. “Most FX transactions with either of these currencies will usually be crossed with the US dollar. But we are now able to give clients the option to settle in IDR or CNY.”

Not many of OCBC’s peers are able to offer this kind of trade, which requires approval from both regulators in both China and Indonesia. The ability to gain the requisite regulatory approvals for these trades, and to be able to execute them according to the clients’ requirements, is testament to OCBC’s FX capabilities across the Asia region.

Net-zero goals

Another landmark moment for OCBC in 2022 was the launch of emissions trading for clients, to provide market-based liquidity and hedging solutions for firms seeking to reduce their carbon footprint. Although OCBC’s carbon-trading desk was set up at the end of 2021, the need to have all the regulatory documentation in place meant that trading didn’t start until last year.

This start of emissions trading at the bank means OCBC can now embed carbon credits into a variety of structured products.

“Besides buying carbon credits for the bank, in order to achieve our own net-zero goals, we also want to help our clients in their net-zero journey whenever they transact with us,” says Wei Min.

The Singaporean bank is also in the process of seeking regulatory approval for trading renewable-energy certificates.