Switzerland's Julius Baer and Bank of China have entered into a strategic agreement whereby they will mutually cross-refer clients and collaborate on marketing activities.

Switzerland's Julius Baer and Bank of China have entered into a strategic agreement whereby they will mutually cross-refer clients and collaborate on marketing activities.

Under the terms of the agreement, BOC will refer clients with international private banking needs outside China's Mainland to Julius Baer. Meanwhile, clients of Julius Baer requiring banking services in China will be referred to BOC.

The two partners also envisage cooperation in product distribution and financial market research as well as certain joint initiatives including investment conferences. Also BOC's Swiss entity, Bank of China (Suisse) will be integrated into Julius Baer.

It is the latest sign of foreign banks thinking creatively of ways to get a foothold in the restricted Chinese market, which, with its vast pool of millionaires, has been frequently painted as the holy grail of wealth management. Many international banks, including Morgan Stanley, Citi, Goldman Sachs, UBS, Royal Bank of Scotland and Credit Suisse, have joint ventures in the country. Some have chosen to partner with a well-known brand, while others have taken the route of tying up with a younger firm with less experience, which may give the foreign bank more opportunity to steer the direction of the JV.

And the rules are gradually becoming more relaxed. A new rule change announced in May by the China Securities Regulatory Commission means that foreign banks are now allowed a 49 per cent stake in an onshore Chinese bank, up from 33 per cent. However control of the board and most of the profits are still in the hands of the Chinese partner. 

Boris Collardi, chief executive of Julius Baer, commented on the partnership with BOC: “The partnership offers the potential for Julius Baer to gain further access to Chinese Mainland, one of the world’s most important and fastest-growing wealth markets.”

Li Lihui, vice chairman and president of Bank of China, said: “Our international private clients have become much more demanding in recent years. The cooperation with Julius Baer instantly complements our existing private banking capabilities.”

It is the latest strategic Asia-Pacific partnership signed by the
Swiss bank, as a way of entering restricted or challenging
heavily-domestically led markets. Last October Julius Baer agreed to
absorb Macquarie's Asian private client business to gain about $1
billion in assets, and is now able to refer clients looking for
investment banking services to Macquarie.

It is not the only bank pursuing this partnership model. Swiss rival
Lombard Odier has been in this space for a few years, and earlier this
year announced a tie-up with Australian wealth manager JBWere, to tap demand for portfolio diversification from Antipodean high net worth investors. It also has around six third party distribution partnerships with Japanese private banks, which sell its funds.

Switzerland-listed Julius Baer’s total client assets amounted to CHF268 billion (US$270 billion) at the end of April 2012, with assets under management accounting for CHF178 billion. The bank's origins date back to 1890 and today it employs 3,600 staff in over 40 locations.

Bank of China was established in February 1912 and is the only Chinese commercial bank which has provided services to its client for over 100 years. It is the most international and diversified bank in China, and is also the first Chinese commercial bank that is publicly listed on both Chinese mainland and Hong Kong stock exchanges. Bank of China said it was the first commercial bank in China with a private banking business. It also has an aircraft leasing business.