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BankAm to set up debt-FII vehicle

BS Banking Bureau

Bank of America is planning to set up a debt-based foreign institutional investor to undertake structured transactions.

The bank is also exploring the options for setting up a back-office hub which would include technology, operations and credit in India.

BankAm's managing director, head of global markets group & Asia Global Corporate & Investment Banking, Duncan E Goldie-Morrison, said : "We will use the debt FII vehicle to do complex structured debt deals for Indian corporates. The idea of a debt FII is to have an apparatus in place so that BankAm can use this opportunity to its advantage."

"The debt FII will give the leverage for the bank to bring in the money when it is required and then take it out without any restrictions. The bank will also not be affected by the single borrower limit in this case," said BankAm's managing director Vishwavir Ahuja.

Goldie-Morrison said: "Traditionally, banks have booked the capital in their own books. We would like to be the arrangers of capital or underwriters. We do not want to own the assets full time. We would like to increase the velocity of the capital. We will originate debt for corporates and move it to other institutional players. This will also help in keeping our balance sheet much more liquid."

The bank has shrunk its global balance sheet size from $670 billion three years ago to $622 now.

In India, the bank plans to churn its balance sheet by selling off some of its assets and buying other assets.

The bank is bullish on Hong Kong, China, Taiwan, Singapore, Korea and India in the Asian markets. In the Indian market, the bank is looking at developing fixed income and also participate in the market development process.

BankAm is in the process of outsourcing a part of its technology work to Infosys, TCS and Accenture.

"We are also looking at sourcing certain of our activities -- technology, operations and credit-- and other operations which are less location dependent to India," Goldie-Morrison said. The bank has made a commitment of investing $50 million in a primary dealing outfit.

Of this, $11 million has already been bought in around a year ago to be a participant in the fixed income business.

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