Foreign Ownership Gives BBVA Compass an Edge in Tech: CEO

This has been a difficult year to run a foreign-owned bank in the United States, but Manolo Sanchez has managed to find some silver linings.

The head of BBVA Compass (BBVA), the U.S. unit of Spain's Banco Bilbao Vizcaya Argentaria SA, says his bank's international focus has been especially helpful as it revamps its systems. In the past few months, BBVA Compass has unveiled bilingual mobile banking programs, several tablet-based apps and even an automated debt collection system. Sanchez has also spent the past two years overseeing a massive internal technology overhaul at BBVA Compass — something he says would not have been possible without the benefit of the parent company's expertise in Europe, as well as emerging markets like Mexico and Latin America.

"We are an organization that believes that there is a case for international banking conglomerates," Sanchez said. "We see a lot of ideas flowing from emerging markets to developed economies … and we as a group really work to extract the value and to transport it to another market."

Some of that value has come from the cost cuts and improved service provided by new technology. The Birmingham, Ala., company has spent years overhauling its systems core, so that it can process customer transactions in real time rather than in the overnight batches that are standard for most of the industry. BBVA Compass is now processing checking, savings and certificates of deposit transactions on the new system, and expects that consumer loan transactions should be migrated over by the first quarter of next year.

The process has cost BBVA Compass $362 million, including the value of a contract with partner Accenture. Sanchez, speaking in late October, called the expense necessary to give the bank a competitive advantage for the future, as traditional branch networks shrink and more customers expect their banks to offer online, mobile and other high-tech options.

The overhaul has shortened the time it takes to open a new deposit account to five minutes from about 45 minutes, Sanchez said. While the bank expected the new core to reduce costs by 15% by 2015, executives told American Banker last month that they are close to hitting that goal already.

"We have seen how banking technology has become a feature in many other markets," Sanchez said. "There's a whole generation coming that … they don't go to a bank branch, they don't know what that is for."

Still, there are certain challenges to being a European-owned bank. The debt problems on the continent have placed pressure on the parent company and the overall European banking system, and foreign banks operating here are coming under increased regulatory scrutiny.

The Federal Reserve this month released a proposal that would overhaul the way regulators will supervise foreign banks that operate in the United States. Foreign banks with more than $50 billion of globally consolidated assets would be required to place their operations under a first-tier U.S. intermediary holding company, something that BBVA has already done for "the vast majority of the U.S. business entities," according to spokesman Thaddeus Herrick.

"While there will be some impact to our U.S. operations, we believe our business model already lines up well with the proposed rule," he said in an email last week.