Standard Chartered Bank

StanChart taps former IMF executive as its new chairman amid ongoing regulatory battles

PUBLISHED : Thursday, 28 July, 2016, 1:38pm
UPDATED : Thursday, 28 July, 2016, 10:24pm

Standard Chartered Bank has hired International Monetary Fund director José Vinals as its new chairman, a move seen as a conciliatory gesture to placate disgruntled shareholders dissatisfied with the performance of outgoing chairman John Peace as the bank faces even greater regulatory hurdles.

At the IMF Vinals was a director of the monetary and capital markets department. He has no previous experience working in the private sector, but has enjoyed good working relations with international central banks and has a high level of familiarity with Asian and Middle East markets, according to StanChart officials involved in vetting his candidacy.

His arrival at the bank marks an end to a difficult 17-month long search to replace Peace, who was roundly criticised at shareholder meetings for the quality of his supervision as the emerging market bank battled with regulatory authorities over the role it played in various financial scandals.

“[Vinals] IMF and[Financial Stability Board] background exemplifies the ever-expanding emphasis we are seeing on transnational, regulatory and governance themes within large financial institutions,” said Urszula McCormack, partner at law firm King & Wood Mallesons, who advises the Hong Kong Association of Banks on regulation and banking policies.

Vinals is the latest in a growing number of officials with regulatory backgrounds in the post crisis landscape who have joined the banking industry, where regulatory action and cross-border policies, rather than new business development, are seen as key for banks’ ability to survive. a

Before Vinals, BNP Paribas’ new chairman Jean Lemierre set the precedent by shifting from a previous role as president of the European Bank of Reconstruction and Development, and a long reign at the French Treasury.

Lemierre was also a public sector official with a focus on official relations and with knowledge of China, rather than having been a career banker. He replaced Baudouin Prot, a respected chief who steered the French bank out of the global financial crisis unharmed, only to be hit with an all-time record US$9 billion fine for lapses in handling sensitive trades connected to sanctioned nations.

Goldman Sachs International has also just named Jose Barroso, a former head of European Commission, as its chairman in a move the market believes could help steer it in the post-Brexit landscape.

More regulatory problems keep cropping up at StanChart, which had already been penalised by US authorities for having facilitated financial transactions with Iran. Singapore authorities said last week they have found new money laundering lapses at the bank in relation to the scandal plagued Malaysian state fund 1Malaysian Development.

The Monetary Authority of Singapore and the city state’s attorney general office are due to file charges against the bank.

While Vinals played no direct role in the assessment of China’s economic performance in the IMF’s annual Article IV consultation or the decision to recommend adding the yuan into the fund’s Special Drawing Rights currency basket, his representation on behalf of the IMF at the Financial Stability Board meetings exposed him to central bank governors of China, Korea, Singapore, Indonesia and India - some markets that StanChart would be keen to influence as national and cross-border regulatory policies continue to tighten.

Amid continuing regulatory problems, Hugh Young, Asia managing director at Aberdeen Asset Management and StanChart’s second largest shareholder, has expressed satisfaction with Vinals’ hiring.

“José Vinals has been appointed due to his financial regulation expertise and his experience with dealing with finance ministers and central bankers around the world,” Young told Bloomberg earlier.

“This seems sensible given the huge amount of contact banks generally have with policy makers and the scrutiny they are currently under.”

StanChart chief executive Bill Winters, the former JPMorgan executive who advised on central bank rescue actions during the global financial crisis, said, “José brings deep and extensive economic, political and regulatory experience of our markets and an exceptional grasp and understanding of the international financial system.

“We have made significant progress in the delivery of our strategic objectives and I look forward to working with José on the next phase of the group’s growth. He’s a proven leader, truly global in his perspective and I am delighted that we’ll be working together,” Winters said.