After several months of uncertainty, Royal Bank of Scotland (RBS) has confirmed it is closing its international global transaction services (GTS) operations for customers outside the UK and Ireland.
The bank will continue to provide transaction services, including cash management and trade finance, to clients based in the UK and Ireland, and large corporates with substantial domestic exposures.
|HR topics do not form part of the agreement. However, we are committed to having a dedicated team to cater to our clients|
Although not confirming the number of clients who will be affected by the move, the bank has provided 7,000 corporates with transaction services.The bank is pulling out of 25 international markets.
There is no deadline for when the business will be closed.
The bank’s existing affected international clients are being given the option to move across to BNP Paribas as part of a referral bank agreement, which BNPP won after a tender process.
RBS stated in its FY 2014 report that it would be focusing its GTS efforts on its home market. However, a complete retrenchment from international markets has come as a surprise to the industry.
RBS signalled its intent to grow the GTS business when Carole Berndt joined as global head of transaction services from Bank of America Merrill Lynch in June 2013. In May 2014, she made some progress to build up a strong team by recruiting bankers from BAML, Standard Chartered and JPMorgan.
The RBS franchise appeared in decent shape last year. It had a respectably strong showing in the Euromoney cash management non-financial institutions survey 2014, finishing in sixth position globally for the second consecutive year.
However, the GTS business took a legal and operational hit last year when it was forced to stop using the BankTrade platform, a trade-finance system, in July 2014, after successful legal action by software developer Complex Systems.
The bank took on the platform after the acquisition of ABN Amro’s business, but Complex Systems disputed that its agreement with ABN permitted the platform's use by RBS. Individual clients were sent letters advising them of the best course of action, which for some included looking for a new banking partner.
At the time of the ruling, the bank stated it was looking into implementing a new platform for the clients that stayed on board.
Despite difficulties, the bank boasted a large presence at Sibos in Boston in September 2014. However, the franchise began to unravel in January when Berndt announced her departure for the position of managing director of global transaction banking at ANZ in Hong Kong, just 18 months after joining RBS.
A senior GTS banker at a GTS house, not part of RBS or BNPP, says RBS's decision reflects an existential crisis facing the bank rather than a comment on the revenue prospects in the cash-management sector.
“The decision seems to be part of a much bigger story within the bank and the industry," he says. "RBS is still figuring out who they want to be. Do they want to become just a UK high street bank?”
In addition, they suggest an outright purchase of RBS's platform would have proved a more efficient means for BNP Paribas of ensuring client attainment and service delivery, compared with the announced referral process.
“Referrals don’t work," he continues. "The whole process has to be compelling. There are only good results if the referrer takes over the whole contract and agrees to the exact policy, or outright buys the platform.”
“Corporates will want to look for another provider as they don’t have the confidence," he says. "There is too much risk. It will be interesting to see what the level of client retention is.”
Current clients of RBS will not be compelled to move to BNPP, and some have already exercised their right to look for a new provider since the announcement in February.
The same GTS banker says: “We have seen tons of RFPs from RBS clients and have been successful in a number of them. Corporates are taking advantage of this time for change as its allowing them to be in the driving seat and look for a new provider.”
Those that do move across to BNPP will have to undergo rigorous checks before the French bank accepts their business.
Marc Carlos, head of corporate trade and treasury solutions EMEA, BNP Paribas, says: “We will do everything that is expected from the regulator to meet their requirements before on-boarding any clients. We have worked together with RBS to ensure a seamless and simplified process for RBS customers wishing to migrate to BNP Paribas. Each client will go through the same due diligence processes as our other clients.”
The story of RBS’s decline is also about the emergence of BNPP. The latter bank has a strong international footprint, with presence in 75 countries. In the APAC region it has presence in 14 countries, and holds a full banking licence in 12.
| This agreement is a perfect fit for our ambitions|
In a statement announcing the agreement, Jean-Laurent Bonnafé, director and chief executive officer at BNPP, says the bank's ambition is to “broaden and consolidate this leadership and to carry on offering its clients seamless European and international banking services, and this agreement is a perfect fit for our ambitions”.
The retrenchment leaves RBS with a staff surplus across sales, service and fulfilment teams. The agreement does not include commitments to take on any of RBS’s existing team.
Carlos says: “HR topics do not form part of the agreement. However, we are committed to having a dedicated team to cater to our clients.”
Recruiters are seeing an uptick of enquiries from RBS bankers.
Ollie Burns, director of Burns Brightiff Consulting, says it is “absolutely true that we have been kept busy of late consulting with RBS candidates both domestically and internationally since Carole Berndt departed earlier this year. Now is absolutely an opportune time to source A* talent from within the organization.”
Other banks keen to pick up clients are also looking with interest at the departing personnel.
The GTS banker says: “We are hiring, not just in sales. There are also needs in the service and fulfilment area. We have had approval to increase the headcount.”
Cash management remains a competitive sector and a priority growth business for wholesale banks. As a result, RBS's decision is unlikely to have a systemic impact.