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RBC Case Study

RBC opened a representative office in Bangkok, Thailand to capitalize on the booming Thai economy and market. The initial staff consisted of 5 people including a general manager from Canada and 4 Thai employees. The estimated pretax profit was $170,000. Upgrading operations to a branch status would allow RBC to engage in onshore lending in the local currency and expand their business lines. However, in 1997 Thailand was experiencing an economic crisis as exports declined, foreign investment decreased, and bad debts accumulated, prompting an IMF bailout. As RBC's representative, advising to remain in Thailand during the economic downturn would maintain their first-mover advantage and believe in the country's long-term economic potential.

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Pedro Hache
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200 views2 pages

RBC Case Study

RBC opened a representative office in Bangkok, Thailand to capitalize on the booming Thai economy and market. The initial staff consisted of 5 people including a general manager from Canada and 4 Thai employees. The estimated pretax profit was $170,000. Upgrading operations to a branch status would allow RBC to engage in onshore lending in the local currency and expand their business lines. However, in 1997 Thailand was experiencing an economic crisis as exports declined, foreign investment decreased, and bad debts accumulated, prompting an IMF bailout. As RBC's representative, advising to remain in Thailand during the economic downturn would maintain their first-mover advantage and believe in the country's long-term economic potential.

Uploaded by

Pedro Hache
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Pedro E.

Hache
RBC Case Study.
Feb. 22, 2017

1. What were RBC’s ultimate goals in opening a representative office in


Thailand?

The Royal Bank of Canada saw tremendous potential in the booming of the
Thailand market and economy. After completing the according due
diligences, they acquired the license to operate and opened their first office
in Bangkok. Their market study determined that great returns where
expected from trading.

2. How large is the initial staff for the office and what is the estimated pretax
profit?

The initial staff for the office consisted of 5 people. One general manager
from Canada with previous experience in RBC and 4 Thai out-of-college with
experience in the needed fields. The 4 young Thai employees were thought to
be good for the know-how and new clientele. The estimated pretax profit is
$170,000

3. What are RBC’s four major business lines in its Asia Pacific network?

The four major business lines in Asia Pacific network for RBC are: financial
institutions, multinational lending, treasuary services and global private
banking.

4. What are the limitations of BIBF licenses?

The limitations are the following: banks are restricted to trade in local
currency, they can only operate with one office, and when engaging in loans,
money for loan must come from overseas.

5. What are the advantages of the possible upgrading of RBC’s operations in


Thailand to a branch status?

Upgrading would open RBC to a larger range of business, including


onshore lending in the local currency.

6. What are Thailand’s most important exports?

Manufacturing consists of 81% of Thailand’s exports. In this category we find


electronics, jewelry, furniture and clothing.

7. What is the “current” (1997) situation in Thailand?

Thailand was amidst an economic conundrum during 1997. “The country’s


exports were no longer booming; foreign investors were becoming
concerned about the current-account deficit; and big loans to property
developers had inflated a dangerous financial state. Bad debt continued
to accumulate, causing more anguish in the financial system. The stock
market plummeted to depths not seen in eight years.” (Case Study)

8. What are the highlights of the IMF’s bailout of Thailand?

Regaining economic confidence and control was the highlight of the IMF’s
bailout. After $16.7 billions in loan exchange, Thailand was able to get back
on track. Two reforms came as result which were: the restoration of
budgetary control and the restructuring of the country’s corrupt financial
system.

9. As RBC’s representative in Thailand you need to prepare a detailed


recommendation for senior management to either:
a. Stay in the country and “weather the storm”, which perhaps means
to take losses for an extended period of time
b. Cut your losses now and have the bank focus on its efforts elsewhere,
which means forgetting about getting back in the country in the foreseeable
future

As a representative of Royal Bank of Canada, I’d definitely advise to stay in


the country and “weather the storm”. Sure, this might result in taking losses
for a determined amount of time, yet I find much more important to maintain
their market advantage as they were the pioneers of International banking in
Thailand. There are more than enough signs of Thailand’s economic future
and capacity.

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