Asian Banking & Finance (January - March 2018)

WOMEN

DISPLAY TO 31 MARCH 2018

IN ASIAN BANKING MEET FOUR OF THE REGION’S TOP WOMEN BANKERS

Standard Chartered’s Anna Marrs Citi’s Hsiu-Yi Lin

HSBC’s Yvonne Yiu

WHAT’S NEXT FOR SINGAPORE bANKS? THE UNCERTAINTIES IN CUSTODY & CLEARING NO bANK IS AN ISLAND E-COMMERCE TITANS TO RETAIL bANKING WHO’S READY FOR IFRS 9?

UOB’s Christine Ip

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Welcome to the first Asian Banking and Finance issue for 2018. This edition features exclusive interviews with top women banking executives from Citi, Standard Chartered, HSBC, and UOB. Find out how these women executives overcame challenges and worked their way up the ranks of Asia’s biggest banks.

Tim Charlton Elisha Yamzon Elizabeth Indoy

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For our sector reports, we tackled the different challenges in trade finance caused by the surge of new technologies and regulations and how APAC banks keep up with these emerging innovations. On the other hand, banks are in the process of experimenting on new and uncertain solutions to different risks emerging in the Custody & Clearing sector.

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In this issue, we also bring you stories on several trends that are taking over the banking industry today such as new reporting standards compliance, e-commerce competition, and trade finance leaders.

You will also find our Vendor View article discussing how both banks and customers can deal with data breaches. Lastly, we present you with a Country Report on the next chapter of Singapore banks’s digitalisation drive.

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MICA (P) 249/07/2011 No. 67

2018

Self-Service Banking Jakarta, Indonesia | 21-22 March 2018

Asia ASIAN BANKING AND FINANCE | march 2018 1

CONTENTS

14 INTERVIEWS the women in asian banking

22

vendor view the exit route: how data breaches can trigger a massive client exodus for banks

24

Country report What happens next after singapore banks’ digitalisation drive?

SECTOR REPORTS

FIRST

OPINION

06 Asia’s trade finance arena

26 No bank is an island: beating

30 Cooler and techier: Is it time

to take another look at the contact centre?

is heating up

trade finance challenges

07 Banks brace for IFRS 9 impact

28 The uncertain solutions to

08 The promise of a well-off year

32 Five key lessons for Asian banks’

for Singapore banks

custody & clearing risks

BCBS 239 compliance journey

10 The growing clout of e-commerce

titans in the retail banking industry

Published quarterly on the second week of the month by Charlton Media Group Pte Ltd 101 Cecil St. #17-09 Tong Eng Building 2 ASIAN BANKING AND FINANCE | march 2018 Singapore 069533

For the latest banking news from Asia visit the website

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BANKING TECHNOLOGY

Hang Seng Bank unveils AI chatbots for retail banking

WHOLESALE BANKING

Siam Commercial Bank’s FEVP Vish Jain talks about the power of digital in wholesale banking Chatbots ‘HARO’ and ‘DORI’ are He also reveals how digitisation now ready to serve. Hang Seng Bank spearheads the use of artificial is vital to improving customer experience. Vish Jain is the first intelligence (AI) technologies for executive vice president and head retail banking services in Hong of new business and operating Kong with the launch of their two models at Siam Commercial Bank chatbots, HARO and DORI. and has been a leader of digital Using AI technologies including transformation. He helped several machine learning and natural language processing, the two virtual banks and insurance firms transform their business and operating models assistants are able to simulate human-like contextual conversations through better design technology and analytics. and interact with customers.

4 ASIAN BANKING AND FINANCE | march 2018

RETAIL BANKING

Three trends in Indonesia’s shift to digital banking Indonesian banks are realising that disruption in retail banking is happening and that they have no option but to embrace the current digital innovations, DBS Equity Research reports. Big banks are now adapting to the current digital trends. It reveals that Bank Central Asia (BBCA) and Bank Mandiri have the best chance to ride this momentum on the back of their scalability, customer base, and product readiness.

The Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), established in 1957, is the largest commercial bank in Vietnam by assets.

BIDV’s operations cover banking, insurance, securities, investment. BIDV has a network of more than 1,000 branches and transaction offices across Vietnam as well as commercial presences and representative offices in foreign countries such as Myanmar, Czech Republic, Russian Federation, Cambodia, Laos,...

BIDV has been included in Forbes Global 2000 list of the World’s Biggest Public Companies.

BIDV is headquartered in Hanoi, Vietnam.

BIDV stock (BID) is listed on Ho Chi Minh City Stock Exchange (HOSE).

BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM JSC

FIRST a low base. Bank of China, Maybank and Sumitomo Mitsui FG also achieved double-digit growth rates of 18.1%, 14.5%, and 12.1% over the same period.

hong kong banks

Richard Hatherall, Bain & Company

Asian Banking and Finance asked Bain & Company partner Richard Hatherall about the top three issues for Hong Kong banks and he revealed that these are: enhancing customer experience through digitisation, growing share of wallet amid threats from non-traditional competitors, and regulation. Here’s more: How does the digitalisation status of Hong Kong banks compare with the rest of the world?

In the middle of the pack and most are investing to catch up with global leaders. Most Hong Kong banks have refreshed the ‘front end’ of their customer experience (mobile apps, online offering etc), but most banks lag best practice in terms of straight through processing (e.g. credit card application processing).

Banks are usually laden with legacy systems and process. What are your observations and what can banks do to prepare for the digital era on a sustainable basis?

System renewal is on every bank’s agenda, and legacy systems and processes put a real brake on bank’s ability to adapt and change quickly.

However, in Bain & Company’s experience many benefits are possible that do not require immediate systems improvements. Changing staff behaviours to be more customer and digitally oriented, eliminating redundant legacy policies, and redesigning processes can all have significant impact whilst investment in digital building capabilities is underway. The prize of pulling these levers is a triple play of customer experience improvement, employee experience improvement, and financial benefits.

Is there any other notable trend to take note of?

Many Hong Kong banks are also starting to move to an agile way of working. Most have some experience (usually starting with IT) and are starting to adopt it more broadly across their businesses.

6 ASIAN BANKING AND FINANCE | march 2018

Trade finance leader HSBC faces competition

Asia’s trade finance arena is heating up For HSBC, the market share leader in Asia’s trade finance, competition may be getting a bit too hot to handle as it continues to lose ground, according to new research from East & Partners Asia. And there will be no let-up as the rivalry between trade finance providers intensifies further in the next three years.

HSBC has already seen a 3.5% decline in market share in the past three years whilst rivals Citigroup and Standard Chartered have gained 2.8% and 5.2%, respectively.

If current trends persist, HSBC could lose its top spot to Citigroup by 2021, according to the market research firm’s Asian Trade Finance Markets Program which monitors trade finance demand in top 1,000 corporates in 10 Asian countries.

Competitive pressure is also building up from several smaller banks that are “making a demonstrable impact” on the market.

Bank of India, for example, has posted a 20% growth pace, the fastest amongst trade finance providers for large corporates in Asia in the three years to January 2018, although from

Citigroup and Standard Chartered have gained 2.8% and 5.2% in market share respectively.

Wallet shares leaders As a sign of rising competition in the market and willingness of Asian corporates to engage with more than one provider, the average primary wallet share has fallen to 46.9% in 2018—the lowest level recorded since the first half of 2014—from 53.1% in 2015. Standard Chartered, HSBC, and Citigroup, however, remain dominant and still outperform as a primary provider in wallet share, holding nearly two-thirds of all customer’s trade financing flows.

Looking forward, trade finance players should brace for intensified competition, with more banks expected to look for customers in Asia. Competitive pitching activity is rising, with 67.1% of corporates reporting unsolicited approaches from trade financiers in the past six months in January 2018, up from 52.3% three years prior. “Product delivery and advisory expertise are the top factors in determining how Asian corporates select a trade finance provider, as opposed to price,” said Sangiita Yoong, analyst at East & Partners Asia.

“Large corporate trade customers in the region expect knowledgeable, highly personalised service from their trade account officers as well as improved trade loan facilities and conditions,” according to Yoong. The analyst further stressed that banks that focus on these two critical initiatives will be talking to over 61.7% of all key drivers behind customer switching in trade.

Key trade finance export markets

Source: Asian Trade Finance Markets Program , East & Partners

FIRST Australia, Hong Kong, Korea, Singapore, and Malaysia are more prepared for IFRS 9.

Ready or not, here comes IFRS 9

Banks brace for IFRS 9 impact Several Asian markets are still unprepared despite the introduction of the International Financial Reporting Standard 9 (IFRS 9) at the start of 2018. A Fitch Ratings survey shows that Australia, Hong Kong, Korea, Singapore, and Malaysia are more prepared, as their banks have experience with models for internal ratings-based RWA calculations, stress testing, and internal capacity adequacy assessments.

Other Asian banks will still need significant work to adopt IFRS 9. The impact of its initial implementation is

expected to be modest, according to the survey of 59 banks in 13 markets in the region, the most talked about requirement being the switch from providing for incurred losses to providing for expected credit losses on financial assets.

Framework provisions Based on this requirement, banks undergo stage 1, where they will set aside provisions for expected losses over the next 12 months for performing assets. Meanwhile, they will need to set aside provisions for

lifetime expected losses in the case of underperforming (stage 2) and nonperforming (stage 3) assets.

Some banks in the region have already highlighted the inclusion of off-balance-sheet items as a factor for higher provisions, whilst some indicated that an increase in provisions will come from specific products such as unsecured retail credit and micro loans. For banks that are expecting lower provisions, the drivers would be more granular assessments, the removal of the loss emergence period, as well as a benign economic outlook.

“An overwhelming majority of survey respondents indicated higher first-time provisions, but most banks estimated that the increase would be less than 20%. Around three-quarters expect an initial decline in their common equity tier 1 (CET1) ratios, but most project the fall to be no more than 50bp,” Fitch Ratings said.

IFRS 9 effect of provisioning

Source: Fitch Ratings, banks

The Chartist: MALAYSIAN BANKS’ 2018 LOAN GROWTH IS THE ‘WILDCARD TO WATCH’ Loan growth amongst Malaysian banks should pick up pace in 2018, rebounding from its sluggish performance in 2017, on the back of the country’s robust economic expansion.

“We expect some loan growth recovery in 2018 premised from the spillover from the persistently strong GDP growth,” said Sue Lin Lim, analyst at DBS. “Our loan growth basecase assumption is 5% for 2018.”

Malaysia’s GDP rose an annual 6.2% in the third quarter of 2017 due to strong domestic demand, said Bank Negara Malaysia. DBS said loan growth is the “wildcard to watch” in 2018 as banks get relief from what has been a “challenging” 2017. Non-residential property loan growth has also stabilised in recent months, giving hope that the downtrend since 2015 will be arrested.

Loan growth vs GDP growth

Source: BNM, DBS Bank, AllianceDBS

Financing growth vs GDP growth

Source: BNM, DBS Bank, AllianceDBS

ASIAN BANKING AND FINANCE | march 2018 7

FIRST SME-friendly banking

The promise of a well-off year for Singapore banks

Singapore banks: Loan growth picking up

singapore

Alexander Lau, DBS Bank (Hong Kong)

DBS Bank (Hong Kong) executive director and digital innovation head of institutional banking group, Alexander Lau, talks about the innovations in business banking especially SMEs in this interview with Asian Banking and Finance. He notes that for banks to truly resolve their SME clients’ pain points, they will have to go beyond offering conventional banking products and services and make the extra effort and equip SMEs to grow their business.

What are some of the new ways of lending to SMEs? Whilst there are new ways of lending to SMEs such as P2P lending in the market, we believe banks still have an advantage to serve the SME customers in this space. In particular, most SMEs are not simply looking for one-off financing and instead would like to find a banking partner that can provide consistent, reliable financial support going forward.

Nonetheless, banks should continue to look for ways to provide financing in a frictionless manner so they can preserve their competitive edge.

What are your most recent initiatives towards being an effective SME banking provider?

In DBS, we are working to digitise the end-to-end process of SME lending, all the way from loan application, approval and disbursement. For example, we have converted the credit scorecard of SME Loan into a mobile app and put it on our relationship manager’s iPad, and transformed the traditional, paper-based approval process into a real-time digital experience. Our relationship managers can simply follow the questions in the mobile app to assess client’s credit quality and generate credit bureau check instantly, right at the customer’s office. With this mobile app, we are able to drastically reduce the loan approval turnaround for SME clients from 4-5 days to 1 hour, and offer a joyful customer experience.

8 ASIAN BANKING AND FINANCE | march 2018

W

ith OCBC putting in place safeguards and contingency measures to deal with the effects of the issues related with the oil and gas sector, Singapore banks look set for an upbeat rhythm in 2018, with profit margins on an upward trend on the back of rising interest rates and healthy loan growth. DBS Group Research mentioned that whilst Singapore banks have had a good run in 2017 with one of the best sector performances to date with collective appreciation at about 30%, the volatile performance of the oil and gas sector have dented this positive outlook.

However, valuations would likely drive up in 2018, according to DBS, with the Singapore Interbank Offered Rate (SIBOR) rally kicking off, the recovery in the oil and gas sector at the tail end of 2017, a healthy loan portfolio that could be boosted further by the city-state’s relatively upbeat GDP growth at 3%, and the banks’ abilities to keep a clean asset quality trend.

Healthy loan growth According to DBS, net interest margin will continue to improve with three interest rate hikes from the US Federal

Source: Companies, DBS Bank

Loan growth, is recovering and is expected to continue to do so in 2018 at a rate of about 7% to 8%.

Reserve expected and the pass-through to SIBOR most likely to normalise, on top of elements including competition and the rise in funding costs outside of Singapore operations. Loan growth, on the other hand, is recovering and is expected to continue to do so in 2018 at a rate of about 7% to 8%.

RHB Securities analyst Leng Seng Choon noted, “The outlook for 2018 loan growth remains bright with their managements guiding for mid-tohigh single-digit loans growth.” He added that recent activity in residential property en bloc sales is a contributor to loans expansion. “Strong Singapore 4Q17 GDP numbers could also lead to more investments by corporates (in relevant sectors) and, correspondingly, strong loans disbursement.”

UOB and OCBC are set to for a more positive year. UOB, for instance, was underpinned by a recovery in the property market, given the bank’s share of property-related loans in Singapore.

Meanwhile, OCBC has a sustained strong non-interest income franchise.

Hong Kong to benefit from RMB internationalisation Chinese banks based in Hong Kong are viewing cross-border financing as the main focus for their renminbi (RMB) business in 2018, according to a recent KPMG China report which surveyed 23 Chinese banks based in the territory, with Hong Kong looking to be the most likely economy to reap the benefits of this continuing trend.

According to industry experts and insiders in Hong Kong, RMB is growing acceptance as a currency for international trade settlement, with Hong Kong benefitting as the largest offshore RMB market. RMB transactions in 2018 for almost half of all mainland Chinese banks in Hong Kong will focus on cross-border financing, followed by RMB exchange and loans, respectively.

“With the establishment of Hong Kong as an offshore RMB clearing centre, Chinese banks in Hong Kong will see their market position strengthen and develop a stronger link with the international financial sector,” said KPMG China.

RMB internationalisation in focus

Chinese banks in Hong Kong

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FIRST

The growing clout of e-commerce titans in the retail banking industry

W

hilst Amazon grabbed global headlines with its $13.7b acquisition of Whole Foods last year, banks also paid close attention to a less ballyhooed development: the e-commerce powerhouse has been building up a range of financial products, including Amazon Cash, as well as a billion-dollar lending operation for small businesses. Some banks might think of disruptive fintech firms as their greatest emerging threat, but well-trusted and well-oiled platforms like Amazon and Alibaba could soon pose a formidable challenge to banks in retail banking, according to analysts.

“It turns out that retail banking is being upended not by nimble fintech startups, but by established tech firms,” said Gerard du Toit, partner at Bain & Company. “Many of the tech giants possess the ingredients of success: digital prowess, large customer bases, organisations well versed in improving the customer experience, and ample leeway to extend their corporate brands into banking,” he noted.

Asian e-commerce behemoths like Alibaba and Tencent are starting to break into banking. du Toit said that Alibaba has built up the world’s largest money-market fund, issuing $96b of loans in five years,

and its Ant Financial has ballooned to a market capitalisation close to that of the ninth-largest bank in the US. It has also established the online bank MYbank, which boasts of instant loan approvals by assessing consumers’ financial history with the Alibaba platform.

“Demand for alternatives to traditional banks will only grow, as younger respondents in our survey showed the greatest willingness to try these offerings,” said du Toit, citing a Bain & Company survey asking more than 100,000 consumers in 22 countries. “Given that Amazon, Alibaba, and others already sell payment services, credit cards, and loans, it’s plausible that they will offer a suite of retail banking services in the near future,” said du Toit.

Are banks threatened?

Top technology firms also benefit from the comparatively high trust placed on them when it comes to financial transactions, dulling a key competitive edge that traditional banks has long held.

“Should banks worry? They do appear to be vulnerable to losing the special status they once enjoyed,” said du Toit, citing how US and UK consumers ranked PayPal and Amazon nearly as high as banks for trust

Respondents who are using third-party payment apps

Source: Bain/Research New Customer Loyalty in Retail Banking Survey 2017

with their money.

Banks are starting to find increasing competition for customers and profits from platform companies like Alibaba, Amazon, and Tencent, said Miklós Gábor Dietz, senior partner at McKinsey. “The idea of fintechs as a threat to retail banking might be receding. But the new strategies adopted by the aforementioned platform companies are even more challenging for incumbent banks,” Dietz said.

The strength of platform companies is that they create “ecosystems” that reduce customers’ costs, increase convenience, provide them with new experiences, and whet their appetites for more. “Not only do they have exceptional data that they exploit with remarkable effectiveness; they are also often more central in the customer journeys including big financial decisions,” said Dietz.

COUNTRY WATCH

South Korean banks’ ASEAN push When Shinhan Bank acquired Indonesian bank Centratama Nasional Bank in 2016 as well as the Australia and New Zealand Banking Group’s retail business in Vietnam in 2017, the bank was driven by a hunger for higher profits and more lucrative growth markets. The low interest rate environment at home and rising competition from online banks have pushed South Korean lenders to expand abroad.

Shinhan Bank Vietnam said it posted a “low” non-performing loan ratio of less than 1% and “good” credit growth of 12.8% in 2016.

As South Korean banks seek growth in other countries, Southeast Asia has been particularly appealing, especially in countries where their corporate customers are also expanding footprint. Vietnam has attracted not only Shinhan Bank, but also Korea Development Bank and Woori Bank, with the former cementing a comprehensive cooperation agreement with Commercial Joint Stock Bank and the latter launching an overseas unit.

South Korean investments in Vietnam reached more than $6b in August 2017, making it 10 ASIAN BANKING AND FINANCE | march 2018

the largest foreign investor in the country, representing more than a quarter of the total, according to data from Vietnam’s Foreign Investment Agency.

South Korean banks also plan to expand in Indonesia, where KEB Hana Bank has increased its presence to at least 59 offices in 11 provinces in Indonesia, as well as in the Philippines, where KB Kookmin plans to open its first branch to follow in the footsteps of Woori and Shinhan. Moreover, KEB Hana Bank, Kookmin Bank, and Shinhan Bank have reduced the number of their domestic branches by 15% as of June 2017 compared to the peak at the end of 2012, according to a Moody’s report.

In December 2017, Moody’s upgraded its outlook on Shinhan Bank and KEB Hana Bank to stable from negative due to an absence in asset quality deterioration or profitability that the agency was previously concerned about.

“Moody’s expects that these banks’ liquidity, funding and capitalization will remain stable at current levels over the outlook period.”

South Korean banks to venture overseas

Rising competition from online banks

Co-published corporate profile

Corporates can control their situation

Corporate client self-onboarding Comarch has found a way to help SMEs and large companies give clients the power to take over their banking channels.

K

now this feeling when you’re asked by the check-in clerk where you’d like to sit on a plane? A torrent of thoughts rushes through your head: being able to see the actual seat map with available options would make your choice much easier.

Otherwise it’s kinda like a child describing favorite movie.

The fog of confusion you find yourself dealing with is pretty much the same as the one experienced by your corporate customer when setting up their access rights as part of online banking. First, the customer needs to appoint users and explain their roles to you in order to request approval workflows which align well with a specific corporate hierarchy. Then, you get back to them with what their options are. Special forms are used for that, followed by emails and faceto-face meetings to assure the customer’s needs are met. It all takes time and effort on both sides.

Self-onboarding tool for businesses Now, if you just showed your corporates what’s what – and had them pick their optimal way to proceed – wouldn’t it benefit everyone? It definitely would, and that’s why we’ve decided to accommodate this particular need. We developed a client self-onboarding tool for SMEs and large companies. Now their employees can request access to the online banking channel and define its parameters however and whenever they want.

Your role then boils down to validating

their choice and granting the said access to new users as well. Simple as that. So first, self-onboarding turns a tedious banking procedure into a breeze. Second, corporates get to control their situation in full. And third, you are empowered to onboard multiple users at once, which counts for a lot: mass user setup is drudgery, not many banks handle it well.

Yours can be an exception to the rule.

Comarch Corporate Banking is an opti-channel and multi-product platform to support corporate clients and mediumsized enterprises. Thanks to the great user interface, modularity and wide customization options, the platform meets the expectations of even the most demanding banks. State-of-the-art onboarding capabilities make the system unique in its class.

Owing to its integration capability with the existing bank systems, the solution is a universal, comprehensive, efficient and safe tool which streamlines the management of transactions, automates business processes and reduces business costs. Comarch Corporate Banking easily integrates with clients’ ERP systems; as a result, companies performing tens of thousands of daily transactions gain an effective tool to automate processes and streamline operations. The system’s openness is ensured thanks to OpenAPI.

Bartosz Lerka, Business Solution Consultant, Corporate Banking, Comarch

BARTOSZ LERKA is a Business Solution Consultant, Corporate Banking at Comarch Former corporate banker with nearly 10 years of experience. During his banking career served international corporations, European SMEs, companies listed on the stock-exchange as well as enterprises with consolidated shareholder structure.

In Comarch supports optimization of banking processes with IT solutions.

Driven by freeing financial officers and bank employees from complex or repetitive tasks and excessive operational risks. Partial to efficient time and money allocation on both sides of the bank-client relation.

Comarch Financial Services is a provider of state-of-the-art IT solutions for banks, insurance companies, brokerage houses, asset management companies, as well as investment and pension funds. The systems and applications offered by us for the financial market are characterized by high quality, excellent performance and great flexibility. Our wide product portfolio allows for the precise selection of software that meets clients’ expectations, preferences and capabilities. Send us an email at finance@comarch.com

“Self-onboarding turns a tedious procedure into a breeze.”

ASIAN BANKING AND FINANCE | march 2018 11

Thought leadership Article

Launching speedboats from cruise ships

Mambu CEO & Co-Founder Eugene Danilkis discusses how incumbents can take on FinTech challengers.

D

igital technology has changed financial services and is being driven by new entrants that possess characteristics that are increasingly important to consumers and shareholders: the ability to be lean and agile, provide a best-in-class user experience, as well as grow and scale rapidly.

Established institutions are starting to realise that legacy technology and the old way of doing business no longer works.

McKinsey estimates that legacy financial institutions will see profits decline by up to 60% by 2025 if they fail to evolve, a figure which should be motivating incumbents to look outside of traditional practices for growth and sustainability.

Growth opportunities Long term growth lies in geographic expansion, improving customer experience and focussing on underserved markets and SMEs. The right level of service can win over digital natives and the large millennial markets which have ignored traditional banks in search of mobile alternatives. SME lending also offers a significant opportunity for growth. McKinsey has identified a $350 billion untapped lending opportunity within this sector which has numerous new

entrants using digital technology to navigate a complex lending environment.

If banks and lenders are willing to change their thinking and take a digital approach now, they can benefit from the same opportunities as they have a distinct advantage, the ability to leverage their balance sheet to help them navigate a rapidly evolving market.

Launching speedboats The simplest route is to build a digital banking spinoff which can operate like a FinTech. If we look at established banks as cruise ships: large, expensive to operate, process heavy and slow to manoeuver, the spinoff can be seen as a speedboat: independent, cost-effective, agile and lean.

It can be launched within twelve months, unrestricted by geography and able to penetrate new markets.

A spinoff has to be seen as an investment in an innovation arm, created to address a specific market need and unimpeded by traditional organisational processes. If allowed the freedom, it could leap ahead technologically by prioritising APIs, cloud and mobile first thinking, and being able to demonstrate results in a short period of time.

Banks can derive value by leveraging technology to streamline operations, automate processes and significantly reduce overall cost of doing business.

Focus can shift from internal systems and processes to the delivery of better service and growth.

New people, thinking and processes Technology, while a differentiator, is just one cog in the machine. Real transformation is only possible with a change of people, thinking, and processes. This means new leadership incentivised to drive success of the spinoff and not conflicted between the bigger organisation and the new venture.

This leadership has to instill a culture of innovation and continuous change from the start to enable it to act like a startup without being held back by legacy processes.

Learn from the market Through digital spinoffs, they can allow themselves the flexibility to play at speeds at which startups operate.

They will be able to innovate, explore new growth areas and quickly change direction, and in the process, redesign banking for the 21st century.

Speedboats from cruise ships

“If banks and lenders are willing to change their thinking and take a digital approach now, they can benefit from the same opportunities.�

12 ASIAN BANKING AND FINANCE | march 2018

ASIAN BANKING AND FINANCE | march 2018 13

Women in general have had to work a lot harder to prove themselves at work, even if they may not be working in a maledominated environment.

Hsiu-Yi Lin Managing Director and Commercial Bank Head Citi Singapore 14 ASIAN BANKING AND FINANCE | march 2018

INTERVIEW

Citi’s Hsiu-Yi Lin discusses opportunities for women and the way to the bank’s top ranks It involves having the tireless willingness to take risks and a bank that values gender balance.

H

siu-Yi Lin is the Managing Director and Commercial Bank Head for Citi in Singapore since 2013. Prior to this role, she was the Head of Product Management & Marketing for Citi Commercial Bank Asia Pacific, based in Hong Kong. She was also the Global Transaction Services Head and Head of Corporate Finance Strategy &Analysis for Citi in Malaysia before her stint in Hong Kong.

In an exclusive interview with Asian Banking and Finance, Hsiu-Yi shares how she has achieved her professional goals and offers advice on how to realise one’s potential for leadership.

What are some of the highlights in your career in the banking industry?

I believe that one of the things that contributed to my career success is my willingness to take risks. Women in general have had to work a lot harder to prove themselves at work, even if they may not be working in a maledominated environment. I strongly believe that it is necessary for women to take risks and challenges in their career and more importantly, believe in themselves.

I like challenges and I believe it is important for one to keep learning for personal growth and development. This is the reason why I decided to leave my first job at Citi, a Financial Control role at Citi in New York, to pursue a Master of Business Administration (MBA) at the Harvard Business School (HBS) in the early part of my career. The MBA has been instrumental to my career progression as it gave me credibility, helped build my confidence, and opened the door to many opportunities for me.

I am also grateful to have had supportive bosses, who happened to be all men, throughout my career at Citi who believed in me and gave me the encouragement to take risks and different roles, each with more responsibilities.

Citi offers many talent development and leadership programmes as well, to nurture and cultivate employees across all levels within the organisation to help them realise their potential for leadership. I have attended a number of these programmes and benefitted not only from the curriculum, but also from the network of high performing women at Citi with whom I have formed firm friendships over the years. This close-knit network of women has been my core support group and has influenced some of the important decisions that I’ve made in my career.

As a woman in the banking industry, what are the challenges you’ve had to face over the years, and how did you overcome those challenges?

What I’ve seen and experienced first-hand over the years is how hard it is for women to make themselves heard in meetings, especially if they are the only woman in the room. My advice to women on this would be to always

look for opportunities to contribute to the discussion.

It is very important to be well-prepared, so that when the opportunity arises, they will be able to speak with confidence and demonstrate the value that they can add to the conversation. It is also important for women to be physically visible, so they must find a seat at meetings where they can be prominently seen and heard.

As I have mentioned earlier, my experience at HBS had helped me build my confidence. During those years at HBS, women only accounted for 30% of the student population and class participation accounted for 50% of the total course grade. As a result of the need for me to participate in these discussions, I was able to overcome my discomfort and fear of public speaking.

Through this experience, I’ve learnt that it is important to understand one’s strengths and weaknesses. But it is also useful to know that the only way to overcome one’s weaknesses is to tackle them head-on, which is what I did.

It was daunting at first, but over time it got easier.

What can you say about the notable progress in the number of women joining different highly-competitive industries such as banking?

I am of the view that women continue to remain underrepresented in corporate decision-making positions despite studies showing that there is a positive correlation between gender diversity and financial performance. Companies have an important role to play in achieving gender balance especially in senior roles, and equally important is the support from the management team in setting the tone, investing in the company’s diversity efforts, and soliciting engagement at every level of the organisation.

At Citi, we recognise diversity as one of our competitive advantages. We believe that in the global marketplace, it is imperative for us to provide a wide range of ideas and solutions to our clients, and having a diverse workforce provides the potential for us to better understand and serve our clients as well as achieve our business goals.

Some of the initiatives that Citi has taken on this front include fostering an inclusive work environment, offering It is important flexible work arrangements, establishing employee to understand networks, and providing women with customised career one’s development and training programmes to develop their strengths and full potential and realise their professional aspirations. weaknesses.

Citi’s Asia Inspiring Women Leaders Programme, for But it is also example, aims to inspire women leaders to take charge of useful to their professional growth and development at Citi. To date, know that the around 150 women from 16 countries in the region have only way to participated in the programme. overcome one’s There is certainly much work to do, but with the growing weaknesses is number of corporations committed to increasing the to tackle them representation of women in leadership roles and opening head-on. up more opportunities, I am optimistic for our future.

ASIAN BANKING AND FINANCE | march 2018 15

There was a degree of skepticism around any woman who was not a secretary.

It made me angry.

Anna Marrs

Regional CEO, ASEAN & South Asia CEO, Commercial & Private Banking Standard Chartered 16 ASIAN BANKING AND FINANCE | march 2018

INTERVIEW

How Standard Chartered’s Anna Marrs leads behind two of the bank’s CEO desks What does it take to become a respected female leader with two roles in one of Asia’s biggest banks?

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n 2012, Anna Marrs moved from being partner at McKinsey & Company’s Banking Practice to being the group head of Standard Chartered’s strategy and corporate development. Currently, she is both the bank’s regional CEO for ASEAN and South Asia and CEO of commercial and private banking.

In this exclusive interview with Asian Banking and Finance, Anna talks about the highlights in her personal and professional lives, how she achieved her goals, and the sacrifices she made to reach the top.

and the fight of proving I could do it, that I could achieve whatever anyone else could, also kept me going in financial services over the first part of my career.

As a woman in the banking industry, what are the challenges you’ve had to face over the years, and how did you overcome those challenges?

The hardest period was during my pregnancy, maternity leave, and coming back from maternity leave. I was on the path to being partner at McKinsey, so I travelled a lot, and I was exhausted. Everything from finding “professional” maternity wear to getting your suitcase up into an overhead bin felt way too hard. I also wondered whether what I was trying to do was possible as there were no role models for women with busy careers in my family. I really benefited over those years from working with a couple of other female partners who had been in the banking practice in McKinsey’s London office 5-10 years before me. Having women around who have gone through similar challenges and having a sense of humour are two very valuable assets.

As CEO, what are your duties and responsibilities?

I have two different roles at the bank. Based in Singapore, I work with CEOs of 15 countries and their teams to enhance their performance, improve the experience of our clients, and engage effectively with regulators and other stakeholders in these markets. The role is very broad as we have several business units in each country, and the region consists of very different markets--from Singapore to Nepal. I am also the head of two global business lines: commercial and private banking. I work with our markets across Asia, Africa, and the Middle East to build out these growing parts of the bank.

A typical day is busy. I travel approximately every other week to spend time with teams and clients outside of Singapore. Given the diversity of these markets and businesses, there is usually something that do not quite happen according to plan. So a typical day always has a surprise or two in it.

Tell us about your journey to get to where you are today.

My career has not been very linear, but it has common themes around liking a challenge, being curious to see and understand markets and the world at large, and wanting to work for people from whom I can learn. I started my career in New York working for a hedge fund. From there I had a “fintech” phase, before fintech was as big as it is today.

That role moved me from New York to London, where I stayed for 14 years. I spent nearly a decade at McKinsey, the last three years as a partner, working in financial services consulting. Then I joined Standard Chartered, from being in a strategy role to running different parts of the bank.

Looking back, the highlights are always around people I worked with and mentored who have done well, from the support of the excellent mentors I have had over the years.

What motivated you to pursue a career in banking?

My first job in New York was on a trading floor and the energy was quite addictive. I loved how the whole world came through your Bloomberg terminal. It was fast-paced and full of smart people. It was also quite a male-dominated environment, and there was a degree of skepticism around any woman who was not a secretary. This made me angry

What is one of the toughest decisions you have had to make and how did it impact your life?

I think the toughest decisions we have made as a family is about location. My husband is English, and my 11-year-old son in particular feels very English. My 9-year-old daughter is more easy going about it all. We agreed as a family to move to Singapore with Standard Chartered. It has been very good for my work, but a sacrifice in other ways. My husband’s parents are very far away in the UK. Mine are further away in the US and not getting younger. Ultimately it has brought us closer as a family as we embark on these things together, but it’s also a recognition that you can’t optimise everything at every point. I am very proud I have been able to have an interesting and challenging career, and a close relationship with my family, and I feel very fortunate as well to have a rich life both inside and outside the home.

That’s what I’d say to women making progress in traditionally maledominated industries: keep going.

What can you say about the notable progress in the number of women joining different highly-competitive industries such as banking?

When I had the last role change at Standard Chartered, I received an email from an old contact who is senior at Citibank in the US. Her message simply said, “Congratulations – keep going.” That’s what I’d say to women making progress in traditionally male-dominated industries: keep going.

Also, try to acquire technical skills early, skills in risk or finance for example, as it gets harder later. Banking is a very broad business and there are many different things to do. Find a part of banking that you really love as you’ll need that passion to keep you going through the inevitable challenges on the way.

ASIAN BANKING AND FINANCE | march 2018 17

By putting in place workfriendly, womenfriendly policies, industries are making huge progress.

Yvonne Yiu Regional Head of International Countries Global Liquidity and Cash Management, Asia-Pacific HSBC 18 ASIAN BANKING AND FINANCE | march 2018

INTERVIEW

How did HSBC’s Yvonne Yiu become a part of the bank’s pivotal transformation?

It’s a matter of providing effective solutions, from innovative services to capable business models.

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in moving into product management given that I was not IT savvy. I felt anxious by leaving my comfort zone and moving to lead a team of experienced product managers who were more technical than me. I took up that challenge finally and it was a very tough move. In the first 6 months, I worked so hard to make myself equipped and connected with so many different people to get their support. Yet it was proven to be one of the best decisions in my career.

Because of that move, I had overcome some of my personal challenges and have since become more open to trying out new assignments; hence my rotation experience as mentioned above.

vonne Yiu, the regional head of international countries for global liquidity and cash management, Asia Pacific since 2015, has direct management responsibility of the cash management business of HSBC across 12 markets. She is based in Hong Kong and has over 18 years of experience in the industry.

In an exclusive interview with Asian Banking and Finance, Yvonne tells us about how passionate she is for her banking career, how she worked her way up the organisation, and how a female banker like her found the company that offered equal opportunities and balance.

What are some of the highlights in your banking career?

I am very fortunate for having the opportunity to rotate to different roles to enrich my experience and exposure. I had a number of regional roles spanning across sales, product management, finance, business management, and now in my current international country management remit.

These required me to travel a lot, but I get to work with a diverse group of colleagues and clients across different sectors, functions and countries, which have helped me to develop a broader understanding on business issues and challenges and gain a better appreciation of the holistic perspective on our business and strategic direction. This is a key enabler to get me to where I am now.

What motivated you to pursue a career in banking?

Liquidity and cash management may appear transactional on face value, but it is the core function of most companies–as our services are essential for operating account and working capital management, and are required by all companies. For us to provide effective solutions, we need to go deep in understanding the requirements and challenges of our clients, and that’s the time we start to learn about their business priorities, growth strategies, operation requirements, liquidity and settlement consideration, risk management agenda, etc. This is truly fascinating as every customer may have different requirements, and we get to learn so much from them. This is one of the drivers.

In addition, it gives me a lot of satisfaction when we can design or implement services that help our clients to enhance their competitiveness, be it gaining operational efficiency to the extent of transformation of their business models through our innovative solutions. We play an important role in supporting our clients to advance along their journey, and this is a key motivation for me to go to work every day.

What is one of the toughest decisions you have had to make and how did it impact your life?

The toughest decision was probably when I was asked to consider moving from sales into product management. At that time, I was doing very well in sales, and I was reluctant

What do you consider as your biggest achievement?

I think my biggest achievement is my contribution to the transformation of our business. I was part of the core team in building out our capabilities and business models. We have worked very hard in the past decades, and it was a big satisfaction that we have now reached the market leading position in the region. I am very proud of our business achievements today, and it is such as privilege to have had the opportunity to work with a group of passionate and talented colleagues throughout this development journey.

Companies understand the challenges women face when it comes to striking a balance. Make sure you take advantage of these to make the job work for you.

What can you say about the notable progress in the number of women joining different highly-competitive industries such as banking?

Financial services is a very demanding industry in terms of time needed to be devoted to work. How to strike a balance to create an environment where flexible working hours is achievable can certainly be a challenge. However, with improved technology, it is doable to work from home and away from the office. This has certainly helped when it comes to attracting and retaining women in the industry.

This is something we embrace at HSBC. We constantly advocate our organisation ethos, which includes being able to work the hours and locations that suit the individual. All these things are important. You need to have the right HR platform in place to support it and it must be supported at the top. By putting in place work-friendly, women-friendly policies, industries are making huge progress.

What is your advice to women who are aiming for a leadership position in banking?

Set your priorities straight. Devote time to planning your career and your life. Understand that priorities have to adjust to get the right balance. Set your mind right so that you will be able to achieve what you want. Take advantage of company initiatives such as flexible and remote working to enable you to achieve a good work and family balance.

Companies do understand the challenges women face when it comes to striking a balance. Make sure you take advantage of these to make the job work for you.

ASIAN BANKING AND FINANCE | march 2018 19

In the highlycompetitive banking industry, it is important to have diversified strengths amongst the workforce to strengthen business competitiveness and organisational performance.

Christine Ip CEO, Greater China UOB 20 ASIAN BANKING AND FINANCE | march 2018

INTERVIEW

UOB’s Christine Ip sets diversity in workforce as one of the bank’s key success factors By valuing the combination of different individuals in the team, she notes positive results for the company.

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hristine Ip, the CEO of United Overseas Bank (UOB) Greater China, joined the bank in 2011.

She spearheads the overall strategy and operations for UOB in mainland China, Hong Kong, and Taiwan and oversees the different banking services and solutions provided by the bank to both retail and wholesale banking customers and corporate clients.

In this exclusive interview with Asian Banking and Finance, Christine talks about the importance of having a diverse workforce from the point of view of a leader and what women need to succeed in banking.

amongst the team, so that when a challenge happens, we can approach the issue in step and with clarity.

What do you consider as your biggest achievement?

My biggest satisfaction in recent years is from building a great team within the Greater China region for UOB. Employees are the greatest asset of a company. These great minds have enabled the Bank and me to achieve so much across different aspects of the business. I am so blessed to have the team working together, united and committed.

I attribute my accomplishments to belief, action and discipline. It is about having faith in my goals, believing that I can do it and nothing is impossible. This enables me to have focus and energy which in turn motivates me to reach greater heights. It is also the willpower to follow up on my plans consistently to increase my chances of success.

What are some of the highlights in your career in the banking industry?

I have been in the industry for more than 30 years and have experience covering product and sales management, customer segment management and risk management in Canada, mainland China, Hong Kong, Singapore and US. In 2011, I was hired by UOB to develop the bank’s Greater China strategy and was appointed as CEO of UOB Hong Kong the following year. 2012 was a meaningful year for me as I was named then by the All-China Women’s Federation as one of the Top 100 Greater China Senior Women Executives. More recently in July 2016, I was tasked to oversee UOB’s business in Greater China.

My achievements at UOB include helping UOB Hong Kong to become one of the leading wholesale banks here and ensuring that our business continues to grow steadily.

In addition to supporting our clients as they seize business opportunities, we believe in giving back to the community where our people and our clients build their lives.

It is my honour to receive the CEO of the Year Award from Capital CEO Magazine in Hong Kong in September 2016. The prestigious award was a tribute to the hard work and dedication of my team, a testament to our focus on serving our clients with professionalism, passion and pride, and a recognition of our efforts as good corporate citizens.

As a woman in the banking industry, what are the challenges you’ve had to face over the years, and how did you overcome those challenges?

Working in a bank, I face different challenges every day but this is also what I find attractive about the job. Change, to me, is an opportunity to build competitive advantages.

Instead of waiting for change to happen, I try to create change by tapping my experience and expertise. For example, together with my team, I anticipate potential issues and strive to come up with preemptive solutions.

In the highly-competitive banking industry, it is important to have diversified strengths amongst the workforce to strengthen our business competitiveness and organisational performance. To ensure that everyone has a common goal, I also encourage open conversations

What can you say about the notable progress in the number of women joining different highly-competitive industries such as banking?

It is encouraging to see more women joining different male-dominated sectors. In Hong Kong, we elected our first female Chief Executive in 2017, a development that I hope will encourage more women to run for public office and to run and lead companies. I also hope to see more men participate in the dialogue, planning, and actions to help women advance in their careers.

But diversity is not limited to gender. At UOB, we respect the differences in age, backgrounds, cultures, experiences, knowledge and skills, as we value the diversity in strengths different individuals can bring to the organisation.

I strongly encourage women who are aiming for leadership positions to realise their dreams.

What is your advice to women who are aiming for a leadership position in banking?

I strongly encourage women who are aiming for leadership positions to realise their dreams. The following traits have enabled me to succeed and I believe that they will also empower more women to attain their goals The first one is assertiveness or being upfront in interpersonal relationships. Maintain your stance – rationally, not emotionally – and embrace new challenges and opportunities. Second is having confidence in your ability to overcome challenges. Third is having the energy.

Being enthusiastic and bringing team-inspiring vitality to the office will constantly encourage and motivate your colleagues to resolve difficulties and to achieve more successes. Fourth is empathy or being able to listen to and understand the feelings of others. As humans, we have frailties and fears, but also opinions that deserve airing. As a leader, it is even more important to acknowledge and to address concerns with tact and compassion. The last one is humility. Being a servant leader means being committed to the service and interests of everyone.

ASIAN BANKING AND FINANCE | march 2018 21

Vendor view: DATA BREACHES

One data breach strike and banking customers are out

The exit route: How data breaches can trigger a massive client exodus for banks From breaking trust to breaking banks, digital attacks are becoming more powerful than ever.

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hen it comes to customer retention, data attacks could possibly be the worst nightmare for any company.

Thousands of clients around the globe have already left compromised banks for those with a cleaner track record.

In fact, seven in ten customers will not think twice to leave their bank once a data breach occurs, making customer loyalty one of the major casualties of a brittle digital backbone.

Almost 90% of organisations globally have revealed being affected by new DDoS-enabled breaches.

Due to the presence of the five largest banks in the world as well as the highest penetration rates for mobile banking and mobile payments, Asia remains the most vulnerable to security attacks. Add to this reputation the region’s feeble policy-making, weak regulatory environments, and subpar enforcement, and it becomes a haven 22 ASIAN BANKING AND FINANCE | march 2018

for notorious cybercriminals.

In general, financial institutions, wherever they are located, have it worse when it comes to data breaches.

According to the 2017 Cost of Data Breach Study by Ponemon Insitute LLC and IBM Security, financial institutions incur an estimated $245 per stolen record, way above the global average of $141.

Tim Liu, chief technology officer, Hillstone Networks said that customers have a long-held assumption that their money is protected from robbery or theft in financial institutions. Given headto-head competition in the banking industry, it is not a difficult matter for customers to find the latest digital solution and switch firms. Liu said that as customers have stayed away from scandal-plagued firms in the past, so will they avoid those with security breaches in the present.

“Considering the high profile cyber

Financial institutions incur an estimated $245 per stolen record, way above the global average of $141.

breaches in 2017, such as WannaCry and Petya Ransomware attacks, businesses and consumers are more aware of the levels of disruption and problems that cyberattacks can cause.

This places an increasing pressure for companies to ensure that the data is well protected, especially given the increasing data volume and value of personal information,” said Sanjay Rohatgi, senior vice president, Asia Pacific, Symantec.

What’s at stake?

Whilst data leaks at corporations and government agencies sound devastating, security breaches in financial institutions prove to be more disastrous. According to Liu, the proximity to customers’ financial assets means that direct monetary loss is a huge possibility. IBM Security and Ponemon Institute estimated that the global average cost of a data breach in 2017 is at $3.62m, more for

Vendor view: DATA BREACHES a financial institution.

To calculate the cost, IBM and Ponemon collected both the firm’s direct and indirect expenses, such as engaging forensic experts, outsourcing hotline support and providing free credit monitoring subscriptions and discounts for future products and services. On the other hand, indirect costs include in-house investigations and communication, as well as the extrapolated value of customer loss resulting from turnover or diminished customer acquisition rates.

However, companies with money to burn should realise that immediate financial losses are small compared to the damage inflicted on a brand and its customers’ trust. For instance, Gemalto’s Data Breaches and Customer Loyalty 2017 Survey reports that almost half (49%) of consumers worldwide would unlikely do business with a firm that had experienced a data breach involving the loss of personal information.

Mohan Veloo, chief technology officer, Asia Pacific, F5 Networks, said that this should not come as a surprise considering recent news that revealed a 41-gigabyte file of usernames and passwords in the Dark Web. Hackers are getting sneakier by the day, and are finding more ways to extract information to suit their needs.

“Globally a total of 1.1 billion identities have been exposed in data breaches in 2016, almost twice the amount observed in 2015. This places an increasing pressure for companies to ensure that the data is well protected, especially given the increasing data volume and value of personal information,” Rohatgi said.

Basic hygiene According to Nilesh Mistry, head of Asia Pacific & vice president, World Wide Technology, Inc., even organisations with hefty cybersecurity budgets and mature risk management, governance, and privacy programs are affected. It is thus important for organisations to clearly understand their legal obligations, particularly in preparation for compliance with standards, frameworks, and regulations.

Robin Schmitt, general manager, Asia-Pacific at Neustar, said that the

fear of reputational damage and loss of customer trust are the key drivers behind the increase in DDoS defense investments in the region. Two in ten respondents to Neustar’s survey, strengthened their DDoS defenses to preserve customer loyalty and confidence.

“To ensure adequate measures some basic questions need to be addressed. For example, are you confident that you have an adequate inventory of all your assets? Do you have visibility across those assets?

Can you detect unauthorised activity, and if so, can you detect an adversary that is already embedded in your network? These questions may seem simple, but many FI’s struggle with some of these basics,” Mistry added.

More than the obvious needs to update capacity in terms of machine learning and artificial intelligence, firms must go back to the basic security hygiene. Mistry said that firms must cover all bases and encompass how server, end-user computing, networking and software development teams use outsourced infrastructure in the form of SaaS, PaaS, and IaaS, amongst others. He added that organisations need to consider segmenting their enterprise in order to help prevent the hacker from moving deeper inside and moving laterally.

Jeffrey Kok, technical director, Asia Pacific, CyberArk said that as notification legislation becomes more common around the world, banks are driven to disclose the full facts of a data compromise to their customers as soon as the information is available. Banks need to remind themselves that the customer always has a right to know the firm’s situation, even if the company’s reputation seems to be on the line.

Kok added that transparency is now not only a legal requirement, but a moral one.

Customers security Despite the clamour for tighter data security measures across the region, analysts show that consumers are also partly to blame for the demise of customer loyalty. Gemalto’s Data Breaches and Customer Loyalty 2017 Survey reports that two in five

Tim Liu

Sanjay Rohatgi

Mohan Veloo

Nilesh Mistry

Robin Schmitt

Jeffrey Kok

consumers do not take advantage of robust solutions available such as two-factor authentication, an added layer of security that notifies users whenever their accounts are logged in on devices. Also, half of consumers continue to use the same password for multiple accounts, a big no-no in terms of personal cybersecurity.

According to Veloo, customers can take a few steps to ensure basic security hygiene: mindfulness in installing apps, choosing a strong password, ensuring auto-updates, and encryption. They must be aware that a single rogue app can do significant damage, and that a passphrase consisting of random words will be more difficult to decode than passwords such as qwertyuiop123.

Rohatgi noted, “Security technology may be able to secure our networks and endpoints, but none of these are effective against human errors. Cybercriminals are aware of these and seek to exploit what they perceive to be the weakest link in the chain – humans. Cyber security needs to be a conscious effort by all parties and requires good digital hygiene on the part of everyone; both at home, and in the office.”

Lastly, Rohatgi emphasised that employees should also secure their accounts, not just the customers. He said that it is important for employees to remain vigilant on a personal level by updating regularly; subscribing to manufacturers’ mailing lists to be altered of important security updates; installing security software on their PCs to ensure that their IoT devices are not being controlled by others; avoiding opening emails from unknown senders; and looking for the padlock and checking the SSL certificate on any sites where they enter sensitive data.

Customers doing their part in personal cybersecurity

ASIAN BANKING AND FINANCE | march 2018 23

Country report: Singapore

DBS launched an API platform in 2017. Now it has more than 150 APIs and growing.

What happens next after Singapore banks’ digitalisation drive?

Chatbots, data analytics, and open banking remain the main challenges for Singapore banks in 2018.

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iven the barrage of digital banking breakthroughs in 2017, were Singapore banks able to ride the fintech tide and catch up to the latest digital trends? Many of them have actually yet to do so, with chatbots, data analytics, and open banking being the main challenges.

The Monetary Authority of Singapore (MAS) estimates that financial institutions that are slow to adopt new technologies could experience income slashes of up to 5%, as fintech payment channels increase to 10% in the next two years and then 50% in five years.

Nevertheless, analysts forecast a positive year ahead for the banking sector, on the back of manufacturing and services growth, as well as a sustained momentum from the previous year. Given their large customer bases, financial expertise, and accumulated resources, banks should be able to take advantage of

24 ASIAN BANKING AND FINANCE | march 2018

these economic prospects to further drive innovation and encourage creativity within their companies.

Tek Yew Chia, head, financial advisory services practice, KPMG Singapore, said that chief information officers (CIOs) need to be in an ‘act fast mode’ and create an environment to test new services and digital technology outside of the core banking system. According to Chia, this provides the freedom to iterate quickly and prove the effectiveness of a new service or system, before bringing that service into the main banking business.

Digital leaders Over the course of the coming year, more banks will experiment with artificial intelligence (AI), particularly robotics, in preparation for application in mainstream channels. Patrick Yap, CIO, Maybank Singapore, said that the chatbot will

Banks will continue to innovate and get closer to the customers through their mobile devices.

play a more central role alongside the sales team and the call centre. He added that cloud computing will also be a primary focus where cost in IT storage could be used. “Banks will continue to innovate and get closer to the customers through their mobile devices, as well as digitise banking services wherever possible. Firms and service providers will continue to ask for application programme interface (API) connections to the banks whilst the banking industry works

Time to come up with new banking technology

Country report: Singapore towards tapping APIs for payment, authentication and many other areas,” Yap added.

In 2017, one of the biggest feats for Singapore banks is DBS’s launch of the world’s largest banking API developer platform delivered by a bank.

According to DBS, the API platform will allow them to boost the bank’s lead in innovating digital solutions for its clients. From fund transfers to rewards and real-time payments, the platform includes more than 150 APIs and growing.

Yap said, “Generally speaking, some of the key digital technologies that Singapore banks have adopted include mobile banking, cloud computing, robotic process automation, chatbots, data analytics and social media engagement. At Maybank, we have been delving into these technologies, the latest being the industry-wide mobile peer-to-peer fund transfer service PayNow since mid-2017.”

What’s to come On a wider scale, the Association of Banks in Singapore (ABS) is expected to extend PayNow, the first peer-topeer fund transfer service in the city, to corporates and businesses in 2018.

PayNow allows its customers to link their bank accounts to one mobile number and one NRIC number and proceed with fund transfer to anyone. To date, seven retail banks in Singapore have offered PayNow: Citibank, DBS, HSBC, Maybank, OCBC, Standard Chartered Bank, and UOB. “Peer-to-peer funds transfer is now conducted in real time with PayNow and this has levelled the playing field between the banks in Singapore, regardless of size or branch distribution outreach. The PayNow platform also provides many innovative ideas for banks to ride on and make the payment process simpler for customers. More importantly, Singapore needs to respond effectively to the mobile payment solutions that are so prevalent and successfully used in other parts of the world,” Yap added.

The QR code and social media payments will also be in the spotlight in the coming year, increasing their traction in the digital space.

According to Dennis Khoo, regional head, digital banking, UOB, the QR code will take off in 2018 due to Singapore’s high digital penetration rates. He added that social media payments will see more innovation with the likes of PayKey where customers can basically pay from any social media site or any site at all using a keyboard.

Social media has also played a huge role in determining the direction that banks will take. “With the advent of social media platforms, banks can choose to become more attuned to what customers care about through the conversations in the social media space, those who leverage on such insights will be able to provide more responsive customer engagement,” Yap said.

UOB is also set to invest in the coming years and roll out the muchawaited near-field communication (NFC) capability, which will make payments faster and more secure.

Khoo said that UOB is also looking into both categorisation software as well as new engagement tools, especially leverage-learning machine technologies.

On the other hand, banks also need to ensure that their employees are up to task alongside their peers in other banks and considering the huge skills shortage in the digital space.

DBS, for instance, has announced that it is investing $20m to train its existing workforce in digital banking and emerging technologies, via an artificial intelligence-powered e-learning platform, curated curriculum, and module delivery.

Dethroning cash as king Despite the rise of digital payments and mobile banking, the question remains as to whether Singapore is ready to transform into a totally Smart Nation. Yap believes that traditional channels will be here to stay for much longer than most think, as many customers in the country still prefer banking with a human interface. The new channels and solutions may extend the bank’s services to more customers, but many long-time clients might probably stick to the processes that they are used to.

Khoo said, “It’s a question of ‘when.’

Tek Yew Chia

Patrick Yap

Dennis Khoo

The slower the society adopts it maybe because you have segments of the population that cannot afford a device to allow a phone to be a bank, or you have the older population who are not used to doing it this way. So it’s not really a question of ‘if.’ It’s a question of ‘when.’ And the ‘when’ in banking plays out over a long period of time because we don’t like to force people to use the channels.”

Whilst traditional and digital channels are expected to coexist for a while, banks have to definitely step up their game to compete effectively in the digital landscape. According to Yap, banks need to do more straightthrough processing (STP) to shorten transaction-related processing time.

Banks also have to remember that the key is to compete by doing the same thing cheaper, better and faster using data analytics.

Side-by-side with fintech On the upside, Singapore banks will find it less difficult to rise above the fintech boom. Khoo said that the growth of fintechs will be very specific to a country and how it has evolved. For instance, fintechs are taking up a big chunk of China due to the country’s size, as well as its level of underdevelopment in the payments space. Meanwhile, fintechs targeted India because of the country’s unique and favourable regulatory requirements.

“Banks should be mindful of the competitive landscape. As such, banks have to be on par with or a notch better than the technology firms who have started to provide banking services, Yap said. “Some measures include improving internal processes, embracing technologies to distil customer insights, and engaging customers wherever they are.”

The digital boom is just the start

ASIAN BANKING AND FINANCE | march 2018 25

SECTOR REPORT 1: Trade Finance

Banks such as UOB get help to digitise trade finance

No bank is an island: Beating trade finance challenges Banks build alliances to tread tricky waters of technology and regulation.

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hen United Overseas Bank (UOB) partnered with the Monetary Authority of Singapore and Singapore Customs to create the National Trade Platform (NTP), working together made sense given the scale of the industry-wide digitalisation task at hand. Other banks have also chipped in to make NTP a one-stop trade information management system that enables the sharing and reusing of digital data for trade-related transactions amongst businesses, and with the Singapore government. Banks involved with the project seem to have realised that cooperation will not only move the industry forward but also benefit them individually. Adopting a collaborative mentality seems to have become a necessity for banks, at least when it comes to solving the complex technological and regulatory challenges in the trade finance sector.

26 ASIAN BANKING AND FINANCE | march 2018

To encourage and establish higher adoption rates of FinTech-based solutions, governments, regulators and banks are working together to standardise processes.

The beauty of the NTP is it lets traders re-use permit data already uploaded to its system to apply for trade financing, effectively speeding up transactions and advancing the digitalisation of Singapore’s trade finance industry, said Ng Poh Yee, executive director and head, corporate trade sales/financial supply chain management, group transaction banking at UOB. The NTP is also an open innovation platform, which means businesses and value-added service providers can create new digital solutions and applications that can support any new needs of the end-to-end trade finance cycle, she said. However, the NTP initiative continues to be the exception rather than the rule in Asia. The region faces a huge trade gap and poor implementation of financial technology solutions to reach underbanked areas, according to a

recent ADB annual survey.

Ng reckoned the two key challenges affecting wider use of emerging FinTech-based solutions for trade finance are the low rate of industry-wide adoption and the high cost of making technology investments. “This is because FinTech-based solutions require the digitisation of documents, especially those related to the transfer of title of goods, custom certification and clearances,” she said. “As digitisation processes are still under development, they do not cover all cross-border transaction types and this limits market adoption.”

To encourage and establish higher adoption rates of FinTech-based solutions, governments, regulators and banks are working together to standardise processes such as ‘Know Your Customer’ requirements, customs clearance and, in the case of NTP, the legal acceptance of digital trade data, said Ng. Technology partners Over in Australia, banks have been collaborating with technology partners since last year to overcome challenges in implementing FinTech

SECTOR REPORT 1: Trade Finance solutions, with themes around data and blockchain as focus points, said Adnan Ghani, head of trade finance at Westpac Institutional Bank.

Westpac, ANZ, and IBM, for example, have teamed up to create a proof of concept for the application of blockchain technology to streamline and digitise the issuance of bank guarantees for commercial property contracts with Scentre Group, owner of Westfield Group.

“Currently, large volumes of applications and manual processes that underpin the issuance of these instruments lead to longer lead times and higher risks of error, relatively speaking,” said Ghani.

“Using a streamlined solution that takes advantages of blockchain technology - and the transparency it brings - as a substitute to existing practises, will help businesses issue and change guarantees quickly in the midst of a stressful relocation move, or a property title change-over.”

Following the proof of concept exercise, Westpac and its partners plan to build an industry solution.

Ghani said Westpac’s alliances with fintechs provide it with the nimbleness and agility to get solutions to market quickly. But he noted that whilst there are plenty of opportunities to digitise and streamline in the trade finance environment, everyone will need to ride the fintech trend of such solutions with a subpar impact.

“The major issue that hampers fintech solutions is the overall trade community making the shift towards technology,” said Krishnakumar Duraiswamy, head of trade finance, transaction banking group at Abu Dhabi Commercial Bank. “As trade involves several counter-parties, unless everyone in the environment adopt fintech solutions, supply chain is still going to be affected.”

“Banks have to come together with other stakeholders of trade namely shipping companies, freight forwarders, chambers of commerce, inspection agencies, customs, amongst others, to start a new journey towards fintech,” he said, adding that whilst small blockchain pilots will always be successful, the key challenge moving ahead is to

bring all counter-parties into single platform.

ICOs still far off The development of industry solutions that not only standardise protocols but also clear regulatory hurdles takes some time. The emerging realm of cryptocurrency, which some believe holds the potential for shaping the future of trade finance, is one prime example.

Amidst moves by regulators in South Korea and other countries to tighten oversight on the use of cryptocurrencies, the near-term prospects of using initial coin offerings, or ICOs, for trade finance is remote.

“It is still early days to see ICOs for trade finance in Asia or any other part of the globe,” said Duraiswamy, citing the lengthy regulatory process that the sector would need go through before such a trend could catch on. “Regulation takes much longer time to evolve and in the area of cryptocurrencies it would take much longer as it can potentially change the entire landscape on how counterparties exchange value with each other.”

Duraiswamy reckoned no major changes will occur in this area between 2018 and 2020 despite a pressure to shift from entities with vested interests to see the trend flourish, mainly due to banks having their hands full with compliance in anti-money laundering, or AML. “Financial institutions are still trying to cope with regulations and compliance to global AML standards and hence moving into a new world will be difficult.”

Pockets of opportunities In 2018, the ability to master technological adoption in key industries and deftly moving with regulatory changes will determine the winners and losers in trade finance, as banks forecast a trade acceleration. This year, commodity prices will rebound and help fuel a pick-up in the global economy, Ng said, with UOB holding a cautiously optimistic global trade outlook in view of modest 2018 gross domestic product forecasts for key trading

Ng Poh Yee

Adnan Ghani

Krishnakumar Duraiswamy

economies including China, Hong Kong, Japan, US and Europe. But pockets of opportunities exist.

“Investments in the TMT industry continue to be on the rise in many countries as governments roll out or sustain their initiatives on automation and productivity, and logistics and telecommunication connectivity in line with their national planning objectives,” said Ng. The construction and infrastructure sectors, especially within the ASEAN region, are notably attractive as well. Ng said UOB will be on guard for any potential rise in U.S. trade protectionism in 2018 and any negative effect on trade flows with key partners like China, India, Japan and South Korea.

Whilst U.S. trade protectionism is a risk factor, Duraiswamy said the major one will be coming from the U.S. rates, which have been rising in 2017 and are expected to rise further in 2018. He foresees trade margins to be hampered as a result of additional rate hikes, affecting the overall growth in trade. Still, those looking for new opportunities will find them in Africa, Middle East, and Europe.

“Banks will have to diversify and be part of the growth in other geographies,” said Duraiswamy. “You will see more of the mix happening between various geographies that will help in trade during 2018.”

Duraiswamy also noted that Asia is going to be a mixed bag with countries like Thailand that are focused on infrastructure growth, and those like Vietnam with growing GDP in 2018 to likely see increased trade flows. “Opportunities would be there in trade. Technology and efficiency will be the key to capture these opportunities.”

Multiple growth opportunites for banks like ADCB

ASIAN BANKING AND FINANCE | march 2018 27

SECTOR REPORT 2: Custody & Clearing

Are there clearer solutions to banks’ custody & clearing issues?

The uncertain solutions to custody & clearing risks Banks are currently looking into outsourcing, blockchain technology, and cybersecurity but are wary of unproven results.

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hen The Network Forum Asia (TNF) meeting took place in Hong Kong in November 2017, a concern that troubled most banks in custody & clearing resurfaced: How can we lower the risk coming from multiple fronts? From stubbornly rising costs to the uncertainties surrounding blockchain and cybersecurity, banks are now facing challenges with solutions that are not so clear-cut.

However, this has not stopped banks from trying to gain more clarity and control through experimentation.

There is the persistent concern on rising costs for instance. In an online post following the TNF, Deutsche Bank said many banks looking to control costs are assessing the viability of outsourcing parts of their middle and back office processes.

The bank cited an audience poll at the event, which found nearly 28 ASIAN BANKING AND FINANCE | march 2018

Outsourcing allows organisations to eliminate structural costs enabling them to devote more resources to less commoditised processes and client servicing.

half or 48% to be actively weighing outsourcing as a strategy to not only reduce costs but to transform their entire operating model. Around one-fourth of attendees or 24% acknowledged the potential of outsourcing to support product complexity and diversification into new asset classes or markets. On the contrary, 28% said they were not considering outsourcing.

“Outsourcing allows organisations to eliminate structural costs enabling them to devote more resources to less commoditised processes and client servicing,” said Deutsche Bank. “People-heavy processes like reconciliations, know your customer (KYC), anti-money laundering (AML) and settlement are particularly ripe targets for outsourcing,” the bank added, whilst also citing expert warnings that banks remained responsible and

accountable for these activities even if they have been assigned to third party providers.

In 2018, sell-side outsourcing will continue to be a key theme as banks get squeezed by higher costs.

“Whilst the buy-side has already outsourced much of its back and middle office processing, the sell-side has remained more ‘in-house’ although often relying on agents for clearing, custody and settlement,” said Bruno Campenon, head of financial intermediaries & corporates at BNP Paribas Securities Services.

“However, the ever growing cost of technology and regulation is causing sell-side firms to look more closely at outsourcing once more.”

Campenon expects a major global investment bank to outsource its entire post-trade activity this year. He also foresees outsourcing becoming the accepted operating model for global sell-side firms. With more banks benefiting from the mutualisation of costs, profitability in this industry should start to recover.

Blockchain is another area in which banks are keen to obtain greater clarity. Deutsche Bank noted the revolutionary potential

SECTOR REPORT 2: Custody & Clearing of the technology, but also the sobering risks that have put banks on a curious-but-cautious stance.

“The securities services industry is on the cusp of a transformational digitalisation, which has been enabled through rapid advancements in fields like blockchain,” the bank said. “The T+0 settlement finality of blockchain-supported transactions could heavily impact clearing and settlement, potentially disintermediating central clearing counterparties (CCPs) and central securities depositories (CSDs).”

Blockchain’s roadblocks According to Deutsche Bank, trading, clearing and settlement could even be completed in a matter of seconds with the emergence of blockchain-enabled initial coin offerings, a cryptocurrency-based equity fundraising tool. If this takes off, it could raise questions on the future of CSDs and CCPs, eventually leading to an industry shakeup.

“Under a blockchain set-up, the necessity of the continued existence of some of the intermediaries currently involved in post-trade processes would come into question,” said Julius Baer Group.

“Assuming that near-instantaneous settlement poses no unforeseen operational or credit risk – as a blockchain would theoretically allow instant verification of participants’ cash balances and security holdings – CCPs would be hard-pressed to justify their continued participation.

In effect, clearing houses could, in theory, be disintermediated entirely,” it added.

“Likewise, the current ‘doubling’ of custody and safekeeping roles between CSDs and custodians would also be difficult to justify. One or the other would be able to offer the full range of post-trade services. A similar reasoning applies to registrars, which would also struggle to justify their services to issuers, if these could liaise directly with, say, a blockchainoperating CSD.” Deutsche Bank observed that the testing of blockchain technology is now shifting towards real-life applications, with banks ushering blockchain tools to clients that want

to improve efficiency in “antiquated, low-risk” processes such as corporate action issuances, proxy voting and reconciliations.

“Banks and market infrastructures are under no illusions about the disruptive nature of blockchain but there are clear concerns about absorbing the technology into systemically important processes precipitately,” the bank said.

“Financial institutions want to ensure the technology is fully understood and can co-exist with legacy systems, some of which are more than 20-years old, before any integrations can begin seriously,” it added.

Testing mode Part of the waiting game is looking out for successful first-use cases, and which is why a lot of eyes turned to the Australian Securities Exchange (ASX) in December when it announced it would be the first global stock exchange to adopt distributed ledger technology (DTL) for clearing and settlement.

ASX’s DTL platform will be developed by Digital Asset. Having found to be superior upon a couple of years of testing, the DTL platform is envisioned to replace the Clearing House Electronic Subregister System introduced roughly two decades ago.

“Blockchain’s broader adoption by the industry may well reside on ASX’s experiences with the technology,” said Deutsche Bank.

For PwC, whilst blockchain technology has been receiving a lot of excitement for several years already, it probably has a long way to go in maturing as an applied technology.

“We still occasionally hear clients ask, ‘Does blockchain really matter?’ The uncertainty is understandable,” said the professional services firm, in a blog post discussing the potential of blockchain in financial services.

“In 2017, firms created plenty of functional, proof-of-concept projects using blockchain in applications such as internal payments, trade finance, and custody. Despite their potential, many of these projects aren’t yet ready for primetime.”

In 2018, PwC expects more clearinghouses and custody providers amongst others to consider what

Under a blockchain set-up, the necessity of the continued existence of some of the intermediaries currently involved in post-trade processes would come into question.

blockchain can bring to clearing, settlement, and other intermediated functions. “Look for blockchain use cases spreading into more mainstream financial market utilities.”

Cybersecurity vigilance Another source of uncertainty and anxiety for banks is cybersecurity, especially following the $81m heist at the Central Bank of Bangladesh in 2016. These days, cybersecurity is given more attention due to its potential to bring the whole enterprise to its knees.

“Having long been siloed with IT, cybersecurity now occupies boardroom and C-suite conversations, and it is widely considered to be one of the biggest systemic risks currently facing the banking industry,” said Deutsche Bank. “In addition to having strong IT protections, many organisations are investing huge resources and efforts into educating staff about the warning signs of cyber-crime.”

The heightened vigilance amongst banks has been a result not only of new threats, but also of new technologies in their systems that need to be continually updated with protections against possible attacks.

Deutsche Bank said the rise of cryptocurrencies, for instance, has opened up a wealth of investment opportunities, but it has also become a target of criminals that have found vulnerabilities inherent to the their exchanges. Even the vaunted encryption-enabled security of blockchain may be cracked due to the emergence of quantum computing in the next five to 10 years, according to the bank, which further impresses the need to be prepared for any risk curveball that may be thrown at the new systems.

Attention is needed on cybersecurity

ASIAN BANKING AND FINANCE | march 2018 29

OPINION

Stuart Beaumont

Cooler and techier: Is it time to take another look at the contact centre?

Staff-assisted client interactions over time

Stuart Beaumont Global Head, Distribution Transformation and Voice and Virtual, Standard Chartered

transactions in branches and in contact centres will decline. But if we know them better, the conversations we do have with our clients will become richer, whether they are face-to-face or digitally enabled.

Banks should make the most of these opportunities. Otherwise we run the risk of having a great digital relationship with them but a weak banking relationship.

Bots still need humans The big game-changer in today’s contact centre is the chatbot.

Chatbots are ideal for taking care of low-value, self-service transactions and triage, whilst freeing up our agents to handle the more important elements of service and sales. The key when making Source: Stuart Beaumont, Standard Chartered the shift to new technology is to be practical and learn from your he rapid advance of technology has created the impression that mistakes. Chatbots are not a ‘silver bullet’ to reduce headcount or the entire banking industry will soon be digitised. Yet whilst costs and if companies think bots will solve all their service and much of traditional banking has gone the way of the abacus, cost challenges, they will be disappointed. Ensure you have agents we’ve learned something interesting along the way: people still want to ready to assist the bot at crucial junctures in the interaction. Invest in speak to people. When my credit card was rejected recently, my first chatbot training as the bots are extensions of your human workforce, reaction was to call the bank. My app won’t tell me what the problem rather than a replacement. Finally, there has never been a more is, at least not today. And when it comes to a decision about my important time to have a strong knowledge management platform. own money, that human touch becomes even more important and Information has to be organised in bite-sized chunks that your reassuring. Not everything will be online and clients don’t want it to front-line agents and your bots can access easily so that the banking be. When making financial decisions about big-ticket purchases, such experience is seamless for your clients. as a home mortgage, a life insurance policy or a retirement plan, we Clients are embracing bots and other new technologies want the kind of reassurance and guidance that can only come from a and that’s why contact centres need to keep innovating. And if real person. you’re working in one, your role is changing fast, from handling complaints and enquiries to providing products, services and even Client conversations are getting richer advice. This changes how we recruit, train and manage our people What technology is doing well is building a better picture of who our and technology and people skills will become increasingly vital. clients are. Digital is generating massive amounts of data – known We’re also having to rethink how to design and manage contact as ‘big data’ - and we’re mining it to understand and anticipate the centres themselves as they move to centre stage in managing client needs of our clients. If I’m sitting in a contact centre, I have a lot more experience. Far from making them obsolete, technology is driving information at my fingertips than I did even a few years ago. So, the rapidly growing role of contact centres. As the role of digital conversations are getting richer - once I unblock your card, I can have servicing grows, however, it’s crucial that we don’t lose sight of a chat about how to save for your children’s education or the benefits that ‘human touch’ along the journey. Whilst our digital channels from that online mutual fund if I see you have a need for it; in other measure the pulse of the organization, our contact centre will words, it’s less about transactions and more about how the bank can continue to be the heart, managing the important moments of truth help you achieve your financial goals. that digitisation will struggle with for some time to come.

A lot of the data enabling these conversations is coming from the contact centre itself. Long seen as the drab, unglamorous backwater of the banking world, it’s becoming a hotbed of digital innovation, deploying sophisticated technologies such as speech analytics, artificial intelligence and biometrics to improve client interactions.

Video banking is bringing clients right into the contact centre, at least virtually. Increasingly, our contact centre colleagues are engaging directly with clients and deepening relationships with them.

That shouldn’t really come as a surprise. Digital doesn’t mean we don’t want to talk to our clients. Actually, we want to spend more Will the future be relying on chatbots? time talking with them. As digitisation advances, the number of

T

30 ASIAN BANKING AND FINANCE | march 2018

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OPINION

Frederic BErtholon-Lampiris

5 key lessons for Asian banks’ BCBS 239 compliance journey

S

ince the BCBS 239 principles on risk data aggregation and risk reporting were published by the Basel Committee in 2013, globally systemically important banks (GSIBs) have invested significant time and budget to reach compliance.

In ASEAN, Singapore was the first country to designate, in 2016, its domestically systemically important banks (DSIBs). These banks have been identified by the Monetary Authority of Singapore (MAS) as being systemically important to the local economy, meaning that should one of these banks default, the potential impact on the Singapore ecosystem and marketplace could be very significant, and could have implications on the labour market and society as a whole.

These DSIBs are already working on their compliance programmes.

Additionally, regional banks in the other ASEAN countries that have either already been or are in the process of being designated as DSIBs will soon begin work to meet the BCBS 239 requirements as well. As they embark on their implementation, there are lessons that can help them avoid, or at least mitigate, certain pitfalls.

Lesson 1: Be aware of the potential implications One should not forget that the primary driver of BCBS 239 principles is the global financial crisis of 2008, during which systemic organisations were wiped out partly because their management were unable to obtain accurate and timely information about their risks and exposures. Ultimately, what is really at stake, beyond the need for adequate information, is the stability of the economy and the protection of the public.

Lesson 2: Spend time on scoping and interpreting the principles BCBS 239 principles are prone to subjectivity. They require a certain level of pre-analysis, understanding and interpretation of the requirements. Here are some examples of areas of subjective interpretation: BCBS 239 ownership: Beyond the political aspects inherent to all ownership allocation processes, there are different governance models in the marketplace that determines ownership. Whilst there is no onesize-fits-all solution, a common success denominator is a high level of ongoing coordination and involvement from all key stakeholders, no

32 ASIAN BANKING AND FINANCE | march 2018

Frederic BertholonLampiris Executive Director, Deloitte Southeast Asia’s Financial Services Industry

matter who is responsible on paper.

Selection of critical risk measures (CRM): There is no rule of thumb for how many CRMs a bank should consider for BCBS 239.

The number of CRMs to employ has to be a management decision and depends on the risk management appetite of each bank’s governing body.

Level of process automation: Each bank needs to perform a detailed analysis on which of their manual processes can be further automated, with a view to maximise the level of comfort on data accuracy and timeliness.

Data quality framework and data lineage: Banks need to be able to articulate the rationale for their data quality thresholds and indicators, and ensure that it is fully understood and approved by its senior management. Solutions range from simple and highly manual flowchart-types to more strategic, integrated and automated tools.

Lesson 3: Identify synergies and leverage capabilities Before investing in heavy solutions and initiating deep transformations, organisations should perform a detailed assessment of their current capabilities and how these capabilities already or could be leveraged to address BCBS 239 requirements. Similarly, banks that already have big transformation programmes in motion should consider integrating solutions to address BCBS 239 requirements more efficiently.

Lesson 4: Try to avoid a pure silo-based approach One of the key challenges of BCBS 239 compliance is that it requires stakeholders with different skills. However, if these stakeholders are not properly coordinated and monitoring the same holistic and integrated agenda, the chance of success will be significantly reduced.

Splitting roles and responsibilities by each BCBS 239 principle is possible, as long as there is a robust overarching governance framework with ongoing coordination and collaboration.

Lesson 5: Engage other key stakeholders early in the process The BCBS 239 programme should not be kept isolated with no regular communication on its progress and status. As the programme progresses, other functions within the organisation may be activated to play their role, and they should be engaged earlier rather than later.

Furthermore, from the regulator’s perspective, opening the dialogue early will allow for opportunities to verify the bank’s understanding and interpretation of the principles, and will provide some assurance that the bank is in the right direction in terms of roadmap and work programmes.

To conclude, BCBS 239 compliance is challenging and requires at least a couple of years to achieve. However, if some of the key lessons reviewed in this article are not duly considered, it can easily double the time needed to reach full compliance.

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