Commentary

Like or not, Jamie Dimon, JP Morgan Chase’s (NYSE: JPM) iconic Chairman & CEO, survived a referendum vote of his leadership over his bank. On May 21, the combative leader of the bank just scored a resounding victory. In what has to be considered something of a shocker, just 32.2 percent of shareholders voted in favor of the split, compared with 40 percent last year.

In Part Two of a special series of reports regarding conduct risk and consumer protection regulations, we continue with a brief history on the principles of fair treatment.

Asian banking success is traditionally measured by Market Share, Wallet Share and Customer Satisfaction rankings. Yet an oft-overlooked metric is ‘Mind Share’. How can banks that are operating in highly competitive and increasingly interconnected Asian markets garner greater support and advocacy of their products and services? This strategic and commonly misunderstood challenge is a clear differentiator between some of the key banks in Asia, and their competitive position against rivals. The concept also offers a valuable opportunity for growth and overall competitive positioning fulfilment.

At the risk of generalising, whilst buyout deals do exist (but are rare), most Private Equity Funds in Asia typically take minority stakes in companies (about 20%) and work with the founders to grow these companies for IPO or for trade sales. This means that in Asia, the PE Firm cannot replace the management of such companies easily and thus in Asia it usually takes more than mere capital to grow a company and prepare the target company for an exit.

Since reference rate is at its lowest throughout the history, whilst inflation stays low, the banks struggle to earn yield. The big banks cut interest rate for their clients with pleasure and aggressively grab loan market share as a means to maintain their profitability and bottom line growth.

Investment banking in Asia has been affected by weak earnings forecasts in the profits of targets (thus resulting in fewer large deals), increased capital adequacy regulation from regulators (so less liquidity they can put into deals which results in a reduced risk appetite for deals) and the general weak macro economy. The confluence of these factors have could be part of the reason for the reduction in general merger and acquisition activity in Asia.

Financial reform is part of political reform and looks like to be a continuous effort of Taiwanese government. However, the idea disclosed by its Finance Minister on the local newspaper recently encouraging a kind of "public to public banks merge" seems debatable.

“Basel III” is familiar as the outcome of the financial crash of 2008. Western governments demanded almost instantaneous reaction to the bailout of some of its largest banks (no Asia-Pacific bank had to be nationalised) but it was the entire global economy that ended up with the higher capital and liquidity requirements associated worldwide with the name of a small town in Switzerland. And now the world’s banks have to gear up for these more onerous demands of the regulator.

The RBI cut the repo rate by 25 basis points as expected.The unexpected hawkish stance was a shock for most commentators,what with the inflation ebbing and international crude oil prices too coming down below the pschological $100 barrel level.

Banks in Asia Pacific have traditionally processed corporate actions on an end-of-day or even a T+1 basis but due to market and regulatory changes, are looking to move to an intra-day process.

When Asian banks look to their European and US counterparts they see the polar opposite of their own post-GFC lending and banking reform initiatives. Euro wide German led austerity measures contrast starkly with Japanese stimulatory ‘Abenomics’, US quantitative easing and other inflation boosting banking reforms in the region. Economic growth and business confidence, generally gauged by lending market activity, is slowly beginning to build stronger impetus. Overall lending growth is still sluggish in relative terms, with a number of Asian countries such as Indonesia, Malaysia and Thailand still struggling to rise up off the canvas following knock out blows by the Asian Financial Crisis of the late 90’s. However South Korea and the Philippines were also adversely affected by the same crisis but have managed to achieve strong lending growth of late - why is this so?

By focusing on operational excellence, a path to creating value for their customers, banks could build customer loyalty, increase earnings while reducing fees charged to recover transaction costs. 

Internal Auditors, Cost Accountants and Relationship Managers are among the candidates in hottest demand this quarter across Asia, according to the Hays Quarterly Hotspots.

Earlier this year, Standard Chartered Bank launched a novel display card solution in Singapore. While the card looks and functions like a regular payment card – debit, credit and ATM - the Display Card has touch-sensitive buttons and an embedded LCD screen, combining features such as EMV payment, One-time Password (OTP) generation and transaction signing for e-banking.

In the recently concluded 5th BRICS Summit in Durban, South Africa proposals for a new BRICS led development bank were floated and discussed. While the summit failed to finalize plans on the proposed bank’s operations and structure, a ‘broad consensus’ has emerged within the BRICS nations for the need of an alternate multi-lateral development agency operating outside the ambit of the World Bank and its sister agencies.

Even though the principles of financial services consumer protection have been around in Asia for a number of years, there seems to be little desire to embrace the concepts of fair treatment as a strategic tool to reduce the risk of poor customer outcomes.