Bank of China

BOC's American credit risk chief quits

PUBLISHED : Friday, 26 May, 2006, 12:00am
UPDATED : Friday, 26 May, 2006, 12:00am

Inability to adapt said to be key reason for banker's departure after only 18 months

Lonnie Dounn, the United States-born credit risk chief of Bank of China, tendered his resignation a month before the mainland's second-largest lender began marketing its $75.4 billion Hong Kong initial public offering.

His scheduled departure in September, 18 months after his official appointment as BOC's first chief credit officer, will end the first experiment by a major mainland bank of installing a non-Putonghua-speaking foreigner to spearhead the campaign to tighten historically lax credit and market risk management.

BOC has over the years seen several of its top officials, including former chairman and president Wang Xuebing and former vice-chairman Liu Jinbao, imprisoned for graft and other scandals.

Improvements in its risk management - including credit risk control - are one of analysts' top concerns during its ongoing IPO, the largest globally since 2000.

Mr Dounn declined to comment on his resignation yesterday while a BOC spokesman said it was due to 'personal reasons'.

However, people who know the 53-year-old New Yorker said his decision was due to no single reason apart from an 'inability to adapt' and came after months of agonising.

'There have been a number of issues in relation to how easy it is for somebody who doesn't speak Chinese to work in a Chinese bank and whether he can get the things he wants to do [done],' a source said.

'Timing-wise, I just think he got fed up,' he added. 'As a professional from New York trying to get a Chinese bank to follow what he thinks should happen ... it didn't work out.'

His resignation will become effective in September, giving China's largest foreign exchange lender breathing room to search for a replacement, according to BOC's listing prospectus.

The document suggested the bank offered Mr Dounn an annual package of about US$1.1 million, placing him among the five highest-paid officials or directors of the bank.

During his tenure, BOC's impaired loan ratio fell 0.6 percentage point to 4.9 per cent last year.

Before joining BOC, Mr Dounn spent more than 30 years with HSBC, most recently as its Asia-Pacific chief credit officer between 1998 and 2004.

The role of chief credit officer is a new development at mainland banks, which historically based lending decisions on state economic policies rather than risk-return assessments.

Non-performing loans were once estimated to account for half of all bank lending in the country.

While the government has been eager to make its banks more competitive and cleaner, observers said the appointment of a foreign banker without local language skills and an in-depth knowledge of the workings of a major mainland state bank would be a doomed experiment at best.

More cynical assessments said the recruitment of Mr Dounn was window dressing for global investors before and during the IPO.

Even at BOC, most bankers are uncomfortable communicating in English. Internal meetings, called more frequently than at international competitors not just to build consensus but also to debate issues, are held in Putonghua.

Although he took many trips to the mainland as a tourist and for HSBC, Mr Dounn admitted to 'a steep learning curve' of the mainland banking system and BOC in particular in an interview with the South China Morning Post in September last year.

International hires at Chinese banks have frequently complained about mainland lenders' rigid bureaucratic structures which prevent them from obtaining essential information in a timely fashion and implementing reforms.