Winner: Bruno Bancal, head of active management & transactions at BNP Paribas

In the significant risk transfer space, BNP Paribas has gone from French ground-breaker to international powerhouse and throughout that journey it has been led by Bruno Bancal, its head of active management & transactions. Described as the bank’s “driving force” by one investor, Bancal has also filled a similar role for the market more broadly, as both a leading advocate with regulators and educator through industry conferences and third-party advisory roles.

As with all good leaders, Bancal is more than aware of the role others play in his success. “The quality of people that I am fortunate to work with – from colleagues to investors, to lawyers and so on – is outstanding, making our business both a success and a pleasure,” he says.

Bancal’s involvement in the SRT market began back in late 2009, when – having gained extensive experience as a structurer and a trader across all asset classes – he got the opportunity to move internally to BNP Paribas’ credit portfolio management operation as head of the transaction group. “The idea was to redevelop and rebuild portfolio management activity, in terms of credit hedging, capital and risk management for the corporate and institutional banking division,” he explains. “Very early on we became convinced that synthetic securitisation was a very efficient and powerful tool to manage the bank’s credit risk.”

However, it would take four years for such a transaction to materialise. “When we began, the market was basically still shut for French institutions, thanks to all the bad press surrounding securitisation in the financial crisis – and derivatives had an even worse reputation. So, a combination of both was seen to be very toxic,” recalls Bancal. “In addition to that, some banks had already issued transactions that did not fully transfer risk in the way that they claimed. The regulator saw this and put a stop on any French bank participating in synthetic securitisations.”

As a result, BNP Paribas – led by Bancal – began extensive discussions with the French regulator, while trying to demonstrate that it was working on a true risk transfer transaction. The firm decided that the best way to achieve success was to create the “simplest and most transparent structure possible”. A conversation that was to foreshadow Bancal’s heavy involvement years later in market dialogue with the EBA around the case for an STS framework for synthetic securitisation.

The result of the earlier discussions was BNP Paribas’ first SRT transaction – Resonance I – in 2013. The deal also acted as a proof of concept for both the regulator and, perhaps as importantly, internally within the bank.

Bancal explains: “Internally, we had to convince everybody that going down this route made sense, because this type of transaction has to gather lots of internal stakeholders. Many people need to be involved and, as it was new and was something that had a bad reputation, it required a lot of educational steps to onboard people from both product line and from function – people from risk, from legal, from finance, from ALM. So, it was a long journey, but in the end, we managed to do this first transaction and it went well.”

From there, the bank has gradually and systematically built its franchise in the SRT space. Not least thanks to Bancal and his team building strong relationships with committed investor partners that have accompanied them throughout the development of the business.

At the same time, the bank has widened the scope of the underlying assets that could be used for SRT transactions and grown the range of the BNP Paribas entities and business lines that can utilise the product. “Over 10 years, we have arrived at a very significant activity that now is very important for the bank, in terms of risk weighted asset management and as a true risk management tool,” Bancal says.

BNP Paribas’ evolution reflects that of the broader market. “The market has, driven by changing regulation and increasing cost of capital, totally evolved from being exclusively for top tier one banks to tier two and tier three banks as well and has widened geographically,” observes Bancal. “Capital management is now something that is more and more prevalent for all banks – we've even seen that ourselves, where initially it was only our CIB division that was looking at managing capital, but it is now all areas of our bank.”

The market has not only expanded in terms of issuers, but also investors. Bancal notes that both the number and range of investors is continuously growing, with pension funds, official institutions, private credit funds, credit insurers and reinsurers being joined by the likes of trade insurers and dedicated SRT funds.

Overall, he says: “There is a market infrastructure that is now really robust and developed for these types of transactions. There is no real reason why the market will not continue to grow – though it will, of course, need to continue to adapt as regulations change and bring new constraints.”

Wherever the market goes from here, Bancal aims to remain part of it, not least because he still enjoys the job. He says: “What I like about the job is that there is first an entrepreneurial type of experience and that takes place within a very big institution – it's a very specific type of challenge to onboard people and to keep them potentially out of their comfort zone in an institution that is very much process oriented. It is quite challenging, but it's very exciting and very interesting.”

Bancal continues: “The second point is that I enjoy the ecosystem of the market very much and the people working in it. For instance, our investors are great people; very seasoned, experienced professionals that are eager to build long-term relationships and have knowledge of how complex it is for us to do this type of transaction. So, they are usually very open to adapting to find solutions and are of the same mind as us that those solutions should be as simple as possible.”

As Bancal concludes: “At the end of the day, it’s always exciting to close a transaction and it's very exciting to find simple solutions to complex problems. On one hand, we try to industrialise our process and to standardise everything to create simplicity. On the other hand, we are always facing new challenges that drives us to find new solutions and to be innovative – not innovation for innovation’s sake, but innovation to solve specific problems.”

For the full list of winners and honourable mentions in this year’s SCI Capital Relief Trades Awards, click here.