GonzoBanker is pleased to announce Marco Krapels of Rabobank, N.A. (RNA) as our February GonzoBanker of the Month. RNA is a California community bank whose parent company, Rabobank Group, is a self-owned cooperative organization comprising 161 independent local cooperatives in the Netherlands plus its central organization, Rabobank Nederland and its subsidiaries. We think Marco deserves a major helping of Gonzo praise for creatively aligning the needs of RNA’s clients – generally speaking, California-based small and medium size food and agri-businesses – with the clout of capital market products. The result has been a satisfyingly credible translation of Rabobank’s vision for local community empowerment.
Name: Marco Krapels
Title: Executive Vice President, Commercial Banking & Global Financial Markets
GonzoBanker Title: Lord of Libor + Swap
Banking on a World View. Marco is a dual Dutch/U.S. citizen and received his U.S. citizenship three years ago. Raised in the Netherlands, he obtained his Bachelor of Science degree in Economics from Jacksonville State University in Alabama, where he received a full academic scholarship, housing included. “I needed to find a full scholarship in order to be able to afford a college education,” said Marco. “My parents didn’t have the money to pay $30,000 per annum for a private school.” It wasn’t a totally free ride, though. “My scholarship was sponsored by the Rotary Club,” grinned Marco, “and I had to give several speeches a year to earn my keep.” Marco entered the Rabobank fold in 1995, after spending some time at ABN AMRO. After getting the lay of the land, he was appointed to head up the Corporate Capital Markets team in London. In 2007 he was asked to set up the interest rate derivatives desk at RNA in California. Since then he has also assumed responsibility for RNA’s commercial banking segment.
Interest. Rate. Derivatives. This topic, for sure, will send cocktail party small talkers scurrying to the other side of the room, but it’s pure magic for RNA’s clients, who opt for Interest Rate Derivatives (IRDs) to help manage risk. The pitch, according to Marco, is simple. “If clients want fixed rate financing we offer this competitively through our Libor Loan + Swap product. The client borrows at a variable Libor [London Interbank Offered Rate] from Rabobank and then separately executes an interest rate swap on the Libor loan for the desired tenor amount. The combined loan and swap provide the client with an effective all-in fixed rate. It’s a win-win.”
As Marco explained it, because Rabobank funds itself in the wholesale market on a Libor basis, it wants to make more Libor loans. At the same time, clients want fixed rate funding but with the flexibility to tailor the hedge to their particular needs. To illustrate, Marco used the example of a winery that wants to expand its bottling facility but knows that construction will take two years to complete. “In the traditional loan market,” stated Marco, “a community bank that doesn’t have the capital market resources we have may offer a variable rate construction loan and at some point in the future decide to term out the loan and offer a fixed rate. The client doesn’t know what their fixed rate will be until construction is complete, which leaves them open to forward rate risk. Our program mitigates the risk with a forward starting fixed rate swap that can be executed at a fixed rate determined today, but that will start sometime in the future.”
The value of Libor + Swap, from Marco’s perspective, is that the client gets the certainty of funds but is able to hedge their forward rate risk so they can manage their cash flows better once the construction is completed.
No Sleight of Hand. Recent events have taught us that transparency and full disclosure are the new fundamentals. Marco acknowledged that the Libor + Swap product carries certain risks that traditional CMT (Constant Maturity Treasury) fixed rate loans don’t. As a result, Marco’s group focuses intensely on providing tailored relationship banking that matches the product exactly to the client’s needs. “An advantage of the Libor + Swap is the lack of prepayment penalty. On the other hand, the swap may have a positive or negative value associated with early termination,” cautioned Marco. “We meet with every client we transact with, digging down to identify their needs so we don’t swap for longer than is required. We also make sure that the client understands the risks and benefits of the product.”
SWAP 101. The ability to successfully present capital market products requires a well thought out program, and Marco’s team seems to have found the right approach. With a combination of education and performance objectives, they’ve created an optimal level of comfort between the bank’s relationship managers and their customers. “You need to set the right performance objectives for each RM,” said Marco. “When we started the program, I met with division heads and we agreed to a set of objectives to which we could hold each other accountable.” Marco and his team also conducted many “Swap 101” road shows to teach RMs and their managers the ins and outs of the product. “The hardest part was getting the RM to take us to see their clients and pitch the product,” said Marco. “They needed to trust that our product would enhance and not harm their client relationship. That’s why I hired experienced people to deliver the product without the execution risk.”
It’s About Knowledge, Intuition – and Trust. RMs dealing with complex capital market products need to be able to grasp the basics. They also have to be able to spot an opportunity, ask the right questions and, most importantly, know when to engage the product team. “If the client trusts their RM,” noted Marco, “they will welcome the opportunity to hear from a solution-driven product team. Sometimes we do more of the legwork than we should, but if an RM adheres to the basic tenets, they can do 80% of the pre-sales work and we will just come in to close.”
Alternative Energy Career. If Marco wasn’t at RNA, he’d be contributing in the renewable energy space, helping deliver solutions to the retail and commercial marketplaces to lower their carbon footprint and reduce their energy bill. Fortunately for Marco, his passion for the environment finds an outlet in Rabo’s general philosophy. “We are currently working on a number of projects within Rabobank that will not only lower our own carbon footprint but also deliver products to our clients to help them be more efficient,” said Marco. “Solar leasing is one of those potential solutions. I feel fortunate that I work for a bank that not only cares about its own impact on the environment but also encourages its clients to do the same.”
When He’ Not Banking. Marco enjoys spending quality time with his wife and children, Luc, eight months, and Sophie, almost four years. “My children always teach me what really matters and to stop and smell the flowers. Reading Dr. Seuss to Sophie is the highlight of my day. I also run 30 minutes every day to maintain my sanity (and keep off the weight).”
Fave Movie. Marco declared it a split between Schindler’s List and Shine. “Schindlers’s List depicts how society under desperate circumstances can do desperate things and that we should never underestimate the horror human beings are capable of,” noted Marco. “But I would also choose Shine because it’s uplifting and celebrates the human spirit.”
Feeding the iPod: The most recent artist to hit Marco’s iPod is Bob Marley. Marco confides to GonzoBanker that he and his daughter dance to it on the weekends.
Impressed by Marco’s dedication to developing a highly competent, bank-wide sales team capable of maneuvering its clients safely through the complex world of capital markets, GonzoBanker is proud to donate $250 in Marco’s name to Global Green. Noted Marco, “They desperately need the money to complete their New Orleans sustainable housing project that will allow Katrina victims to return to their old neighborhoods and live there with dignity.” He encourages everyone reading this article to check out the NOLA project on the Global Green Web site.
Article written by Diana Ferguson
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