Banks will not end connected hiring
Financial institutions say employing the children of government officials or important people happens all over the world
Banks have no plans to change their policy of hiring so-called princelings or other well-connected people to help grow their business on the mainland or in other emerging markets - despite the shockwaves caused by news that United States regulators are investigating JP Morgan's hirings of the children of the elite in China.
The US Department of Justice last month joined the Securities and Exchange Commission in examining whether conflicts of interests may arise for the US investment bank from its hires of the princelings - the second or third generations of senior mainland government leaders - to help the firm secure deals in China.
The JP Morgan case attracted public attention on the mainland where social unrest is on the rise due partly to the corruption perceived as widespread within the ruling party.
However, many bankers said the case would not stop banks from hiring the children as the practice was not unique to China and occurred around the world, in particular on Wall Street.
Sergio Ermotti, the global chief executive of UBS, who is ambitious about the Swiss bank's rapid expansion in China, said he would not rule out the hiring of sons and daughters of Chinese leaders as long as they were hired on merit.
"Our hiring policy focuses on recruiting the best talent, regardless of their background. It is also discrimination if we decide not to hire a good talent just because he or she comes from the family of a leader," he said.
"The most important issue is to have good controls in place to prevent any conflict of interest and UBS has always had policies in place to prevent that happening."
Mainland firms also hire the so-called princelings and plan to continue doing so.
Senior executives at major mainland investment banks including Citic Securities and Haitong Securities acknowledge privately that they all have some sons and daughters of "very important people" working for them.
"Because their parents are very important people, they (the children) know many important people and have business ties too," said one senior executive at a major mainland investment bank who declined to be named due to the political sensitivity of the issue.
"As long as we do our compliance in a fair way and in line with the law I don't see why we should not hire these children," he said.
"If you say because your father is 'someone', I cannot hire you. That's not fair for the kid either," the banker added.
Timothy Lo, managing director of French private bank CIC Investor Services, said in the wealth management business where private bankers were under pressure to take on wealthy clients, hiring princelings or prominent businessmen and well-known people was a common practice.
"This happens not only in China but also in Hong Kong where banks like to hire second generations from the established families," Lo said. "Private Banks not only target the princeling family or relatives but more often leverage on the princeling family and social connections and contacts for other business opportunities."
An international headhunter, who does not want to be named, said all big investment banks or private banks were in favour of hiring princelings and he did not believe this would change as a result of the US regulators' action.
"No bank would make having a 'family connection' a requirement for any candidates. But under the table we all understand this is an advantage, though not a must. When the candidates have an interview with the headhunter, they won't forget to mention their family connection and the headhunter won't forget to pass on the message to the banks," the headhunter said.
Kelvin Wong, the chairman of Hong Kong Institute of Directors, said in any free market banks or companies should be allowed to decide who to hire.