Rabobank International has applied for additional banking licenses to allow it to distribute structured products to Japanese institutional investors. Its Hong Kong desk will handle risk management for the effort and the sales team will be based in Tokyo.
Donal Galvin, head of global financial markets Asia in Hong Kong, said it is difficult to know exactly when it will enter the market. "We'll hopefully have everything in place by the end of Q2 2007." Planned structures are based on debt, credit, foreign exchange, interest rates, equity and hybrids of all the above.
The attractiveness of Japan for the bank is not just the size and appetite of the investors but also the fact that investors in Japan tend to buy long-dated structures. A lifespan of 20 years on a product, for example, means there is risk to the investor's principal if something happens to the issuer in this period. This is why Rabobank will pitch its AAA rating as important, said Galvin. "Everything is scalable in Japan, so even a small percentage of a large market will make a difference."
The banking market in Japan is regionalized, so Rabobank will be able to approach the regional banks as distribution channels.