Neither Zurich nor New York for BNP Paribas

“The Swiss school is more relationship-driven, historically based on confidentiality, and the American one is more transaction-driven and product-oriented” says Mr Debiesse. “What we have in mind is to become the third path to private banking, combining the best practices of these two schools into something that would be mostly advice-driven.”

Mr Debiesse, who joined Banque de Paris et Pays-Bas in 1971, become CEO of BNP Paribas Private Banking at the end of 1999, following the high profile BNP and Paribas merger.

“Four years ago we merged the BNP and Paribas private banks, that were two very different entities,” Mr Debiesse says. “We had to build a new private bank with new systems, new platforms and new types of products, taking into consideration the new standards and constraints in the sector.”

Regulatory complexities

The increasingly complex regulatory framework under which private banks operate, together with the move towards greater consolidation in the sector and uncertainty in the investment arena, is having a major impact on the shape of the industry affecting domestic players, Swiss banks and their American peers who compete to gain market share.

“In France the competition mostly stems from the French banks,” says Mr Debiesse. “We can, however, differentiate by business segments. In the very and ultra high net worth segments, we are also competing with our international peers – mostly Swiss and US banks. In the upper affluent and high net worth individuals – the most critical business segments in terms of profitability – the competition remains domestic, even though certain Swiss banks are making inroads.”

He explains that the Swiss banks’ push to develop a comprehensive onshore presence in Europe is a logical move, given the implementation of tax amnesties in certain key European markets, and the general perception that growth potential is stronger onshore than offshore.

“However, on a country-by-country basis, the domestic banks still control the bulk of their respective national private banking markets. This situation is unlikely to change in the foreseeable future, unless the European banking industry goes through a wave of cross-border mergers,” says Mr Debiesse.

Being France’s largest private bank, and the world’s 11th largest, according to Scorpio Partnership, BNP Paribas Private Bank is now focusing on onshore and offshore growth.

“We are investing to become more visible in the domestic European market,” Mr Debiesse says. In Belgium, for instance, it has restarted its private banking activities that were stopped when BNP and Paribas sold their Belgian subsidiaries in 1997. “I think it was a mistake to leave the private banking market in Belgium because it’s an important market and we have now re-settled our activities in Brussels.”

Another European market where its presence has increased is the last few years is Spain. BNP had a retail network in the country, but after the merger with Paribas this was sold to regional bank Caixa Galicia. The new BNP Paribas organisation kept only 15 branches fully dedicated to private banking.

But this still left Spain the second largest market in terms of private banking branches, after France where it has some 200. The Spanish presence has also grown with the purchase in 2002 of the Spanish asset management and private banking divisions of the former Chase Manhattan Bank.

Eastern potential

Asia is also becoming an attractive region for private banking activities. BNP Paribas is the sixth largest private bank in the region. A year ago, along with its investment banking division, it created the Premium Group to address the needs of Honk Kong’s tycoons.

This experience in Asia could be duplicated in Europe, as the bank intends to be more visible in the very and ultra high net worth segment. “This segment is less important in terms of revenue, but important in terms of visibility. It is a laboratory for new products and approaches that could later be adapted to other clients.”

Their exposure to the US has been recently boosted by the acquisition of the high-net-worth client accounts of Banca Intesa’s subsidiary Banque Sudameris in Miami. Mr Debiesse says this move shows the bank’s commitment to grow through selective acquisitions and local presence.

“Private banking is a local business by excellence,” Mr Debiesse says. “You need to develop a customised approach for each market you intend to seriously tackle. Such an approach obviously includes a strong geographical and cultural proximity between the target clientele and their dedicated client relationship managers. ”

Joint ventures

In France, for instance, the private bank has developed a successful joint venture with the group’s retail network that allows it to source new clients from different business segments that range from income savers, previously serviced by personal banking teams, to corporate owners who have relationships with the corporate banking divisions.

“In other European markets, we do not have similar agreements but we benefit from other cross-selling opportunities, notably with our corporate and investment banking division.”

Mr Debiesse also explains that although the private bank has a long-standing relationship with the asset management arm of the group, this is a non-exclusive agreement, and it uses external investment managers when it considers it to be the most appropriate solution for its clientele.

“But we are not a supermarket of funds. Our added value is not simply to allow clients to access funds but to provide advice by selecting and regularly reviewing the credential of asset managers.”

Mr Debiesse also plays down the impact of open architecture on private clients’ investment portfolios. “We have not seen a rush for external funds but our clients appreciate the flexibility and are receptive to additional opportunities and alternatives.

“The promotion of external funds is certainly not cost effective compared with distributing in-house products when you have a significant size. However, it is more important for us to build long-term relationships than to make short-term extra gains.”

In terms of investment products, Mr Debiesse explains that structured vehicles have been a pivotal component of private banks’ offerings in 2002 and 2003. “Volumes remained strong in the first quarter of 2004, and in certain instances it makes sense to hedge a portion of the equity exposure after last year’s recovery.”

He says the bank has dedicated professional teams who select, price and structure customised derivatives and structured products for clients. Estate and tax planning are also paramount. Vehicles, including insurance policies, are used to ensure a tax efficient management of assets. “In markets such as France it is extremely important to utilise the tax effectiveness linked to insurance products.” The bank has privileged, though non-exclusive, relationships with the insurance businesses within the group.

Further afield

Reinforcing its international presence will be one of the bank’s priorities during the near future: “Even though we have French roots, we are an international business. The majority of our clients’ assets are outside of our domestic market which is, I believe, one of the two exceptions, along with HSBC, in the top 10 global private banks.”

“There is an ethical revolution in private banking,” he says. “This is fantastic because this profession has the means to bring a really important added value to clients, which was probably not the case 20 years ago.”

In the coming years those private banks that are not fully compliant and ethical “will die,” he predicts. “And this is a good thing.”

Debiesse: ‘Asia is a laboratory for new products and approaches that could later be adapted to other clients in Europe’