Magazine article The RMA Journal

Revolution & Evolution: The Bank Was at Risk Right at Birth. Now Bernard Allorent Ensures That BNP Paribas Uses Risk to Advantage

Magazine article The RMA Journal

Revolution & Evolution: The Bank Was at Risk Right at Birth. Now Bernard Allorent Ensures That BNP Paribas Uses Risk to Advantage

Article excerpt

More than 150 years ago, in the midst of revolutionary upheaval, Comptoir National d'Escompte de Paris opened with FRF 20 million (approximately $3.86 million) in assets. In 2000, CNEP's successor, Banque Nationale de Paris, took over Paribas, which was founded 24 years after CNEP; the combined institutions' net income in 2004 was 4,668 million euros; today, 90,000 employees work in 85 countries around the world.

In April 1999 The RMA Journal interviewed BNP Group Risk Manager Edouard Sautter, who retired in 2000. Now, RMA's Maurice H. Hartigan II and Nicholas Hayes interview Bernard Allorent, Chief Risk Officer at BNP Paribas, who took over the position in 2001. Allorent also is an RMA board member.

BNP's Risk Management Division of the institution was created in 1994. Formerly head of the Europe Division of Corporate and Investment Banking, Allorent now rides herd over risks in each of BNP Paribas's core businesses as well as operational risks on an enterprise-wide basis. This article looks at the unique risks of each and how they are integrated into the enterprise, particularly for operational risk. The common denominator for establishing an enterprise view of risk, says Allorent, is economic capital, "since it provides the common metrics for what we do."

Hartigan: In April 1999, The RMA Journal visited with Edouard Sautter, chief risk officer of Banque Nationale de Paris [BNP]. How has the role of CRO changed over the past sly years and what aspects of your background best prepared you to take over that role for BNP Paribas?

Allorent: That interview took place about a year before the merger between BNP and Paribas. Following the merger, the best practices from each institution were combined to create the current Group Risk Management area, which Edouard headed until his retirement. We now have an independent, more integrated risk management function with risk tools developed from an economic capital framework. We also have geared up to meet the requirements of the most advanced options under Basel II and have made Operational Risk Management a formal segment of risk management at the group level. Finally, the bank has grown significantly since the merger. So overall I believe it is fair to say that Group Risk Management at BNP Paribas has undergone a very deep transformation.

This was my first risk management assignment. What I bring to the role of chief risk officer is broad-based experience in corporate and investment banking, together with a career of international assignments. My 11 years in the U.S. were particularly helpful and a very rewarding professional experience.

Hartigan: Let's dig a little deeper into your international experience. What were your responsibilities in the U.S. market?

Allorent: I began my banking career at what was then the Chase Manhattan Bank, and I went through their training program. My first assignment at Chase was in the Expansion and Diversification area. Then I moved to Paris and began working for Paribas. I returned to the U.S. 10 years later to Paribas's New York branch--first as deputy head, then head of the branch, and then head of the U.S. investment banking operation, for which we were grandfathered under the International Banking Act.

The 1980s were a very good time for a foreign bank to be in the U.S. We took full advantage of the emergence of the leveraged buy-out activity. Then one of Paribas's businesses had suffered from the oil crisis of the early 1980s; we were able to rebuild it as a more project-finance-oriented business, which was--and continues to be--very successful. Meanwhile, on the capital markets and investment banking side, the giant bull market in the U.S. was creating remarkable growth. Both situations provided the bank with excellent opportunities.

Hayes: You now also serve on the board of directors at RMA; how did your involvement with the Association come about?

Allorent: RMA is a splendid organization, which I first came to know through participating in a Global Round Table. …

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