China Fund News Wu Juanjuan
A few days ago, Philippe Benoit, head of strategic business and business transformation at BNP Paribas, Europe's largest custodian institution, Franck Dubois, head of global custodian banking Asia Pacific, and Stanley Song, head of global custodian banking China, said in an exclusive interview with China Fund News in Shanghai that the strategic position of the Chinese market in the global asset management business will be further enhanced. As the world's fifth-largest custodian bank, BNP Paribas believes that China is crucial to the development of its fund custody business.
BNP Paribas has an extensive presence in China and is one of the most licensed foreign banks. Public information shows that with years of continuous investment, BNP Paribas has not only registered a local bank in China, but also participated in shares or established a number of joint ventures and cooperation projects in China. This includes a stake in Bank of Nanjing and extensive cooperation with Bank of Nanjing to provide retail, corporate banking and financial market services. Another example is the joint venture with Haitong Securities to operate Haitong Asset Management Co., Ltd., and the joint venture with Bank of Beijing to operate Sino-Dutch Life Insurance Co., Ltd.
In October 2022, BNP Paribas Asset Management Holding S.A. (ABA Asset Management), a joint venture between BNP Paribas Asset Management Holding S.A. (ABC Asset Management) and ABC Wealth Management Co., Ltd. (ABC Wealth Management), a wholly-owned subsidiary of Agricultural Bank of China Co., Ltd., was approved to be established.
In addition, in January 2022, the CSRC disclosed information that BNP Paribas had submitted materials for the establishment of securities companies for approval; In July last year, BNP Paribas' application for securities investment fund custody qualification was accepted.
An inevitable choice for the world's fifth-largest custodian institution
BNP Paribas is the fifth largest custodian in the world and the largest in Europe, and its asset custody services began in Europe, initially for sellers and gradually included buyers. Over the past 20 years, BNP Paribas Global Custodian has gradually established a global custody network, designing comprehensive custody and asset service solutions for asset managers, asset managers, asset owners, issuers and financial intermediaries.
BNP Paribas Group is committed to providing customers with a full range of financial services. Based on this consideration, it is necessary to include China's asset custody business in the business landscape. The three interviewees said that Faba Global Trustee Bank hopes to help customers better capture opportunities in China.
In recent years, as China continues to open up to the outside world, foreign investment has gained more and more channels into China. After the launch of QFII in 2002, the stock market successively opened Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, and then promoted the implementation of Bond Connect, complementing the original CIBM, QFII, RQFII and other channels to meet the needs of foreign investors entering China's bond market.
BNP Paribas was one of the first foreign banks to qualify as a CIBM settlement agent in 2016 and has also obtained the Qualified Foreign Investor (QFI) custodian qualification in 2021, enabling it to more directly support foreign investors to participate in China's equity and bond markets.
BNP Paribas believes that obtaining a securities investment fund custodian license can better serve Chinese customers locally. In addition, with the transformation of wealth management of Chinese residents, more and more Chinese investors are eager for global allocation, which also brings opportunities for global institutions such as BNP Paribas.
However, China's fund custody market has been fully competitive for several years, with large state-owned banks occupying the main market share, and foreign institutions facing greater challenges.
Faba believes that in the domestic fund custody field, there is no direct competition between itself and Chinese banks. "The difference in scale is on the one hand, and the focus of each other's businesses is also different," Dubois told reporters. For example, he said, more and more international institutions are adding Chinese assets, and for such institutions, they often have already established cooperation with us in other markets before entering China, "so if we can provide them with fund custody services in China, they can land China-related fund business without adding additional 'relationship maintenance' costs." Of course, on the other hand, when Chinese institutions are deployed overseas, France and Pakistan can also provide corresponding services. ”
Song Wenjun stressed that the custody field pays special attention to "network effects", taking Faba as an example, its global custodian banks now cover more than 90 markets, and 27 of them have become local custodian banks. "For institutions committed to investing globally, Faba can help them expand overseas and provide a full range of custody services in various markets."
In July last year, the China Securities Regulatory Commission disclosed that BNP Paribas had submitted an application for a securities investment fund custody license. Talking about their preparations, the three interviewees said that they are building the system and some testing work - and are actively recruiting professionals from the local market to serve various customers with professional local teams in the future.
Asked what challenges will be faced in starting a fund custody business in China, Benoit said that data security may be one of the concerns of some customers. China has its own requirements for data security, but similarly, other markets have data security regulations. "This is not a new challenge for Farba. We ensure that our infrastructure is structured to meet relevant local data security regulations in each market. ”
Asked about the potential impact of the trend of data localization based on data security considerations in various markets around the world on the compliance costs of custodians, Benoit further stated that meeting the regulatory requirements of each market is the essence of custodians. As the fifth largest custodian in the world, Faba has the strength and investment to do just that. "The custody business is only one part of BNP Paribas' business. Banks already have well-developed infrastructure, so the costs are not a huge challenge when they are evenly apportioned. ”
More critical than data-related issues is how a company's long-term strategy is set and executed. The three interviewees believe that it is important to exercise restraint, step by step, and start with a small business scale, so as to build credibility and win the long-term trust of customers.
"Our commitment to China is long-term. Success doesn't happen overnight, so we will continue to invest in understanding the local market and developing local talent. "In addition, we will continue to support international investors to increase their exposure to China – just this morning we visited a Chinese financial infrastructure company to discuss their roadshow in Europe to bring the Chinese market to the attention of more international investors."
Some of the global investors have returned to China
However, they also admitted that it takes time to understand the Chinese market and lay out China. "If you give me a sum of money to invest in China, I will ask where should I invest? Which industry, which company? Should I invest in equity or bonds? China is a huge country with a huge market, so it is not easy to get the right expertise to make the right investment. They further said that asset managers are constantly laying out China to better understand China and invest in China. In addition, the Chinese government and regulators are very supportive of international investors' layout in China, which helps to promote the further development of the two-way opening of the capital market.
What should global investors pay attention to when investing in China? The three interviewees said that there are already many interconnection mechanisms for global investors to enter the Chinese market, and it is very important to choose the channel that suits them. In addition, it takes time to build a platform and build a professional team, not weeks or months, and it is necessary to adhere to "long-termism".
Custodian institutions are an important part of the global asset management industry. The three interviewees shared their views on the asset management industry from a custodial perspective, and believed that there are four major trends that are currently reshaping the entire industry.
First, the shift from active to passive investing is a huge trend that is happening and it's not over.
Secondly, the investment layout across the public market and the private market – benefiting from many factors, non-public market assets are getting more and more attention, and Faba has noticed this trend, whether it is stocks, bonds, derivatives or private market assets, it can provide a complete set of services.
Third, the consolidation of the asset management industry on a global scale may not be over, and the trend of the stronger and stronger will continue.
Fourth, for more complex collateral, customers need solutions. Clients hedge certain risks of their positions, foreign exchange or structured products through collateral, and Fabar pays attention to the need for managers and launches related products to help them optimize collateral costs.
Editor: Captain
Review: Xu Wen