Sep 22nd, 2008, Singapore
Singapore - OCBC Bank expects to see 20% growth in its dual currency returns (DCR) business in Singapore next year, following implementation of a structured deposit pricing and processing system from FinIQ, said bank officials.
"The growth rate for DCRs at OCBC in Malaysia will probably double that - 40% - because Malaysia is a newer market with less initial volumes," added Vincent Caldeira, vice-president of group treasury at the bank in Singapore.
OCBC saw a four-fold growth in the number of DCRs in 2007 and a 60% growth so far this year, he said. "Because volumes were picking up, we started thinking about managing trade booking directly at the point of sale, which is why we decided to implement a retail-focused solution such as FinIQ.", said Caldeira.
The system, which will be deployed at the bank in October, will connect to Reuters for live price feeds on FX spot. FinIQ will also be integrated with a system from Murex that handles the bank's cash and derivatives pricing, and risk management. FinIQ is also being linked to OCBC's core banking system. "The core banking system is used to debit the deposit and credit the account in a foreign currency.", said Caldeira.
The majority of clients buying DCRs from OCBC are 'preferred banking' clients and private banks. Preferred banking clients typically have total assets of at least S$200,000 ($139,000). Caldeira noted that it is currently difficult to market DCRs to smaller retail clients because the transactions can take a long time to process. Prices going from relationship managers to dealers and back again via telephone can take several minutes.
"The absence of a platform for streamlining the process has impaired our ability to reach the mass market.", said Caldeira. By the end of 2008, 250 relationship managers across the bank in Singapore and Malaysia will be using FinIQ to provide near-instantaneous pricing to customers, he added.
DCRs at OCBC are mainly Singapore dollar deposits converted to high interest rate currencies such as the Australian dollar and New Zealand dollar, with some interest in SGD/EUR transactions, said Caldeira. He said interest in DCRs began to grow in 2002-2003 as investors moved away from exotic structures and products with high capital protection.
In the 1990s investors had a higher appetite for exotic structures with good upside, usually linked to equities and commodities, said Caldeira. However, after the Asian financial crisis, investors began looking for investments with capital protection, he explained
A few years later, investors have been burned by exotics and realise that, with too much capital protection, there is no availability for upside, he said. "DCRs have the advantage that they are easy to explain to clients, they give an upside if the client's vision of the foreign exchange market is correct, and maturity is a month or two, providing quite a fast return. That's why the product is successful.", he explained.
OCBC plans to leverage FinIQ to promote multi-currency returns, foreign exchange accumulators and equity-linked deposits in the second half of 2009, added Caldeira.
While OCBC hopes to bring in a broader retail base of customers, JP Morgan is leveraging FinIQ for wholesale clients. JP Morgan first deployed FinIQ to automate price delivery for dual currency deposits (DCDs) for private bank clients in June of last year. "We've been able to industrialise distribution of products, with a five-fold growth in DCD volumes since implementing FinIQ," says Will Shropshire, regional head of FX structuring and sales at JP Morgan in Singapore. The bank is expanding its use of FinIQ by implementing FX accumulators.
Source: FX Week