Li Bing of Industrial and Commercial Bank of China
Photo: Mike Zenari
Finance: China’s largest bank has entered the European investment fund market. The move is part of a big push, both globally and in Luxembourg, into new markets.
The first Chinese bank has received approval to enter the European investment fund sector. Industrial and Commercial Bank of China unveiled its first EU mutual fund in October, as part of the bank’s concerted overseas push and the internationalisation of China’s currency, the renminbi (RMB).
ICBC, the world’s largest lender by assets, arrived in the Grand Duchy three years ago, and over the past year alone it became the authorised bank for renminbi clearing operations in Luxembourg, Cambodia and Singapore; received a license to open a branch in London and announced plans to open branches in ten countries in Africa, Asia and Europe; acquired 75.5% of a large Turkish bank; and expanded its existing operations in Argentina, Canada and South Africa.
“In order to actively get involved [in the Luxembourg] market, we are trying to diversify our range of services into investment banking, private banking and asset management, cross-border RMB business and global cash management, in addition to our existing commercial banking activities such as trade finance, bilateral and syndicated loans,” Li Bing, head of ICBC’s asset management business in Luxembourg, told Delano.
“The launch of the UCITS fund is our first attempt in the European investment fund industry, with the idea of leveraging our experience in the Chinese onshore market, especially the China inter-bank bond market, and our network in continental European countries, which could provide ‘China Concept’ investment products to European investors and facilitate our private banking and asset management business in the local market,” Li said.
“We do see more and more interest from European institutional investors in diversifying their portfolio and currency exposure given the current economic situation in the euro zone,” he added. “Our UCITS could be an ideal candidate within their choice.”
As for future plans, Li stated: “We will proceed [with] our product development based on the market reaction to our UCITS and provide more competitive investment products and solutions to European investors.”
ICBC currently employs more than 90 staff in Luxembourg, according to Li. “We plan to add more staff in the coming year with the development of our business.”
Those positions are likely to be client focused. ICBC appointed RBS Luxembourg as its “third party independent management company” handling administrative and risk management functions.
“It wasn’t a quick decision,” Revel Wood, CEO of RBS Luxembourg, said in an interview. “We’ve been in discussions [with ICBC] for quite some time. They were very methodical” in conducting due diligence on both his unit and his parent company.
Ultimately RBS’s track record in trustee and depositary services--which dates back to 1935 in the UK, Wood noted--and its presence in China sealed the deal. Plus in Luxembourg “we have Mandarin speakers in our office, which of course was of benefit.”