It’s not every day that a global banking giant opens a branch in Israel. This week, French bank BNP Paribas began operating in Israel as foreign bank from its branch in Asia House in Tel Aviv. BNP Paribas is the largest bank in Europe and, in terms of its balance sheet, the fifth largest in the world with a presence in 88 countries, €1.3 trillion in assets, and 138,000 employees. The person largely responsible for the opening of the bank’s Israel branch is head of territory Charles Reisman, who managed its representative office here for a number of years.
This is the fourth time Reisman has opened a branch of the bank - the previous three were in the US and Switzerland. This time, however, Reisman has come full circle since he grew up in Israel and completed his matriculation here. Assisted by a relatively small team, he has managed to bring top people in European banking and in French business to Israel. In an interview with “Globes”, Reisman describes what it was that brought the bank to Israel, and its plans for the future.
Globes: How important was it for you to have your bank open a branch in Israel?
Reisman: “I think that this is a step that is line with the liberalization of the Israeli banking system, which began seven or eight years ago when two or three foreign banks decided to open branches in Israel. This an extremely positive process for Israel. It shows that the Israeli economy is attractive to banks and that it is worth investing in the country, doing business with its importers and exporters, and providing finance for large infrastructure initiatives. The fact that a large financial institutional sees potential in Israel says a lot about the Israeli economy. As regards private banking, Israel has people who come from different places, that is to say, Israel is a human mosaic.
“We believe that in view of the extensive contacts between Israel and Europe, both business and private, there is room for a European bank here. Two foreign banks currently operate in Israel, both of which are Anglo Saxon. They are both excellent institutions, but we believe that there is a need here for a bank with a clear European base. BNP Paribas is the largest bank in Europe and the euro zone, so it will play an importing role in supporting the ties with Israel’s most important trading partner.”
Each of the foreign banks in Israel specializes in different activities in the local economy. Do you plan to do so too?
“I agree that there is specialization. This is a matter of strategy, meaning that each foreign bank comes to Israel and tries to target those niches in which it can make full use of its advantage. It would be absurd if all the foreign banks in Israel did exactly the same thing. That would not create any added value at all. As I said, our added value is in the contacts between Israel and Europe. This is because we are the largest bank in Europe, because trade with Europe is so developed, and because so many Israelis have ties with Europe. This, therefore, is our main component, in exactly parallel to Citigroup Israel’s strong contact with the US, for example.
“We have another advantage in our Europe-wide deployment. Take Italy, for example. There is no Italian bank in Israel, but Italy is a large trading partner of Israel, and our bank, BNP Paribas, controls one of Italy’s largest banks, Banco Nazional de Lavoro (BNL). It has branches all over Italy. As an institution, we want to bring the advantage we have through our large Italian presence to the Israeli market.
“This is just one example, since we control a number of banks across Europe, and anyone who wants to do business in Europe will find this a great advantage. In addition to Italy, we also have a presence in Turkey, through a strategic partnership with Turk Ekonomi Bankasi, an important banking institution in that country. BNP Paribas also acquired Ukrainian Bank UkrSibbank, the fourth largest bank in the Ukraine, with hundreds of branches throughout the country. We know that there is demand for the advantages that we can bring to the market because of these contacts, since Israelis are very keen to penetrate European markets. From our point of view, they can locate their main activity in different places in Europe, because BNP Paribas has all the facilities in place to help them.”
What about financing for infrastructure ventures? You have said several times in the past that there is a difference between the way things are done in Israel and the accepted practice abroad.
“We are very interested in financing infrastructure, energy, gas, and environmental ventures. BNP Paribas has a leading global position in some of these segments. In recent years, we have seen changes in Israeli in the way deals are built or structured, and I believe that we may see the bank taking an active role in certain deals of this kind in the future. Any such deals will be built in standard form in their financing, with each part of the project valued and financed on an individual basis, and not the provision of one lump sump based on the total project value. We are unlikely to take part in any project whose financing plan is not built in the way that we understand.
“Israel wants to be a player in the global market in many different fields, including financing. If Israel has a project market worth $2-3 billion, it will have to conform to the financing formats of the big institutions.”
One gets the impression is that your bank is planning to be more closely affiliated with the real economy - trade, business, and infrastructure venture financing - than with Israel’s capital market. In this respect you will be somewhat different from other foreign banks.
“That’s true. We decided that our niche in Israel will be different from that of other foreign banks. We appreciate very much what the foreign and Israeli banks have been doing, but we believe that our attention will focus initially on those activities in which we feel we have an advantage. In spite of this, we decided that in the first few years of our activity here, we will choose market segments that are slightly different from the regular capital market activity, although BNP Paribas could gradually become an extremely strong player in those segments. I refer mainly to structured products, and derivatives, but perhaps we might not be in the securities market since it’s not in our program.”
But there is a European presence in the capital market, in the stocks and bonds markets. If those market traders approach you and ask you to provide them with services, will your answer be ‘it’s not in our program?’
“Obviously, we won’t turn them down. We have a five-year program, which is the accepted procedure. This is the fourth bank that I have opened worldwide on behalf of BNP Paribas, after opening two in the US and one in Switzerland, and I can tell you that a plan like this is a must, and that the focus must be placed on the profit centers that have been identified. We are willing to bring new products onto the Israeli market; we can bring financial instruments to the local market as well as instruments in the areas of leasing and loan packages, and bonds. Our immediate plan is to focus on four fields: one of these is activity in industries, especially the more traditional ones. We will also focus on private banking, specifically for Israeli people of European extraction, who already know about BNP Paribas, and very much want to work with us here, just as they worked with the bank in Barcelona, Rome, Paris or other places. We will offer the use of a dealing room, which will operate just like that of any other bank, and we will naturally be aiming to take market share in this field.
“Eventually, we will have another niche in the form of assistance to Israeli exporters, who are unable to use the services of other banking institutions. We have proven success in this, and we will continue to demonstrate a presence, since we are interested in this segment of the market. I am strong believer in Israeli exports, and when we can assist in financing exports by an Israeli factory to various countries, I know why we chose to have a presence in the Israeli market.
“There’s an undeniable trend. There is movement from several places in North America, in France, and in Latin America. It wasn’t all that noticeable that much five years ago but it is clearly discernible today. More and more people in Europe view Israel as a possible location for private investment. I won’t go into the reasons for this; as a bank we are here to help them. I think that it’s natural for someone who was a customer of BNP Paribas, or BNL in Italy, to want to continue do to be a customer at the Israel branch. Having said this, it should be remembered that we will only have one branch. This is our strategy for the time being, so we will manage our business from our branch office in Asia House in Tel Aviv.”
Published by Globes [online], Israel business news - www.globes.co.il - on November 16, 2006
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