Q&A with MoraBanc: Reaching out to private banking investors across the globe
SRP talks to Ferrán Vila, director of the structured products desk at Andorra-based private bank MoraBanc, about how the private banking landscape in this country and how the firm is approaching the structured products market.
How developed is the structured product market in Andorra? Is there a retail market or is it a private banking activity?
Andorra has always been a market with a strategic value for private banking and has been extremely prolific on the investment side. Structured products have been and continue to be a common investment product in this market.
Andorra has a population of around 80,000 and has a small retail market, but the core business is mainly private banking. In addition, most banks in Andorra are expanding abroad with new offices and branches. In our case, we have offices in Andorra, Zurich, Miami and Montevideo and the bank is very focused on continuing with the international expansion.
How long has MoraBanc been involved in the structured products market and what are the plans for the firm?
MoraBanc has been involved in the structured products market for the last 15 years. Nowadays, the bank has a strong focus on this business and we have plans to expand our wrapper offerings as well as to reach out to private banking investors across the world.
Is there any regulation specifically for structured products? Are there any restrictions or guidelines when distributing these products?
MoraBanc follows European regulatory standards such as Mifid and we apply the suitability and appropriateness test to match the risk profile of our customers. The domestic regulator in Andorra is the Institut Nacional Andorrà de Finances (INAF) and financial institutions are governed by its rules on investor protection.
Are there any restrictions in the use of counterparties? Does MoraBanc use Spanish-based counterparties or counterparties based in other jurisdictions?
MoraBanc deals with counterparties from all over the world. We hedge our trade through derivative instruments and third-party notes subject to approval from our risk department and we follow standard guidelines required in the market to mitigate risks, for example memorandums of understanding and Isda (International Swaps and Derivatives Assocation) master agreements.
What kind of product wrappers have more traction among MoraBanc customers e.g. notes, certificates, funds, deposits etc?
We have a diverse approach when it comes to the use of wrappers. Currently, our structuring is done through the bank's Diposit Morabanc (booking in Andorra) and EMTN Morabanc/third-party notes (booking in Andorra and outside) programmes. We recently introduced a new special purpose vehicle (SPV), named Alco Finance (booking in Andorra and outside). In this way, we have three different ways of structuring products and can look for the most suitable wrappers for our customers.
Is there more demand for capital protection or capital-at-risk structures?
Historically, the most commonly used types of products in Andorra have been structures linked to credit events such as credit-linked notes or first-to-default products. That's the reason why there is strong demand for capital protection subject to credit. Equity-linked structures are also very common in Andorra. We are currently looking for opportunities within the interest rate, FX and commodities segments.
What opportunities are you looking for at the moment?
Nowadays we are looking for a product range with a diversified offering regarding wrappers, asset classes, credit risk, underlyings and payoff types. We strongly believe that with our new SPV, Alco Finance, we will improve our offerings and this will allow us to add flavor to our products.
How does your recent performance compare with your expectations?
Our performance is beyond our expectations. We are sure that the way to obtain a good portfolio for our customers is to diversify and try and approach customers with the opportunities that the market is providing. We are working hard to offer our customers risks and solutions that we can back with our own balance sheet.
Raul Encisco Portoles is a research analyst at StructuredRetailProducts.com. Connect with him here.