The first Chinese bank to have settled in Luxembourg
Bank of China Luxembourg Branch
The 103 year-old Chinese bank still in existence was also the first to open a branch in Luxembourg more than 35 years ago. Today, Bank of China is one of the largest banks in the world by market capitalization value. It was, over the recent 3-year period, consecutively elected to G-SIFIs. The bank aims at nurturing the business relationships between the Chinese and Luxemburgish markets.
Bank of China has been operating in Luxembourg for 35 years. When the Bank first came to the Grand Duchy in 1979, it was the very first Chinese bank to set up a branch outside China under the name “Bank of China Luxembourg Branch”, after the founding of the People’s Republic of China in 1949. In 1991, Bank of China subsequently set up a subsidiary “Bank of China (Luxembourg) S.A.”, adopting the combined operating business model of both a branch and a subsidiary.
During the 80s and the 90s, the banking activities of Bank of China Luxembourg consisted mainly in customer deposits, loans, remittance as well as letters of credit, cheque collection, and foreign exchange, money-market, etc. As the bankin-g business worldwide gradually evolved towards new banking products and services, so have the Bank’s activities in Luxembourg, especially over the last few years with the internationalization of RMB and the increasing number of Chinese companies expanding abroad. Today, Bank of China is proactively reshaping its offering with comprehensive services packages including diversified product structures tailored to its customers’ specific needs.
Over the past 8 years, Bank of China has established branches across the borders through its Luxembourgish EU-passport banking license. Bank of China Luxembourg is currently oversighting 5 branches in the Netherlands, Belgium, Poland, Sweden, and Portugal. It is now a 6-country 7-entity financial institution, with approximately 150 employees of about 20 different nationalities spread within its 5 branches. Bank of China is consistently looking for new opportunities to further develop its business in Luxembourg and to act as a bridge between Luxembourg and China.
Bank of China supported HNCA in purchasing Cargolux’s shares (35%). This acquisition is a great opportunity to open the passenger and freight channels between Zhengzhou and Luxembourg as well as promote bilateral economic, trade and cultural exchanges. Bank of China Luxembourg offers continued support to Chinese companies willing to develop business ties between China and Luxembourg. Interview with Lihong Zhou, general manager of Bank of China Luxembourg Branch.
What projects are you currently working on?
One of our primary objectives and projects is to continue with our business transformation. This involves turning our corporate banking business from a purely traditional commercial banking business to a business structure that focuses on both commercial banking and investment banking business; this translates into speeding up the upgrade of our financial market operation and developing the asset management, funds, bonds, trust, as well as cross-border trading business; further developing the RMB business and consolidating our RMB market position; continually focusing on our funding, adjusting our assets and liabilities structure, and improving liquidity and promoting high-end and value-added personal financial services.
We are also presently spearheading an all-round fully-integrated RMB business. Using RMB as our strategic business to establish and strengthen our brand name, we have set up a special RMB service team to help promote the various types of RMB businesses such as deposits, loans, account, settlement, treasury, capital market business, etc. In 2014, our Bank’s cross-border RMB settlement business amounted to 115 billion yuan. Over the same year, we successfully became the first Chinese company to issue and list RMB bonds in Luxembourg and Continental Europe, known as the “Schengen Bond”.
What successes are you particularly proud of ?
As a Chinese bank operating in Europe, faced with a complex operating environment in recent years and an increasingly stringent regulatory situation, we did a lot of work to continually promote proactive risk and compliance management, improving our staff’s risk awareness and fostering good compliance culture to ensure strict compliance with the local regulations, both at the Luxembourg and the European levels. Going hand in hand with this approach, we have also put in our vigorous efforts to develop and expand our overall business. As such, one particular achievement which is very significant to our Bank is that despite the many challenges we faced, our combined and consolidated operating results for 2014 made a historic breakthrough, ranking us the first among the Group’s branches in continental Europe. We certainly hope to keep on improving all aspects of our business operations for the coming year.
What are the biggest challenges your sector is facing?
One of the biggest challenges for our Bank is the increasing market competition. For the first 20 years that we have been here, Bank of China has been the one and only Chinese bank in Luxembourg. Now, there are ICBC and CCB. Also, Agricultural Bank of China and China Merchants Bank will soon open branches in Luxembourg. The Bank of Communications, Shanghai Pudong Development Bank and other Chinese banks are also eager to set up offices here.
At the same time, regulatory control is increasingly stringent, with many new important regulations and requirements such as BASEL III, LCR (liquidity coverage ratio), quantitative indicators CRDIV banking supervision system / CRR, the liquidity stress testing concept, FATCA, EMIR, MIFID II, etc. which need to be implemented progressively over the coming years.
Our Bank has grown from a small bank with merely 10 employees, to the present 6-country 7-entity financial institution of about 150 employees, with extensive business development and rapid assets increase to EUR 16 billion currently- It was inevitable that such a fast and powerful growth has yield some challenges we need to address. We recognize the importance of strengthening our middle-management capacity in order to ensure effective management of our business.
If you could change one thing about your sector, what would it be? How could the Chamber of Commerce support you?
The Luxembourg banking sector has accomplished many excellent achievements to stay ahead as a leading financial center. Indisputably, Luxembourg has a very open market, an efficient regulatory supervision as well as a stable and business-friendly environment. As our business expands, we are in need of suitable and talented professionals to join our Bank, particularly people who can also understand Chinese - which is a rather limited pool. I must admit that we have faced some difficulties in recruiting the right people. What may be helpful is perhaps to organize more training programs addressed to attractive young talents from the country and abroad.
Bank of China (BoC) at a glance
1912: Formal establishment of Bank of China
1929: BOC opened its first overseas branch in London
1979: BOC opened a branch in Luxembourg, which gradually became its European Headquarter
Employees in Luxembourg: 150 (including its branches)
Employees worldwide: 300 000
Text: Corinne Briault - Photos: Pierre Guersing