According to Paul Baldwin, global head of structuring, it is not just HSBC’s global footprint or the size of its balance sheet and risk appetite that give the bank an edge. Those things are a given, he says. What clients really appreciate is the franchise-driven nature of HSBC’s business and the level of innovation it brings to the table.
“For example, we have been instrumental in creating new geographical markets, such as China and Vietnam. They are not always easy or ‘convenient’ markets, and take a lot of work with local regulators to establish what is acceptable.”
Equally attractive to clients, says Mr Baldwin, is the fact that HSBC also deals in new risk classes, and particularly in taking risks that are not easily “hedgeable”.
“Taking off-the-shelf risk is not enough anymore,” he says. “Clients need you to take difficult-to-hedge and non-traditional risk. One example is deal-contingent hedges, which allow financial sponsors to lock in a cost of funding in respect of their acquisition financing without market risk downside in the event that the proposed bid does not succeed.”
Another example of innovation came from the swaps market. “Financial instruments for risk management are limited in China in both the onshore and offshore markets. Deposit rates are low and last August a client was looking for a way to enhance the return from its surplus currency funds held in China. We transacted the first currency non-deliverable interest rate swap of its kind,” says Mr Baldwin.
“The days of pay-off driven innovations are over. Now it’s all about finding real solutions for real world risks.”
