BNP Paribas enters US retail market via Bank of the West

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BNP Paribas makes first move into US retail

SAN FRANCISCO – BNP Paribas has marked its entry into the broad US retail market by offering market-linked certificates of deposit (MLCDs) issued by its subsidiary Bank of the West.

The French bank is meeting the high demand for certificates of deposit, which are covered up to the level of $250,000 by the US government's Federal Deposit Insurance Corporation (FDIC) scheme.

"The market for MLCDs has been growing in the US, partly as a result of the crisis," says Serge Troyanovsky, director, head of retail distribution North America in the Structured Solutions Group at BNP Paribas in New York.

"After the collapse of Lehman Brothers, a lot of investors started paying close attention to the credit quality of the issuer and have decided to allocate a larger part of their portfolio to CDs," says Troyanovsky.

Any new issuer coming to market receives a lot of interest, he says, especially from high-net-worth investors looking to invest significant amounts through FDIC covered deposits.

As CDs can only be issued by a US bank, BNP Paribas has used its subsidiary to issue the products. "Bank of the West has a large retail distribution network, particularly on the West Coast and in the Midwest. That is the best way to tap the market," says Troyanovsky.

The Bank of the West MLCDs track a basket of 10 stocks and pay an annual coupon based on the performance of the stocks measured from inception, with a cap at 8% and a floor at -35%.

MLCDs paying regular coupons have become popular in the US as investors look for income they cannot find elsewhere in the current low-rate environment.

The notes are 100% capital protected as well as being covered by the FDIC scheme in the case of a bank default.

BNP Paribas plans to start with these products and extend its issuance programme through Bank of the West as the products gain interest. "We will focus on a greater distribution for the current products and then look at CDs which cover other asset classes," says Troyanovsky.

The bank already has a business in the US offering medium-term notes through broker-dealers, registered investment advisers and family offices, but this is its first broad retail product.

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