BNP Paribas brought on Timothy Bitsberger, a former Treasury Department official and Freddie Mac treasurer, to create and lead an official institutions coverage team for the Americas.
The hiring this week is part of the French bank's global effort to boost dealings with central banks, sovereign wealth funds and government-sponsored entities and supranationals.
Previously, such clients may have worked with BNP through its U.S. financial institutions group, but for the most part, the interaction was limited to conversations with a specific desk about a specific product.
"Historically, different people in the firm spoke to these institutions," said Joe Malley, head of the North American financial institutions group. "It wasn't being handled on a coordinated basis." With the onset of the global crisis, these institutions started to play a much bigger role in the global capital markets, making it more important to organize BNP's relationships with them, he said.
According to Federal Reserve data, more than $3 trillion worth of U.S. Treasuries were held by foreign central banks as of last month. Last year, U.S. government debt issuance totaled $2.2 trillion, according to data compiled by industry group Securities Industry and Financial Markets Association.
In addition, foreign central banks are big investors in U.S. agency securities. Debt issued by the government sponsored enterprises last year totaled $1.1 trillion.
According to the U.S. Treasury department, some of the biggest holders of U.S. securities — including Treasurys and agencies — are China, Japan, India, Taiwan and the Russian Federation. A bulk of China's investments are in long-term U.S. Treasurys and long-term U.S. agencies.
The needs of the World Bank, the International Monetary Fund and the Inter-American Development Bank are not exactly the same as those of Freddie or Fannie Mae, but they are quite similar in some ways, Malley said. "It became a market, just like the bank sector or asset management."
Bitsberger said the needs of these institutions have grown, as well.
"It's no longer just about selling Treasurys and mortgage bonds. They need investment banking help, debt capital market assistance, basic rates flow and, in some cases, pretty sophisticated project finance," he said.
"As they become an integral part of the capital markets, we believe BNP Paribas can help across the board."
BNP needs to get to know the accounts better, so it can serve them on a more "holistic" basis, Bitsberger said. "The market too often groups central banks as the same, sovereign wealth funds as same, but each are individual institutions. Sometimes they act very differently. They have different risk parameters, and they view the world differently. Because of that, their investment needs, even their DCM [debt capital markets] needs, are quite different. Our job is to view each individually."
BNP has been a primary dealer of U.S. Treasurys since Sept 15, 2000; at the time Paribas Corp changed its name to BNP Paribas Securities Corp. Paribas had been among the primary dealers but a merger between Paribas and BNP in 2000 brought about BNP Paribas.
Fannie, Freddie and other government-sponsored enterprises have long been some of Wall Street's biggest clients. They issue large amounts of debt to fund their purchases of mortgage bonds. Their combined holdings total around $1.5 trillion. They also use interest rate derivatives to manage the risk in these portfolios.
Securities firms also do a steady business trading the mortgage-backed securities that Fannie and Freddie guarantee. But underwriting GSE debt and trading mortgage bonds tend to generate thin margins.
Bitsberger said that despite the competition from other Wall Street firms, working with GSEs is not necessarily a low-margin business, because it conveys other benefits.
"It's one of those things opens a lot of doors," he said. "It gives the bank great exposure, on an international scale, to a whole host of investors."
Bitsberger was Freddie's treasurer from 2006 until 2008. Before that, he worked for four years at the Treasury Department, first as deputy assistant secretary and then as assistant secretary for financial markets.
At the Treasury, he was involved with expanding the Treasury Inflation Protected Securities program, creating an auction system and reintroducing of the 30-year bond.
Bitsberger, who joined the firm as a managing director, reports to Veronique Ormezzano, head of official institutions coverage in Paris, as well as to Malley.
The official institutions group will also be active in Latin America. It's part of a broader plan for expansion in the region.
Guido van Hauwermeiren, BNP's head of international coverage, said it has a regional hub with about 2,488 professionals in Sao Paolo and smaller offices in Argentina, Chile, Peru and Colombia. It wants to double its revenue from the region over the next three years, and one of the ways it hopes to do this is by expanding its work with central banks, sovereign wealth funds and supranationals, "as well as continuing our efforts with the most important Brazilian corporations," van Hauwermeiren said.
He said BNP has been expanding its product capability in Latin America, including fixed income, custody and equity derivatibes. This expansion will involve "incremental" hiring, he said.
Van Hauwermeiren it was up to Bitsberger to organize the Americas official institutions group, in close cooperation with the Latin America regional head, Louis Bazire.
Also this week, BNP announced that it had hired Mike Albanese as a managing director in its financial institutions group. He will report to Malley and will cover insurers and reinsurers. Albanese was head of business development for the Americas at Swiss Re. Before that, he held senior-level positions at Deutsche Bank and AM Best Co.
BNP was the 13th among underwriter s of U.S. debt in 2010, with $38.6 billion and a market share of 1.6%. World-wide, it ranked 12th with total volume of $163.2 billion It ranked 43 in terms of U.S. equity with $156.7 million