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Interview: The plans for Deutsche Bank’s IFSC global transaction banking unit Back
Finance Dublin interviews Nelius De Groot, Deutsche Bank's Global Head of Financial Institutions & Securities Sales about the role global transaction banking has for DB and its advantages as a relatively low risk and capital efficient business. He outlines why DB chose Ireland and outlines the plans for the unit. 'Transaction banking in general is a relatively low risk and capital efficient business, generating a substantial part of its revenues via fee income and long lasting partnership based relationships with clients' he says.
1. Speaking at a conference on the 18th of November, the chairman of the Basle Committee (Stefan Ingves) said "it is important that bank capital is seen to be of sufficient quantity, quality, consistency and reliability. These four characteristics are critical to the long - run credibility and success of the international capital adequacy framework."
How do Deutsche bank's plans in Global Transactions Banking (GTB) mesh with these objectives?


Deutsche Bank's strategic focus on GTB is very much in keeping with the current and future state of the banking industry. It is also in keeping with management's and regulator's desire for large global banks like ours to focus on sustainable earnings and low capital consumption.
Transaction banking in general is a relatively low risk and capital efficient business, generating a substantial part of its revenues via fee income and long lasting partnership based relationships with clients.

Within Deutsche Bank, GTB has been a core business for many years. During that time it has generated consistent and increasing earnings for our shareholders and in doing so supported the bank's capital position.

Not only does GTB consistently contribute to the bank’s capital base, but it is also one of the lowest capital consuming businesses in the bank.
Nelius De Groot


Deutsche Bank's management focus and strategic ambitions for GTB are a direct result of these positive characteristics and are very much in-line with the sentiment expressed by the Chairman of the Basel committee.

2. GTB is a new paradigm for the development of banking across the world, in what particularly distinct ways will Deutsche make its mark in the market? You have previously published indicative growth targets for the business, out to around 2015, do these targets envisage a significant growth in market share, or so they rely on growing the total market size?

I would not class GTB as 'a new paradigm', our corporate and financial institution clients have required the services provided by GTB as part of the basic functioning of the financial system and capital markets for very many years; take cash management and the administration of debt facilities as just two examples – in fact trade finance instruments go back hundreds of years. We've also been an important partner to other parts of the bank, providing connectivity to market infrastructure to parts of our global markets franchise for many years.

It is fair however, to emphasize how the sustained, fee focused earnings we generate off a comparatively low capital base makes GTB an even more attractive investment case for management and shareholders in the new banking environment.

We expect to realize our aspirations for this business by both being part of macro-growth stories as well as broadening our product capabilities to service more of our clients’ needs; creating a more meaningful proposition for our clients and in doing so grow our business.

A good example of our focus on macro growth is our continued commitment to the world’s largest and fastest growing markets; for example our leading custody franchise in India, and our development of RMB cash clearing solutions.

In terms of growing our products, a good example are businesses like GTB’s fund services, which has many of its staff based here in Dublin. GTB entered this space via the acquisition of a relatively small US focused operator – we have grown this into a global business and in doing so built new client relationships, in new sectors and made ourselves increasingly relevant to existing clients and other divisions of the bank.

3. How important is the quality of regulatory compliance and efficiency in Deutsche Bank's GTB business model, and can you provide some examples of this?

It is hard to emphasize enough the importance of regulation not only to Banking but to transaction banking in particular.

Understanding regulation and working with regulators is core to our business model. We are in the business of providing solutions to clients around market connectivity, infrastructure, capital market administration and liquidity – if we are not able to comply with regulations, and in doing so ensure our clients understand and comply with regulations then our service and client relationship is severely compromised.

In transaction banking we have teams of professionals purely focused on regulation and market advocacy – they are embedded in the formation of our strategy, within bank wide forums, and most importantly they regularly meet with our clients, listening to their concerns and de-mystifying the regulatory landscape.

A great example is how we consultatively work with our clients in order to help them comply with regulatory initiatives in Europe like SEPA.

Quote with some details on SEPA: 1 February 2014 is the end-date for SEPA migration; SEPA is no longer a voluntary initiative, but a regulatory requirement. Corporate migration to the new instruments is therefore necessary, and with the end-date fast approaching, we recommend that you focus on finalizing your migration preparations immediately. In this version of the Ultimate Guide to SEPA Migration you will find some updates that incorporate additional topics and country information.

We produce many white papers a year on regulatory and market infrastructure initiatives, for example the latest was just released earlier this week on ASEAN post-trade environment by way of example.

IRELAND SPECIFIC

4. Does the prospect of Ireland remaining in the eurozone, medium to long term, (providing it with the prospect of full ECB-compliant hands-on regulatory engagement) impact on the attractiveness of the location as a hub for GTB activities?

A number of Deutsche Bank Board members have publicly voiced their support for the eurozone construct; the benefits of Eurozone membership are clearly understood.

It is also understood that a well-functioning market for financial services in Ireland requires clear rules and an effective supervisory framework. The interconnectedness of financial markets across Europe also makes regulatory co-ordination and co-operation important, as such the ongoing involvement of Ireland in the EU regulatory architecture is a positive.

5. Strategy for Dublin
- You have said it is not a regional but a global hub. This presumably means that you will service clients from North America, Asia PAC and MENA, as well as Europe from there. Is this right?
Within GTB there are several sub areas, such as securities services, and trade finance, as well as payments and treasury services. Do you expect any of these in particular to be rolled out in Dublin?


The two groups currently present in Dublin are Group Technology & Operations (GTO) with nearly 250 employees and Global Transaction Banking (GTB) with 80 employees. These GTO and GTB staff already service clients from around the world; Dublin is already a global hub for Deutsche Bank and we plan for it to remain as such.

The team provides services to some of Deutsche Bank’s largest Financial Institution and Corporate clients, specifically: payment processing, payment investigation, electronic banking, static data and account maintenance, quality assurance, implementation and customer service.

Our plans involve expanding our existing operations, but as part of this expansion we will continuously assess new opportunities. Nevertheless we need to execute on our existing plans first.

One example is that we do not currently provide Technology services from Dublin, given Ireland’s strength in the technology sector that may provide an opportunity.

6. You have announced some ambitious targets for 2015, but looking further down the road, the Irish project could be described as medium term. How do you expect, and hope, it and other production units will interface with Deutsche's plans down the road?
Our plans are constantly evolving, but is already clear that we have a vision for the future of Deutsche Bank and our presence in Dublin will play a key role in the pursuit of our 2015 targets and beyond.

We are looking to grow from nearly 330 employees today to over 1,000 employees by the end of 2017, these current plans, encompassing ca.700 new roles, represent very significant growth through to 2017.
Ireland provides an employer like Deutsche Bank with:

-a wide range of language skills - for example, we provide client service in 8 different languages today, but our existing staff speak 20 languages

-a highly educated and experienced workforce that is eager for new challenges, and an enviable stream of new talent emerging from the universities

-excellent services, infrastructure and connectivity that Dublin offer.

It’s for these reasons we use Dublin as global hub and plan to expand its role in the coming years.
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