In an exclusive interview with Euromoney | Sibos Insider Michael Spiegel, head of finance and cash management for corporates at Deutsche Bank sets out plans for an expansion in headcount, products and services within China. The announcement comes as client trade flow and industry continues to book, with favourable foreign exchange (FX) plays also accounting for the developments.
“On the FX side, there are huge opportunities in the offshore renminbi (RMB) plays,” says Spiegel. “With the deregulation of the RMB, there are major opportunities for clients to save on costs and reduce their FX exposure. We are looking to expand our presence in China across new branches in physical locations, which includes a hiring drive to get more people on the ground. We are looking to expand in at least two more major cities in China that have a strategic importance from an industrial and trade flow perspective.”
Deutsche Bank opened a branch in Chongqing in April this year, following approval from the China Banking Regulatory Commission. The branch is the bank’s fifth in China, after Beijing, Shanghai, Guangzhou and Tianjin. Chongqing has a growing population that has more than doubled over the last 10 years.
At a pre-Sibos briefing, Werner Steinmuller, head of global transaction banking and a member of the group executive committee at Deutsche bank said that cities like Chongqing offered extremely significant growth possibilities and will be profitable for the group from the outset.
Deutsche Bank’s Spiegel also revealed that the first liquidity squeeze when the credit crisis was in full swing actually presented the bank with opportunities on the trade financing and the cash management side for corporates.
“The opportunity in not this liquidity crisis, however the previous liquidity crisis created more awareness of the corporates in the broader supply chain,” says Spiegel. “It brought a greater awareness for broader enterprise risk, supplier’s liquidity and it necessitated large multinational corporates to review their suppliers. There was no doubt that it put trade finance back on the map.”
However, while Spiegel noted that there were a number of developments and opportunities that the group has explored there are a number of overarching issues that need to be addressed.
“Basle III is a concern for not only the banks, but for lower rated countries looking for financing and cash management,” says Spiegel. “There is the challenge in the banking industry to support traditional trade, while also adhering to higher capital requirements.”
Basle III is a new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basle Committee on Banking Supervision which enforces banks to have a certain level of capital on their books, in order to promote bank stability and liquidity.
On other aspects of regulation Spiegel says that banks need to work closely together with regulators.
“The banks need to work together with the regulators in order to move forward, but we have to be aware to not be seen as ganging up on the regulators,” says Spiegel. “The current changes in the regulatory framework are far more complex than ever before, but they are designed to make the banking system safer, so it is a positive thing. They just have to remember that the liquidity crisis didn’t come about from financing the real economy.”