Keeping regulators happy a top priority for banks in Asia

PUBLISHED : Wednesday, 07 May, 2014, 3:14pm
UPDATED : Thursday, 08 May, 2014, 4:44am

Banks have a new buzzword to describe their strategy in Asia: diplomacy.

Stung by regulatory probes into allegations ranging from the hiring of the offspring of senior Chinese officials to rate manipulation in Singapore, and grappling with reams of new rules brought in after the global financial crisis, firms are going on a charm offensive with the region's regulators and governments.

Executives brought in to head banks' businesses in major Asian financial centres are now expected - by the management and regulators - to devote more time to building their relationships with financial watchdogs.

"Regulators have become major stakeholders - as important as big corporate clients - so firms are recognising how key they are for business," said Judy Vas, a regulatory leader for global consultancy EY's financial services business in Asia.

Barclays recently promoted its Asia head of tax, Li Li Kuan, to become country head for Singapore, stressing one of her primary duties was to manage "regulatory relationships" in the city state.

Her appointment was unusual, given country head roles are more often filled by "rainmakers" - corporate or investment bankers there to close deals and look after major clients. But priorities are starting to shift.

JP Morgan brought in former DBS Vickers boss Edmund Lee as its Singapore head last year, replacing Philip Lee, who had been more focused on investment banking clients, noting one of the new appointee's key duties would be to manage relationships with the government and regulators.

A survey found the amount of time compliance teams at financial firms in Asia spent preparing reports for their boards increased the most compared with other regions.

More than a third of teams in Asia spent at least one day a week on such work, compared with about 20 per cent of them in 2012.

Banks are also building up their regulatory or government affairs offices, an area they have previously put less focus on in Asia.

"Although many firms have established regulatory policy and strategy functions in the US and Europe, most firms have a very nascent function or none at all in the Asia-Pacific region," said Chris Cook, a head hunter for Executive Access in Hong Kong.

Cook said his firm was trying to fill several such positions because there was no established pool of talent in the region that could be tapped.

JP Morgan appointed the International Monetary Fund's former Asia head Anoop Singh in January as its Asia head of regulatory affairs, while Goldman Sachs brought in former US ambassador to Singapore David Adelman as head of government relations.

In January 2012, UBS hired former Wall Street Journal journalist Peter Stein as its head of Asia-Pacific governmental affairs.

"You will see front-office staff made redundant in order to ramp up these areas," said Marc Baloch, the Asia-Pacific head of Harvey Nash Executive Search.

Baloch said HSBC, which increased the number of compliance staff by 54 per cent between 2012 and 2013, was looking to hire people with a "diplomatic" skill set.

The challenge in Asia is the sheer number of regulators that banks must handle. JP Morgan interacted almost daily with more than 30 Asian banking regulators, a spokesman said.

The US bank, in common with its global peers in Asia, reports to more than 100 regulators in the region across the full range of its businesses, including banking, insurance and commodities.