RBC To Grow FX in Singapore As Barnett Moves From London

Royal Bank of Canada is planning an expansion in foreign exchange operations in Singapore after relocating David Barnett, FX trading manager for Europe and Asia, to Singapore from London (FXW, March 13). Barnett is managing the room there as well as acting as chief dealer.

"We felt that Singapore, because of its newness and its importance to our strategy, had to have a hands-on operation," says Barnett. "It's a lot easier for me to run London from Asia than it is to run Asia from London."

RBC Singapore recently lost its chief dealer, who returned to Bank of Montreal, as well as David Wong, its general manager for Asia, who left for personal reasons. Barnett will be stationed in Singapore for the next year, but plans to train a replacement to eventually take over the regional job.

In the meantime, however, he plans quite a bit of expansion. "The bank's new chairman, John Kleghorn, has said that he'd like international revenue to grow as a percentage of RBC's revenue," says Barnett. "And the one area where we think it can grow is in Asia, where traditionally, we don't think we've been as strong as we should have been."

He says that is therefore the region where the bank will be putting a lot of emphasis over the next 12 months. When RBC effectively split the world in two last March --North America began reporting to Toronto and Europe and Asia into London -- the bank funnelled the non-domestic currency business into Singapore.

At the time, the Singapore dealing room had only five traders. It has now grown to 28 and Barnett says it will probably stabilise at around 35 people, growing to 40 in the next two to three years. He adds that the bulk of new hires will be in the regional currencies.

"The local currencies here are very important to this market. We are looking to add four or five people to staff that desk," he says. "But the problem is, everybody's looking for them." He says he will probably hire a local to head the desk in the next five or six weeks.

RBC's business in the region is mainly customer-driven. "Our customer turnover in Asia, which is very important, has risen five-fold in the last year," he says. "We expected it to increase in Singapore because we had a small dealing room. But in Asia, particularly, it has risen. Our Tokyo office has been responsible for a lot of this additional business being funnelled into Singapore." Tokyo is managed by Ed Docherty.

RBC also has a small proprietary operation. "But," says Barnett, "I believe that proprietary trading is the icing on the cake -- and you have to have the cake first. The customer base has to be your reason for being in the business. So what we're doing is concentrating on our sales side."

RBC transferred Stephen Yolland from London to head that effort (FXW, December 12). RBC concentrates its sales efforts on large financial institutions, fund managers and the like, says Barnett. "We've exceeded our turnover target," he adds. "I think customers are probably gravitating towards banks such as us, the Morgans, Chemical Bank and Chase, because they like the credit. And we offer so may products, whereas certain banks boutique it."

"He says that banks within this "top 12" are going to succeed, while other banks perhaps could start to fall by the wayside in Singapore, "where they'll find it very difficult to break into the limited customer business that's around."

RBC currently has five customer sales dealers in Singapore, nine in spot, ten dealers trading FX forwards and money markets and an options trader and an assistant. Tokyo has nine dealers, seven of whom are in sales, while two are spot yen traders. Hong Kong has six, primarily in sales, but a spot trader for Hong Kong dollars and a Hong Kong dollar money-markets dealer. The bank also has small operations in Taiwan, Korea and Shanghai.

After he's finished building Singapore, Barnett says he'll probably turn his attention next to building Shanghai, Sydney, Thailand and Vietnam. These operations would be active primarily in sales and the indigenous currencies. "We've done this in Europe and it's worked so well," he adds, "but it's a long way down the road."