Asian Banking & Finance (April - June 2024)

Issue No. 114 DISPLAY TO 30 JUNE 2024

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STROKES UOB CRAFTS BANKING STRATEGY WITH ARTISTIC FLAIR

Asian Banking & Finance

WHY SINGAPOREANS ARE OKAY WITH LOCKING AWAY OVER $4B OF THEIR MONEY UBC AIMS FOR TOP 5 IN SRI LANKA BANKING BASEL III CAPITAL HIKE NO PROBLEM FOR APAC BANKS WHAT MAKES MALAYSIA THE NEXT GREAT INVESTMENT BANKING FRONTIER IN SOUTHEAST ASIA?

Nirvana Chaudhary Chairman, Union Bank of Colombo p. 16

Christine Ip, Head of Strategic Communications and Brand UOB

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EDITORIAL

F

inance and creativity go hand-in-hand in building a holistic pool of talents, and veteran banker Christine IP from UOB draws on her arts background to craft her vision for raising the bank’s profile and branding. Read more of her insights on page 14.

Tim Charlton

abf@charltonmediamail.com

Nurturing future bankers also means confronting gaps in the current talent shortage. We chat with Maisie Chong from Standard Chartered about banks’ intentional efforts to address gender disparities in the industry on page 18. In addition, Mayda Lim for OCBC shares her experiences in growing OCBC’s engineering team and her thoughts on opening tech and STEM training to more people. Read more on page 20.

In Singapore, transparency and security are the top problems addressed by fintechs. The money lock feature enables people willing to lock away over $4b of their funds, while HomePay combats renovation scams with disbursements based on milestones reached. Know more about these updates on pages 27 and 13, respectively.

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In this year’s Asian Banking and Finance Summit, banks are urged to go beyond simply aligning themselves with disruptions and choose to be their industry’s game changers. Join the conversation with Bain & Company’s Sen Ganesh and other leaders on page 28.

Read on and enjoy.

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ASIAN BANKING & FINANCE | Q2 2024 1

CONTENTS

EVENT COVERAGE

TECH DISRUPTION, BRANDING INNOVATION ARE 28 HOW SHAPING THE FUTURE OF FINANCE

FIRST 06 Basel III capital hike is not a problem for APAC 07 Embedded finance, digital banks to drive SEA’s fintechs 08 Will property woes continue to weigh on Chinese megabanks?

BRANCH WATCH 09 Citibank expands in Singapore with spacious new wealth centres

CASE STUDY 12 How BPI Private Wealth strategically courts 25% of the local HNW market

Published quarterly by Charlton Media Group Pte Ltd 101 Cecil St. #17-09 Tong Eng Building ASIAN BANKING & FINANCE 2024 2019 2 ASIAN BANKING AND FINANCE| Q2 | MARCH Singapore 069533

SECTOR REPORT 16 How have banks’ wealth management pivots played out in China?

14

INTERVIEW UOB CRAFTS BANKING STRATEGY WITH ARTISTIC FLAIR

13

FINTECH WATCH HOW HOMEPAY IS COMBATING RENOVATION SCAMS IN SINGAPORE

COUNTRY REPORT 27 Why Singaporeans are okay with locking away over $4b of their money

COMMENTARY

INTERVIEW 18 StanChart revamps strategies to close gender gap 20 OCBC builds the next pipeline of talent 22 UBC aims for top 5 in Sri Lanka banking 24 What makes Malaysia the next great investment banking frontier in Southeast Asia?

30 Navigating the fintech frontier: key trends shaping 2024 32 Unlocking the potential of sustainable lending in Asia

For the latest banking news from Asia visit the website

www.asianbankingandfinance.net

ASIAN BANKING & FINANCE | Q2 2024 3

News from asianbankingandfinance.net Daily news from Asia

RETAIL BANKING

How Trust Bank won the trust of Singapore’s 12% One year after being launched, Singapore’s Trust Bank has already declared an ambitious plan: become the fourth largest retail bank in the country. It may seem like a tall order, but in just 12 months, the digital bank has made great strides that other digital banks across APAC are struggling to replicate.

BANKING TECHNOLOGY

CARDS & PAYMENTS

NETS boosts SMEs’ revenues with card data Singapore’s major payments and card network NETS says that it is leveraging its 130,000 payment touchpoints in the city to help SMEs increase their revenue. It uses the data collected from the spending habits from the over 10 million cards in the country for SMEs to get to know their customers better.

MARKETS

BANKING TECHNOLOGY

GenAI, CBDCs to shape Singaporean finance in 2024 Look forward to new payment methods, clearing systems, and fraud detection bots in the Singapore finance scene as generative AI and central bank digital currencies (CBDCs) will start to be mainstays in the industry, according to experts and regulatory authorities in the eighth Singapore Fintech Festival (SFF).

BANKING TECHNOLOGY

OCBC unveils blockchain-powered CBDCs at Singapore Fintech Festival

Default risks, peaking margins push APAC banks into a ‘mixed bag’

DBS’ digibank shrinks loan approval time to 10 minutes

Conference-goers who visited OCBC’s booth display during the Singapore Fintech Festival 2023 were in for a treat: they were the first to get a taste of how the Monetary Authority of Singapore (MAS)’ central bank digital currencies (CBDCs) could be used for instantaneous interbank settlement.

Whilst the majority of emerging market banks in Asia Pacific are expected to log better financial results in 2024, unique hurdles in loan defaults, credit growth, or net interest margins will engulf each banking system over the next 12 months, Fitch analysts said in a report.

BS Indonesia’s mobile application digibank by DBS is promising to approve customers’ loans instantaneously from the previous 10 working day cycle. To do this, the bank employed a credit-decisioning engine, including live verification within the data, and a fraud prevention engine equipped with data pattern analysis.

ASIAN BANKING BANKINGAND & FINANCE 2024 4 ASIAN FINANCE| Q2 | Q3 2021

ASIAN BANKING & FINANCE | Q2 2024 5

FIRST domestic implementation of final Basel III at the start of 2024, and will be followed by Japan’s internationally active banks from end-March.

Successful implementation could be a positive for the Chinese banking sector’s operating environment in the future, Fitch said in a separate report.

On 18 Feb. 2023, the local banking regulator launched a draft consultation on new capital rules implementing the final Basel III standard for large- and medium-sized commercial banks.

The domestic implementation, which kicked off in January 2024, classifies banks into three buckets based on their balance sheets and international exposures.

JAPAN ENDS NEGATIVE INTEREST RATES WITH ‘HISTORIC’ EXIT LENDING & CREDIT

J

apan’s banking industry is expected to gain an additional $1.98b in interest income per year, following the Bank of Japan’s recent decision to exit its negative interest rate policy.

But the positive interest rates give rise to a slew of other concerns, including a possible adverse effects on small businesses and deposit rates, which could see increases that burden small and medium enterprises less equipped to handle rising costs.

On March 19, the Bank of Japan finally ended its negative interest rate policy by lifting rates from 0% to 0.1%.

The “historic” move makes Japan the last economy to exit its negative interest rate policy, said Alvin Liew, senior economist for UOB Global Economics & Markets Research.

BofA Global Research research analysts Shinichiro Nakamura and Yuki Yaginuma noted some concerns about the risk of deposit rate increases.

“Even with ordinary deposit rates of 0.02% and a 5bp increase on time deposit rates industrywide, the estimated JPY290-b (approximately $1.92-b) annual increase in deposit interest expense could be covered by the increase in interest income on BOJ current accounts,” Nakamura and Yaginuma said in their report.

Megabanks have already taken the lead in raising deposit rates. Notably, MUFG Bank raised its rate on ordinary deposits to 0.02%, from 0.001%.

SMEs In a separate report, Moody’s Ratings’ senior vice president and manager, Christian de Guzman, noted the possible negative impact on small and medium enterprises (SME), noting their weaker ability to pass on costs from higher interest rates and higher wages.

These were also concerns of monetary policy meeting board member Nakamura Toyoaki. Toyoaki reportedly had wanted to continue negative rates, noting that SMEs may not have the capacity to raise wages.

6 ASIAN BANKING & FINANCE | Q2 2024

Indonesian banks have notably made strides in Basel III adoption

Basel III capital hike is not a problem for APAC

M

RETAIL BANKING

ost of banking jurisdictions in most Asia Pacific markets should be able to absorb the moderate increases in capital requirements stipulated under the final Basel III standards.

Their conservative regulatory approaches, and less extensive use of internal models, will be to their advantage, Fitch Ratings reported.

“Few have implemented the rules in full so far, but we expect the transition will not have a substantial impact on capital requirements over the next two years–by which time adoption should be complete in most major APAC jurisdictions,” Fitch said.

Amongst markets, Australia and Indonesia have notably made strides in Basel III adoption. Australia has already adopted the final Basel III package, beginning 1 Jan. 2023, which resulted in reported domestic bank common equity Tier 1 ratios improving by up to 100bp for the major banks.

Indonesia’s pilot application of revised standardised approaches from January 2023 improved Tier 1 capital ratios initially by up to 300bp, Fitch noted.

China has already launched its

Few have implemented the rules in full so far, but we expect the transition will not have a substantial impact on capital requirements over the next two years

Varying strategies Japanese megabanks, meanwhile, are not expected to report a significant impact in the first year of implementation. The exception is Mitsubishi UFJ Financial Group, as the removal of capital floor-related buffers will reduce its overall risk-weighted assets (RWA), according to Fitch.

Singaporean banks will live under the new regime from July, and then Hong Kong and Malaysian banks from January 2025.

“We believe they will do so largely faithfully, since authorities in these major systems are Basel Committee members, and so committed to applying the final Basel III framework,” Fitch Ratings said.

South Korea has also already implemented the revised credit risk, market risk, and credit-valuation adjustment measurements required under the final Basel standards in 2023.

India has yet to publicly disclose its implementation timescales, although as a Basel-member jurisdiction it will be under moral suasion for a timely and full implementation.

Overall Asian markets are expected to fare better than their US banking counterparts. US bank regulators estimate that adoption would cause a 16% increase in common equity requirements for large US banks, as suggested by the Federal Reserve Chair in March 2024.

Estimates from the Basel Committee on Banking Supervision’s March 2024 monitoring report posits that the final Basel III framework could lower Tier-1 minimum required capital for internationally active large APAC banks by an average of 0.8%.

FIRST

Takahiro Okawara

Mobile wallets and QR code payments are expected to accelerate growth

Hiroshi Tsuchiya

Embedded finance, digital banks to drive SEA’s fintechs

E

BANKING TECHNOLOGY

mbedded finance, partnerships, and digital banks will be the three defining trends shaping Southeast Asia’s financial technology (fintech) landscape in the future.

Embedded finance “Embedded finance will integrate financial services directly into customer journeys, enhancing convenience and accessibility. Digital banks will disrupt the traditional banking model by offering fully digital and customer-centric financial services,” stated a YCP Solidiance whitepaper exploring

fintech trends in the region.

According to the its YCP Solidiance authors — Partner Takahiro Okawara, Director Hiroshi Tsuchiya, and Manager Samantha Wong — more fintechs are expected to collaborate with traditional financial institutions, both as a means to drive innovation and financial inclusion.

Cashless transactions Southeast Asia’s fintech industry is flourishing thanks to a rapidly growing digital economy and a tech-savvy population.

Digital payments, including

Samantha Wong

Regulatory frameworks will evolve to provide clarity and address concerns surrounding cryptocurrencies

mobile wallets and QR code payments, are expected to accelerate further thanks to the continuous growth of e-commerce as well as increasing preference for cashless transactions.

“Cross-border payments are also expected to become more seamless and efficient, facilitating trade and remittances across the region,” YCP Solidiance noted in the whitepaper.

Digital credit and cryptocurrency Along with payments, digital credit demand is also poised to become a primary revenue driver for SEA financial services, with automated loan procedures speeding up approvals and expanding access to underserved segments, YCP Solidiance noted.

Wealth management will also play a role in expanding the fintech space, with WealthTechs, robo advisers, and other digital financial platforms slated for growth as investors of all income levels seek wealth advisory services.

Cryptocurrency adoption is also expected to continue growing in Southeast Asia and will lead to changes in regulations.

“Regulatory frameworks will evolve to provide clarity and address concerns surrounding cryptocurrencies. Cryptocurrencies will be explored for new use cases, such as cross-border payments and remittances,” the experts wrote.

THE CHARTIST: MALAYSIA AND INDONESIA’S MARGIN DILEMMA

M

alaysian and Indonesian banks have one thing in common this 2024: their net interest margins (NIM) are at risk of declining.

Indonesia’s four biggest banks are weighed by tighter liquidity as a result of fewer deposits and a rise in loan demand.

The tighter money supply could drive up the margins of Indonesian banks in the short term, said UOB Kay Hian analyst Posmarito Pakpahan. But problems are on the horizon should the lower supply overstay its welcome.

“Based on historical industry data, the liquidity tightening, which led to LDR gradually rising, could lead to net interest margin (NIM) expansion or stable NIM due to more efficient funding (liquidity) usage.

Nevertheless, as liquidity continues tightening, NIM would decline deeply as we believe the

cost of funds (CoF) would increase faster than lending rate,” Pakpahan warned.

State of major banks All four Indonesian banks– Bank Negara Malaysia, Bank Rakyat Indonesia, Bank Central Asia, and Bank Mandiri– have guided for strong loan growth in 2024. This could lead to lower lending rates, Pakpahan said.

Their neighbouring banks in Malaysia also face the possibility of declining net interest margins amidst intense competition in the country’s saturated banking sector, said Nikita Anand, a credit analyst for S&P Global Ratings in her report She added the possibility of a modest deterioration in asset quality coming from restructured loans of low-income households and small businesses.

Indonesia’s LDR and NIM

Source: OJK

ASIAN BANKING & FINANCE | Q2 2024 7

FIRST emerging sectors and ongoing caution in giving out real estate loans.

Return on average assets (ROAA) is expected to decline to 0.65%-0.75% over 20242025, down from 0.8% in 2023 and 0.85% in 2022. The primary cause is a reduced net interest margin (NIM) amidst lower interest rates. BOC’s NIM already fell to 1.59% in end2023 from 1.75% in 2022.

The Agricultural Bank of China may face lower profits over the next two years, says S&P Global

Will property woes continue to weigh on Chinese megabanks?

LENDING & CREDIT

T

his year, Chinese megabanks are facing two big hurdles: the government’s mandate that may force banks to take on more risks in the name of propping up China’s embattled property sector; and declining credit demand and interest rates.

The Agricultural Bank of China (ABC) and Bank of China (BOC), face lower profits over the next two years, with property risks continuing to weigh on their performance.

ABC, in particular, faces additional risks from a recent mandate by Chinese authorities’ directing local megabanks and larger joint stock companies to inject liquidity into the

real estate sector. The government has further mandated the restructuring of lending to local government financing vehicles (LGFVs), and this will also dent its income, noted S&P Global Ratings in a separate report.

One advantage ABC has is its positive prospects for credit growth.

“Emerging industries (such as those related to science and technology), green credit, inclusive finance, and manufacturing will remain key to lending growth,” S&P said.

Bank of China’s profits, meanwhile, is still expected to dip over the next two years despite efforts to expand lending to

Margins a challenge Recent rate cuts by the People’s Bank of China (PBOC) would drive lower net interest margins in ABC and BOC, as well as the China Construction Bank (CCB), the Postal Savings Bank of China (PSBC), and China Merchants Bank (CMB).

Tighter NIMs will constrain CCB’s profitability amidst its ongoing shift to corporate sectors. Compounding this are consecutive cuts in interest rates and the government’s push for banks to lower their lending rates to support the real economy, according to the S&P report.

Overall, however, CCB has sufficiently prudent risk management to protect its asset quality this year, the ratings agency said.

“Whilst net interest margins are being squeezed, loan growth is healthy. A 2.3% rise in net profit in 2023 highlights the bank’s financial resilience,” it added.

CMB, meanwhile, has already been guided that it will be “challenging” to achieve positive earnings growth in the first three months of the 2024 fiscal year, noted UOB Kay Hian analyst Kenny Lim Yong Hui said.

Car prices and M&As help Thai banks win big

B

anks in Thailand outperformed profit estimates for the first quarter, but their future outlooks are a mixed bag as some grapple with bad loans whilst others are set to win with rising car prices.

Kiatnakan Phatra Bank (KKP TB), Krung Thai Bank, and TMBThanachart Bank all exceeded profit forecasts set by UOB Kay Hian.

KKP TB saw their Q1 profit more than double compared to Q4 2023, rising by 125% to THB1.5b, although this is lower than net profits in Q1 2023. Krung Thai Bank, meanwhile, saw its net profits rise 81% to THB11.1b compared to Q4 2023.

TMB Thanachart Bank reported a net profit of THB5.3b, which beat UOB Kay Hian’s estimates by 7%, although still in line with expectations. SCB X was also in line with UOBKH’s estimates, with its net profit rising 3% to THB11.3b.

KKP TB’s hire purchase (HP) loan portfolio is expected to benefit from the recovery of used-vehicle prices in Thailand, said analysts Tanaporn Visaruthaphong and assistant 8 ASIAN BANKING & FINANCE | Q2 2024

analyst Thanawat Thangchadakorn. The market expects used-car prices to recover significantly in the last six months of 2024 due to a government stimulus and consumer spending recovery. Used cars make up 62% of the bank’s HP loan portfolio.

Home Credit Vietnam SCB X, meanwhile, saw its non-performing loans ratio rise to 3.52% although this was just due to a lower asset base.

One bright spot in the horizon for SCB X is its acquisition of Home Credit Vietnam Finance. Its subsidiary Siam Commercial Bank (SCB Bank) has entered into a sale and purchase agreement with Home Credit N.V. to buy 100% of Home Credit Vietnam Finance (HCVN) for approximately VND20,973b (THB31b) in 28 Feb 2024. HCVN is a leading consumer finance company in Vietnam.

The transaction will immediately enhance earnings and shareholder return for SCB upon its completion by 2025, according to UOB Kay Hian.

The used car market is set to recover significantly in H2 due to a government stimulus

BRANCH WATCH: CITI

Citibank expands in Singapore with spacious new wealth centres Citibank Singapore has opened two new wealth centres in One Holland Village and Parkway Parade.

C

itibank is elevating its wealth management services in Singapore with the launch of two new, spacious wealth centres at One Holland Village and Parkway Parade. These centres, significantly larger than their predecessors, are located to provide Citigold and Citi Private clients with convenient access to their relationship managers and a range of first-class services.

The new centre at One Holland Village, situated at the development’s fourth floor, features a 3,700 square feet (sqft) and is said to be 80% larger than the previous branch in the area. It has close proximity to the main Citi Wealth Hub at 268 Orchard. access to a team of product specialist from the main hub.

The second new wealth centre is on the 22nd floor of Parkway Parade. It features a floor area of 4,600 sqft, and boasts a panoramic view of the sea. Similar to the new wealth

1

Brendan Carney

centre at One Holland Village, the Parkway Parade wealth centre is bigger than the previous branch in the area by 60%.

The centres feature private advisory rooms with video conferencing capabilities. This will enable them to meet with their RMs as well as speak with product specialists remotely.

Both centres also feature a space to host bespoke lifestyle events and investment seminars of up to 35 to 40 clients.

Singapore is one of Citi’s four global wealth hubs, and establishing two new wealth centres within the borders of the Lion City is part of the bank’s affirmation of Singapore’s strategic position for the wealth management plans.

Citibank Singapore CEO Brendan Carney said that the enhancements are all about Citi elevating their clients’ experiences, and enables the bank to deliver first-in-class wealth management services to their clients.

2

1 Client meeting

room at the Holland Village centre

2 Client meeting

room at the Parkway Parade branch

3

4

3 (L to R) Brendan

Carney, Singapore CEO; Andy Sieg, Global Head of Wealth; Tibor Pandi, Singapore Citi Country Officer; Shyam Sambamurthy, Citi Asia South Wealth Head, officially open the Citi Wealth Centre at One Holland Village

4 Carney, Sieg,

5

Pandi, and Sambamurthy at the One Holland Village opening.

5 Symbolic

pineapple rolling ceremony by Andy Sieg, Citi Head of Wealth, during the opening event.

ASIAN BANKING & FINANCE | Q2 2024 9

NEW CONSUMER LENDING PRODUCT OF THE YEAR - MALAYSIA FINANCIAL INCLUSION INITIATIVE OF THE YEAR - MALAYSIA (FOR ALLIANCE DIGITAL SME)

Alliance Bank and CGC Digital Offers Innovative Digital Financing for Startups and Small Businesses The Alliance Digital SME Startup Financing scheme leverages innovative AI-driven analytics to evaluate creditworthiness, marking a significant step towards financial inclusion and supporting Malaysia’s MSME sector. poised to play a crucial role in empowering startups and small businesses, thereby nurturing a vibrant and sustainable entrepreneurial ecosystem in Malaysia.

Alliance Bank launched the Digital SME Startup Financing

A

lliance Bank Malaysia Berhad has taken a significant step forward in supporting the burgeoning startup ecosystem in Malaysia by collaborating with CGC Digital, a subsidiary of Credit Guarantee Corporation Malaysia Berhad.

This partnership has culminated in the launch of the Alliance Digital SME Startup Financing scheme, a groundbreaking initiative aimed at bolstering startups and small enterprises.

Recognising the challenges faced by these businesses in securing financing due to insufficient collateral and limited credit history, the scheme provides a lifeline by offering financial support ranging from RM20,000 to RM100,000.

The scheme is especially tailored for businesses as young as six months, highlighting a commitment to fostering earlystage growth and enabling these enterprises to seize timely market opportunities. The streamlined online application process, which requires just a 6-month bank statement, demystifies the traditional barriers to financing, making it more accessible and less cumbersome for entrepreneurs.

This initiative is a testament to the synergistic partnership between Alliance Bank and CGC, with CGC Digital pioneering the use of alternative data to assess the creditworthiness of applicants. By embracing such innovative approaches, the scheme not only enhances financial inclusivity but also propels the development of Malaysia’s micro, small, and medium enterprises (MSME) sector.

This sector is pivotal to the nation’s economic vitality, contributing significantly to GDP growth and employment.

Transforming Banking with AI Furthermore, Alliance Bank is set to revolutionise the banking experience for its clients through the introduction of its Bank Statement Analyser. This AI-powered tool is designed to refine financial management practices and boost operational efficiency.

It represents a key component of the bank’s strategic Proof-of-Concept project, which aims to deliver banking services that are not only faster and more efficient but also highly personalised. Through these innovative efforts, Alliance Bank Malaysia Berhad is

This scheme will enable us to reach out to underserved segments and provide them with easy and convenient access to financing 10 ASIAN BANKINGAND & FINANCE 2024 ASIAN BANKING FINANCE| Q2 | DECEMBER Q3 2021 2019

Empowering SMEs with Digital Financing Mr Kellee Kam, Group Chief Executive Officer of Alliance Bank, said: “We are excited to launch the Alliance Digital SME Startup Financing scheme with CGC Digital, as it is a game-changer for the SME market.

This scheme will enable us to reach out to underserved segments and provide them with easy and convenient access to financing. We believe that this will spur the growth of the SME sector and contribute to the economic growth of the country.”

Mr Raymond Chui, Group Chief SME, Commercial & Transaction Banking Officer of Alliance Bank, said: “The MSME segment faces unique challenges accessing financing as they typically lack adequate collateral and credit history. This collaboration with CGC Digital helps broaden financial inclusivity and will help young MSMEs access the banking ecosystem. Our business customers will find added value in our full suite of banking and non-banking solutions which can support them throughout their lifecycle. The Bank’s refreshed strategy, Acceler8, puts businesses as our core focus and digitalisation is a key enabler in our efforts to in building fast, seamless and personalised solutions to help our customers thrive in a dynamic marketplace.”

Pn. Yushida Husin, Chief Executive Officer of CGC Digital said: “CGC Digital is committed to innovating its suite of digital guarantee products via digital platforms.

The game plan is to provide MSMEs with a one-stop digital marketplace with better access to financing, focusing on targeted assistance to scale up. All these is anchored to enhancing financial literacy and increasing digital adoption among MSMEs, through this strategic partnership with Alliance Bank.”

The Alliance Digital SME Startup Financing scheme is now available for eligible businesses via Alliance Bank’s Digital SME platform. For more information, please visit https://www. alliancebank.com.my/digitalsme or call 03.2604 3333.

ASIAN BANKING & FINANCE | Q2 2024 11

CASE STUDY: BPI PRIVATE WEALTH

How BPI Private Wealth strategically courts 25% of the local HNW market CEO Maria Theresa Marcial says they are targeting US$53b in AUM by 2026.

preservation, but also customer preservation.

Marcial also noted the potential to tap into a broader ecosystem that involves not just wealth management, but their customers’ businesses tapping into other non-wealth related services offered by BPI. “We are tapping into potential opportunities for their businesses,” Marcial shared with the publication.

For the children and grandchildren of UHNW and HNW, they hold seminars and lessons to help them in a future of managing their finances and their wealth.

Amongst events they hold include their Signature Yacht Race series, with four races taking place in Corregidor Island, Busuanga, Boracay, and Subic between 2023 to 2024.

BPI holds seminars and lessons to help the children of high-profile clients manage and secure their wealth

T

PHILIPPINES

he Philippines’ oldest bank aims to double the assets that it manages for the ultrawealthy and to clinch a 25% share in the Philippines’ growing wealth management market over the next two years.

Speaking to reporters, BPI Private Wealth president and CEO Maria Theresa Marcial said that they are targeting an assets under management (AUM) of about US$53.3b (PHP3t) by 2026 – more than double the current US$21b (PHP1.22t) they currently manage.

Marcial cites opportunities with the growing number of high net worth (HNW) individuals in the Philippines– those with assets of US$1m and above– which is estimated to grow to 32,000 by 2026, from just 18,000 in 2021.

The ultra high net worth (UHNW) Filipinos, or those with over US$30m in assets, will remain few at an expected 440 by 2026. But this would still be a massive jump from just 313 UHNW Filipinos in 2021.

“We’re expecting strong growth in this segment,” Marcial said. “The key 12 ASIAN BANKING & FINANCE | Q2 2024

It’s not just coming from the old rich, we’re seeing more and more people reach this affluence

Maria Theresa Marcial Javier

Gail Totañes

theme [in the market] is the growing affluence…it’s not just coming from the old rich, we’re seeing more and more people reach this affluence.”

As of 2024, BPI Private Wealth has reportedly cornered 25% of the UHNW market, and eyes to grow its number of HNW customers with the aim of being the bank of choice of 25% of this.

Establishing legacies Marcial highlighted BPI Private Wealth’s expected role in the lives of their clients: not just to manage their investments, but also to help prepare their children and grandchildren in preserving their wealth across generations.

Estate planning is a particular pain point of HNW clients, noted Atty.

Gail Totañes, head of wealth planning at BPI Private Wealth. “[They’ve] been so busy dealing with their businesses, so busy focusing on their careers, that they leave out estate planning and the transition of their wealth to the next generation,” Totañes said.

This isn’t just a matter of wealth

Wealth loans Whilst their premier customers may be amongst the country’s creme de la creme in terms of assets, they could still find themselves in need of immediate liquidity– to buy a much-desired property, for example, at a short notice.

To meet the wealthy’s liquidity needs, BPI Private Wealth unveiled its “Wealth Loans.” Touted the first in the market, these loans are backed by their clients’ personal investments. This allows clients to obtain the funds they need without having to liquidate assets.

Compared to the off-the-shelf retail loans, these wealth loans are bespoke to each customer and offer varying interest rates and tenors depending on their individual needs.

BPI Private Wealth adapts a discretionary model portfolio, with customised investment strategies based on objectives of their clients– whether it be wealth preservation, income generation, or capital growth.

Assistance is also offered in regard to legal, property management, investment assistance, and even in navigating taxes and other government structures, amongst others.

FINTECH WATCH: HOMEPAY

How HomePay is combating renovation scams in Singapore

Money is put in an escrow account and disbursed when milestones are reached.

SINGAPORE

I

n October 2023, the Singapore Police Force arrested a man for allegedly swindling a total of $198,000 in a series of renovation scams. This is just one example of the thousands of renovation-related complaints that had been reported in the Lion City.

From 2021 to early 2023, over 3,300 complaints were logged, according to data from the Consumers Association of Singapore; and between 2021 to 2022, over $1.16m in prepayment losses due to sudden business closures were reported.

These cases inspired David Ng– who was the group chairman of a tech solutions company– to launch HomePay, a local app designed to redefine payment practices for both interior designers and clients.

“HomePay was created to solve a very simple problem. And that problem was that a lot of cases reported of either interior design firms running away with the money that was put on deposit by homeowners when they agreed to a renovation contract; for when the work is done to a substandard workmanship level, leaving homeowners not happy and unwilling to pay,” Ng told Asian Banking & Finance in an interview.

Lack of regulation Ng noted that there is a lack of regulation in the industry, or a lack of yardstick that could properly measure what should be the right standard of workmanship or quality of materials.

“We hope that we can help to reduce the risks in that industry and try to solve that problem from both the homeowner’s side and the interior designers’ side,” Ng added.

HomePay, whose financial wallet system is approved by the Monetary Authority of Singapore, serves as a platform to connect homeowners with interior designers. Before onboarding an interior designer firm onto its platform, a vetting process is done via a “Know Your Business” process to ensure that

They can actually check, because everything has been properly documented before the first dollar is actually awarded to the contractors.

David Ng

the company or its directors do not have any bad records.

“Both sides have to be vetted and cleared right before they can use the platform,” Ng said.

Data of transactions between the company and individuals will be stored in the back-end administration of HomePay, which will allow them to see the timelines of when contracts have been uploaded and whether said timelines have passed, every milestone met, and every payment dispensed.

“What we’ve built in HomePay is a system whereby they can actually document the entire renovation journey. First starting from the contract-- that was agreed upon, what the scope of works are, quoted pricing, work progression, work images or documentation of work completed for each stage-- and they can actually check, because everything has been properly documented before the first dollar is actually awarded to the contractors. So, both sides have peace of mind,” Ng said.

Payments are uploaded to an escrow account with DBS, with HomePay disbursing the payment automatically once certain milestones in the written and uploaded contract have been met.

Business plans Currently, the app– which launched just in December 2023– is privately funded, and as of now has no intention of doing a funding round.

Right now, HomePay is focused on scaling up operations. Ng shared that the app recently partnered with an equipment manufacturer that has hundreds of interior designers working with them, and HomePay is in the process of training and onboarding all these IDs into its platform.

Further developments in the works include a warranty tracker; an invoice tracker; a mood board for users to sort out different styles of renovations they may be keen to explore; and a directory to facilitate homeowners in finding credible ID firms.

“We also plan to put in some rating system where people that have completed projects on our platform can read the IDs or read the contractors for how good their job is, quality of their workmanship, or how painless or enjoyable that process was [working with the contractor],” Ng said.

Funds are released in stages only after the client has reviewed and approved completed works (Photo from HomePay)

ASIAN BANKING & FINANCE | Q2 2024 13

INTERVIEW

UOB crafts banking strategy with artistic flair Ip believes that finance and creativity go handin-hand in building a holistic pool of talents.

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HONG KONG

hen you’ve had a storied 30-year career spanning a handful of banking markets, including being the CEO of UOB’s Greater China and Hong Kong businesses for a decade, where do you expect the next stage of your career to take you?

Veteran banker Christine Ip found herself coming full circle with a role that delves into her first love: the arts.

Ip, who took over as UOB’s Group Head of Strategic Communications and Brand in 2023, is now the main driving force for raising the bank’s profile and branding.

She also leads her team in building up the Bank’s art portfolio, which veers close to her childhood dream of becoming a performance artist. “[This role] resonates with [the career] I originally imagined I would pursue,” Ip told Asian Banking & Finance in a recent interview. “While my role with UOB focuses on visual art rather than performing arts, I can use both my business and art experience to lead UOB in building its brand, external and internal communications, and social media platforms.”

Art is close to both Ip and UOB’s hearts. Recently, UOB ventured into renewing its commitment with the arts.

“We recently renewed our partnership with National Gallery Singapore for another five years, a testament to our commitment to support the art community across ASEAN,” Ip shared with the magazine.

She added that they are collaborating to grow the world’s largest collection of modern Southeast Asian art pieces through acquisitions. UOB also established a partnership with the Nanyang Academy of Fine Arts to provide holistic education to over 4,000 art students and artists over the next five years.

“You can see that even though we are a bank, we believe in creativity. Both are equally important so that we can build a holistic pool of talents that can fit today’s dynamic business,” Ip told Asian Banking & Finance.

Ever-learning, always changing Before she circled back to a role close to her first love, Ip had established herself as a powerhouse woman banker.

She remains a member of UOB’s management committee.

She was most notably CEO of the bank’s Hong Kong branch for over a decade and the CEO of UOB Greater China for seven years.

Prior to joining UOB, she was the CEO of ANZ China and led the Australian bank’s incorporation in the country.

Before that, Ip served as head of consumer banking for China in Standard Chartered.

She experienced rapid changes in banking and finance as she was part of the first generation of bankers when credit cards were just becoming a norm. Today, mobile phones 14 ASIAN BANKING & FINANCE | Q2 2024

Christine Ip, Head of Strategic Communications and Brand at UOB

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Both are equally important so that we can build a holistic pool of talents that can fit today’s dynamic business

and other forms of technologies are slowly replacing physical plastic cards as the default form of payment.

“It’s an ever-learning journey,” Ip said, when asked to reflect on her banking career. “I actually went to study a program in Oxford on blockchain, because if I don’t understand this, how am I able to work with the modern generation to understand crypto, to understand how to avoid scams, to have a better understanding about AI? Last year, I went for a course to get a certification on sustainability. It’s a lifelong, ever changing operating environment.”

Different life stages, different career options So, what led a once aspiring actress to exit the stage and pursue a career in finance?

“I was from a very typical traditional Chinese background. And being the eldest in the family and having a university education-- they expected me In a way, becoming a banker was the younger Ip’s form of “rebellion” against expectations, whilst still being somewhat obedient to parental expectations.

Ip recalled how, at that time, women were often boxed into following two careers: work in the government or pursue a career in education. Even such careers came with a caveat — women then were expected to eventually halt working as they transition to becoming full-time mothers.

The flexibility that the banking industry offers is another point of attraction, especially for bankers with young children or with elderly family members who need care.

“You don’t always need to have a very active, frontfacing role, or a role that requires you to travel long hours,” Ip said. “Depending on your lifestyle, we can choose to pursue different roles within the bank.”

ASIAN BANKING FINANCE Q2 2021 2024 15 ASIAN BANKING ASIAN BANKING AND FINANCE AND&FINANCE | DECEMBER || Q3 2020

SECTOR REPORT: WEALTH MANAGEMENT

How have banks’ wealth management pivots played out in China?

There’s up to $25b in fees to be made in Asia, but it’s a tough market, an analyst said.

F CHINA

or the last half decade, whenever it’s time for lenders to make the quarterly or mid-year update on their earnings, you can bet to hear one of three things: lower profits; another restructuring; and the potential of wealth management as the driving force for profitability.

Banks’ hopes in managing the money of the affluent are not without cause. A 2023 report by McKinsey & Co. posits that there is as much as $25b in fees to be made from Asia’s richest.

Success stories, like UBS’ Wealth Management Division generating around US$1.5b in wealth-related fees for the third quarter of 2021, for example, showed promise. From then, that division of UBS would report US$4.97b and US$3.58b in earnings for 2022 and 2023, respectively.

Oliver Wyman’s Jasper Yip told Asian Banking & Finance that there is $200b in global revenue pool for “wealth management (and) corporate and institutional banking” solutions, in particular.

Apart from fees and commissions, banks’ wealth management businesses have also presented themselves as an effective lever to attract stickier funding for their balance sheet, which is particularly beneficial to the higher interest rate environment, Yip said.

But not everyone in the industry is treading the same path.

“Under the current environment, banks need to develop a more resilient revenue portfolio where the longerterm nature of wealth management economics can serve to complement short-term natured businesses like investment banking and sales & trading,” noted Yip, who is a partner and the head of corporate and institutional banking for Asia Pacific at Oliver Wyman.

China’s lustre fading?

China is often a key Asian market elevated by banks as a wealth mecca.

There is a good reason for this: the Red Dragon is said to be creating millionaires at a rate three times faster 16 ASIAN BANKING & FINANCE | Q2 2024

China is said to be creating millionaires three times faster than the US through 2025

Onshore China is still very much a local “captive” market, where wealthy local individuals would still prefer to go to local providers with a deeper local product shelf

Jasper Yip

than that of the US through 2025, at least according to estimates of the 2021 wealth report by Credit Suisse.

“In Asia, wealth creation is characterised by the rapid emergence of entrepreneurs. This was certainly the case for China with the tech sector over the last decade, while we are also observing the same for other emerging Asian markets,” Yip said.

The 2020s has not been the kindest to China, however. Apart from the global negative impact brought about by the COVID-19 pandemic, China has been hit with a whammy of economic-related issues. There is that still-ongoing property crisis, which notably claimed real estate giant Evergrande.

Evergrande filed for bankruptcy in 2023, a slow decay that began after it defaulted on its $333-b debt in 2021.

Its banking industry is also experiencing weakness. One notable example of China’s banking woes is when three banks in its Henan province froze at least $178m of deposits in 2022. Strict lockdown rules in 2020-2022 further weighed down on an economy already grappling against a slowdown that began before the pandemic.

Tricky geopolitical issues with Taiwan and the US are another cause of concern for bankers.

“We certainly observe a more nuanced attitude towards building wealth management in China compared to 5 years ago,” Yip said.

For foreign banks, though, there is the fact that Chinese locals are more predisposed to working with local banks than trusting their money to international players.

“Whilst geopolitical challenges were often cited as the reason, the initial exploration by foreign banks has also revealed that onshore China is still very much a local “captive” market, where wealthy local individuals would still prefer to go to local providers with a deeper local product shelf,” Yip said.

On a more positive note, Yip believes that these attitudes are “gradually turning a corner.” The “reversal of interest rates” in late 2023 meant that Chinese individuals are increasingly open-minded about tapping into cross-border and global investment products that global banks are better able to provide.

The asset management strategy Foreign banks have also taken a different approach to penetrating the wealth management market in China: asset management firms.

“We observe that most wealth managers/private banks have now sharpened the focus to build asset

SECTOR REPORT: WEALTH MANAGEMENT management capabilities in China to tap into their global product strengths immediately and to gradually build the local brand affinity for future doubling-down opportunities, compared to very initial hypotheses to build a full private bank in China,” Yip noted.

Overall, despite challenges, China is still seen by banks as a significant portion of global wealth pools. “[It] is still strategically important for global banks to explore onshore China cautiously to keep their brand relevant for the offshore capital of the Chinese,” Yip said.

Optimising for the future Overall, Oliver Wyman remains optimistic for the future of the wealth management industry — at least for the foreseeable 12 to 24 months.

Meanwhile, near term challenges are expected for the global investment environment.

“Banks that enjoy healthy net interest income associated with wealth management during this period need to look into optimising the infrastructure and management science to continue to grow more sustainably in the future,” Yip said.

He advises banks to adopt a tailored combination of human-led service and technology and digital interface, noting that this will become Mutual fund assets under management

Source: WealthTech in Asia-Pacific 2024, McKinsey & Company

increasingly crucial for future winners.

McKinsey & Co. echoed the same thing. “Banks and wealth managers can use digital products and services that are more personalised and tailored to the needs of specific customer segments, and which have a lower cost to serve than traditional client interactions,” it said in a report on digital and AI-enabled wealth management in Asia.

To achieve these advantages, banks and wealth managers will reportedly need a full-stack approach across four dimensions: segmented customer value propositions, reimagined digital engagement, AI-powered decision making and core technology, and the right operating model and talent, said McKinsey & Co. Wealth management products Investor appetite for China’s wealth management products (WMPs) remained muted in 2023.

China’s WMP balance stood at CNY26.8t (approximately US$3.72t) as of end-2023, a decline of 3% from a year ago, according to Fitch Ratings.

Whilst WMP balance grew by 6% in H2 compared to H1, this was more the result of the stabilisation in domestic bond prices and net asset values, which eased redemption pressures in the last six months of the year.

“Investor appetite for WMPs has remained cautious in recent years, with increased allocation towards more liquid assets. This, together with tepid home purchase demand and consumer sentiment, drove retail deposit and term deposit growth higher in 2023 despite reductions in deposit rates,” Fitch Ratings said.

Fitch says that WMP yields have shown signs of recovery since H2 2023. If sustained, this could lead to modest growth in the WMP balance in 2024.

Investment in non-standard assets declined to 6% of total outstanding WMPs in end-2023, from 7% in 2022.

Investor appetite for WMPs has remained cautious in recent years, with increased allocation towards more liquid assets

Cultural preferences In a joint study on China’s family wealth management by HSBC and Tsinghua University, results showed that ultra-high-net-worth (UHNW) Chinese entrepreneurs lean toward passing on values as part of transferring wealth to their heirs.

The financial services firm and the Research Centre for Global Family Business, PBC School of Finance, Tsinghua University published the 2023 China Family Wealth Management – Beyond Uncertainty: The New Wave of Succession Planning and Family Trust.

The study conducted showcased the recent patterns and changes in the behaviour of Chinese entrepreneurs regarding wealth management such as crossgenerational wealth transfer, corporate governance, family governance, and philanthropy.

“The study finds that Chinese entrepreneurs create wealth faster than their counterparts in overseas markets and are currently undergoing or will soon begin their first cross-generational transfer,” HSBC said in a release.

One of the findings showed that Chinese wealth creators prioritise creating their businesses whilst newer generations look at other industry opportunities as the second and third generations are more receptive to newer technologies.

“They are more willing to invest in or attempt to enter emerging industries, such as biotechnology, artificial intelligence, and new energy,” HSBC revealed.

ASIAN BANKING & FINANCE | Q2 2024 17

INTERVIEW

StanChart revamps strategies to close gender gap Intentional policies for women bankers help them feel more heard and supported.

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SINGAPORE

aisie Chong’s approach to life is moulded by two fundamental principles: never say no to opportunities and always embrace the chance to learn and grow.

“My personal life modus operandi is “never, ever say no, until you’ve tried something once.” Chong told Asian Banking & Finance in an interview. “Now that I’ve reached a different stage in my career, the second thing that I’m really looking forward to is learning from my younger colleagues. I see the new generation of bankers coming in; they bring a different perspective, [and] they have a different kind of motivation as well.”

Chong — who is the head of Transaction Banking, Singapore; and head of Trade and Working Capital, ASEAN & South Asia for Standard Chartered — believes in the power of learning and opportunities. This has led her to experience a wide range of roles within the banking industry, from sales to product management and even structured finance.

Another aspect Chong highlighted was her commitment to adopting the right mindset and paying things forward.

She applies this in both her personal and professional life: whether it’s in ensuring that her two children learn about their cultures as they grow up in Singapore — both were adopted from Malaysia and Indonesia — or supporting women in the banking industry.

Mindset shift Chong recalled a moment early in her career that gave a definitive view of what it is like to be a woman in the finance industry.

“When I first joined Standard Chartered, in my very first week our then global head of transaction banking who was a female leader, told me, ‘There are so few of us out here, we really need to band together to help each other succeed’,” Chong told Asian Banking & Finance.

It was a moment that stayed with her. Today, about 32% or 1 in 3 of Standard Chartered’s senior leadership roles in Singapore is taken by women.

Both Standard Chartered and Chong believe that more can be done: the bank is targeting to increase the share to 35% by 2025. Chong especially highlighted the need to have a mindset shift that is both personal and professional.

Closing the gender gap, for example, and ensuring a balance of views through the representation of women in management roles can bring about varied perspectives, according to Chong.

“Professionally, there has to be a conscious effort as well. Because when we make a conscious effort to hire female leaders into the bank, it does encourage and shows commitment from the corporation that they’re supporting women,” she noted.

18 ASIAN BANKING & FINANCE | Q2 2024

Maisie Chong, Standard Chartered Head of Transaction Banking, Singapore, and Head of Trade and Working Capital, ASEAN & South Asia

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When we make a conscious effort to hire female leaders into the bank, it does encourage and shows commitment from the corporation

For its part, Standard Chartered has taken steps to communicate the importance of building a fair and diverse workplace, such as a fair pay report that sets out fair principles for performance and reward decisions, be it male or female.

Last August, the bank announced enhanced parental benefits: 20 weeks of paid parental leave for all new parents, recognising the importance of the role both new fathers and foster parents play.

In October 2023, Standard Chartered further rolled out global medical coverage benefits to include the treatment of menopause-related symptoms, to all employees and their partners. “A lot of my female colleagues were actually very happy about this. They felt the bank was resonating with life changes they were going through,” Chong said.

Seeking meaning Chong also shared an important lesson she learned from the younger generation of bankers: finding greater satisfaction and fulfilment through the course of work.

“I’ve learned a lot from these younger colleagues,” she said.

They want to do good, feel satisfied and fulfilled, even in the workplace. When I was growing up, we were told, let’s just have a job so we can pay our bills. Today, it’s about building a career that is meaningful and impacts the world.”

Chong further shared that collaboration now comes in different forms, one that she’s very much open to. “I learn from younger colleagues, such as interns. They have a different way of looking at things – they are happy to voice their opinions, share their thoughts and challenge you. I think that’s very exciting,” she shared with the magazine.

ASIAN BANKING & FINANCE | Q2 2024 19

INTERVIEW

OCBC builds the the next pipeline of talent

Lim weaves in support for women bankers to broader industry talent shortage.

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I

n 2021, Mayda Lim took the next step in her banking and IT career: after a four-year stint working in China for a prominent Australian bank, she returned to Singapore to spearhead the development of OCBC’s engineering team across Asia Pacific.

“When I first joined the bank, my first assignment was to grow our in-house software development team,” Lim, who is OCBC’s Head of Software Development Centre in the Group Operations & Technology division, told Asian Banking & Finance in an exclusive interview. “We want to transform from buying the product to building the product ourselves.”

Just over two years later, Mayda has successfully scaled OCBC’s engineering team, quadrupling the number of experts in the team by hiring more than 600 software engineers.

Looking at her time before joining OCBC, it’s easy to see why Lim was chosen to complete this task: she had previously served as head of technology for ANZ’s China technology campus, where she directed the offshore software development centre with staff composed of 300 people. In her brief stint with ANZ Singapore before this, she drove the development of 8 prototypes and launched a start-up company focusing on blockchain in trade finance.

Tech roots Before becoming a banker, though, Lim had always traced her roots to tech and engineering, starting her career working for a logistics company and later with Thomson Reuters.

“I never started my career thinking about entering the banking industry–not really,” Lim recalls of her over twodecade career. “But from the beginning, I knew that I wanted to go into tech, or anything related to it. I see tech like the core department of many sectors. It’s a vertical role. You can plug into any of the industries.”

In the future, Lim shared excitement in the up-and-coming developments around quantum computing, which she believes is where the future lies– both in tech and in banking.

“From our bank [OCBC’s] perspective, we have determined that we need to train our people to at least have awareness about quantum computing. It’s the same thing a few years back with blockchain,” Lim said, saying that OCBC has “always been first” to reposition itself to explore new technologies, and thus is now exploring training curriculum for quantum computing.

“To be future ready, training should not be limited to tech employees. Instead, it should be open to the whole bank, like our Data Program or the cybersecurity program,” she added.

Apart from tech, there’s one other topic close to Lim’s heart: empowering up-and-coming talents, and of course women, in succeeding in the banking and IT industry– a sentiment shared by OCBC. 20 ASIAN BANKING & FINANCE | Q2 2024

If the upstream supply is few, then the downstream industry will get impacted, including finance

Talent gap A woman leader being chosen to lead a bank’s tech team may still raise some eyebrows in Asia, where only 1 in 4 senior management roles in businesses are filled by women– although the number is significantly higher in Singapore. Data from Grant Thornton Singapore found that 39% or over 1 in 3 of senior management positions in the Lion City are occupied by a woman. As for women in tech, in Singapore at least the gap is closing, with 4 in every 10 tech majors being a woman.

For Lim, however– and for OCBC, the first major bank in Southeast Asia helmed by a woman– the bigger issue lies in the lack of talent in the pipeline and the immense competition in Singapore for the limited pool of workers.

Lim noted that the lack of representation for women both in the banking and in the tech industry isn’t necessarily due to conscious bias against hiring women, but rather a result of the overall shortage of talent in the pipeline.

“If we have to trace back, it goes back to the situations when we were in school. How many of our girls chose to study STEM subjects? If the upstream supply is few, then the downstream industry will get impacted, including finance,” she noted.

As an example, under one of the internship and talent initiatives of OCBC, Lim shared that it is sometimes difficult to maintain a 50% ratio of male and female talents because there weren’t enough women in the course– an example of what she calls “unconscious bias”.

This situation is further exacerbated by immense competition amongst companies to get the right talent. In Singapore, banks like OCBC have to compete with tech giants like Google, TikTok, and Facebook, amongst others.

C

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CM

MY

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Mayda Lim, OCBC’s Head of Software Development Centre

ASIAN BANKING & FINANCE | Q2 2024 21

INTERVIEW

UBC aims for top 5 in Sri Lanka banking

Chairman Nirvana Chaudhary is prepared to lead amidst a national finance crisis.

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N

SRI LANKA

irvana Chaudhary, newly appointed chairman of the Union Bank of Colombo (UBC) in Sri Lanka, has laid out a bold goal for the bank’s revival: to make it one of the top five players in Sri Lanka’s banking industry by 2026, despite a challenging landscape still reeling from the financial, economic, and political crisis it suffered in 2022.

Instead of being daunted by all these issues, however, Chaudhary even floated the idea of helping Sri Lanka overcome its financial crisis.

“Once the country gets politically stable, it wouldn’t be a big challenge to revive the economy. We aim to help overcome the cash-strapped nation’s financial crisis,” Chaudhary told Asian Banking & Finance. “We are taking a strategic growth approach to make UBC among the top private commercial banks in Sri Lanka.”

Chaudhary outlined the two factors that he says will be key to achieving this three-year goal: collaborations and their growth plan. In particular, this might involve “partnerships in collaboration with fintech companies, NBFCs and other stakeholders, which helps to innovate and expand the bank’s service offerings,” he said.

“The banking opportunities I see in Sri Lanka and our growth plan for the bank is to drive digital leadership, tap into green funding, cater to infrastructure development needs of the country, and [drive] SME financing,” he said.

Amongst other opportunities he listed include the potential to create a profitable digital-only bank; improve the formal sector and push for more financial inclusion, thus reducing the shadow economy; and monetisation of remittance.

He also shared with the magazine that he plans to take advantage of what he calls the “massive potential” of the Colombo port as a tax-efficient hub.

Synergized efforts To start, a rebrand of UBC is underway, with the aim of becoming more customer-centric and digitally driven by 2025. For this organisation overhaul, Chaudary said he will leverage not just his decades-long experience as a bank leader in Nepal but also the strengths of UBC’s parent company, the Chaudhary Group (CG).

CG acquired a 71% stake in UBC in 2023. Chaudhary noted that CG had always wanted to enter the banking industry in Sri Lanka, where CG also owns a lot of highend properties, luxury hotels, and resorts.

Prior to setting sights in the Southern Asian nation, Chaudhary had been a mainstay in Nepal’s banking industry for almost 15 years. He has served as vice chairman of Nepal’s largest commercial bank, Nabil Bank, since 2009. UBC’s parent company CG has owned Nabil Bank since 1995.

“While I am appointed as Chairman of UBC, I will not be the sole person contributing to the bank. Along with 22 ASIAN BANKING & FINANCE | Q2 2024

We want to also look at the possibility of UBC’s expansion to emerging and frontier markets such as Africa, Nepal, and Bhutan

me, there comes a huge experience of our overall group, including Nabil Bank, which can be leveraged for the growth and success of our latest banking acquisition in Sri Lanka,” Chaudhary shared with Asian Banking & Finance.

He also shared plans for UBC to cater to helping Sri Lanka meet its infrastructure development needs —including transportation, energy, and telecommunications, all of which present opportunities for banks to finance large-scale projects.

Going global UBC’s strategy is in line with its parent company CG’s goals: expansion through partnerships, acquisitions, and investments. And similar to how UBC plans to be a top five bank in Sri Lanka by 2026, CG aims to grow its value and be a US$5-billion enterprise in 2025.

For the latter, Chaudhary — who also serves as managing director of CG Corp Global — says that they will expand the company’s pièce de résistance: its instant noodles. manufacturing business, notably the Wai Wai noodles His father Binod Chaudhary famously acquired the rights to distribute the Thai brand in Nepal in 1984, which earned him the title of Nepal’s “Noodle King.” Today, Binod Chaudhary is Nepal’s sole billionaire as the owner of CG Corp Global, which employs more than 30,000 people across 20 countries worldwide.

“We want to continue to expand our global presence through strategic partnerships, acquisitions, and investments majorly focusing on the manufacturing of instant noodles across the world,” Chaudhary shared.

Furthermore, CG plans to increase its headcount by another 6,000 over the next five years and expand initiatives in its foundation.

Nirvana Chaudhary, Union Bank of Colombo Chairman

ASIAN BANKING & FINANCE | Q2 2024 23

INTERVIEW

What makes Malaysia the next great investment banking frontier in Southeast Asia?

EVs, takaful insurance, and its proximity to Singapore attract investment activity, according to a BofA executive.

M

alaysia is emerging as a prime place for investment banking activity in Southeast Asia, buoyed by its government’s commitment to renewables and advantageous geographic location.

Notably, electric vehicles (EVs), takaful insurance, and the Sarawak province count amongst the hottest sectors for investment activity in Malaysia in 2024, a top official from Bank of America Malaysia told Asian Banking & Finance.

“Given the focus of the Malaysian government and the incentives towards renewables, I do think that EV is another sector which we should watch out for,” Gautam Puntambekar, BofA Malaysia country executive, told the magazine when asked to pinpoint the next investment opportunity in Malaysia.

It was this keen eye for seeking opportunities that carried BofA Malaysia to clinch the title of Malaysia’s top investment bank in 2023, according to data from Dealogic. Its notable deals include its involvement in the $1.5-b Khazanah Nasional bond issuance and the $1.3-b Ramsay Sime Darby healthcare said the executive.

Puntambekar particularly highlighted the bank’s focus on sectors like agriculture, mining, manufacturing, and the electrical and electronic sector, which contributes to 40% of exports, as to what carried the bank to the top.

“Being close to our clients assessing the requirements and supporting their business plans are core to what business for Bank of America is,” Puntambekar said, when asked what he thinks made BofA Malaysia the investment bank of choice for Malaysian businesses.

The bank has further invested in building an onshore team and leveraging the strengths of its parent company to enable its clients to better reach a more global audience.

Takaful insurance, hydrogen energy Another market that Puntambekar sees much opportunity in is in the insurance sector, particularly Malaysia’s takaful insurance sector. The takaful or “Islamic way” insurance allows businesses to mitigate the financial risk of unforeseen events.

“The other one which could see a lot more activity is the insurance sector. As global companies look to invest into or to tap the market in Malaysia, insurance and especially the takaful insurance is a key area where global companies may want to enter. The market being saturated, we could see some activity along those lines,” he noted.

Sarawak province could also become a hotbed of investment activity related to renewable energy.

“The state of Sarawak supplies hydrogen electricity to Singapore. This could be the next possible destination where companies looking for green energy could continue to invest,” Puntambekar said.

Malaysia’s geographic size and proximity to Singapore is another advantage– it has the ability to attract and spread 24 ASIAN BANKING & FINANCE | Q2 2024

Gautam Puntambekar, country executive of Bank of America Malaysia

From a language skill set perspective, these people speak Chinese, Malay and English, which is a very powerful combination

talent across the country.

“From a language skill set perspective, these people speak Chinese, Malay and English, which is a very powerful combination. The ability to set up shared service centres in Malaysia is a perfect strategy for banks, for clients who may want to set that up in Malaysia,” he said.

Slowing investments One notable expectation for investment banking in Malaysia is that more investments would come in at the first half of the year, as companies will be more focused on the US elections in the second half of 2024.

This year will not be easier for investments, Puntambekar admitted. “We anticipate further market volatility as a result of anticipation of rate cuts versus inflation, rhetoric from the US elections, investor reactions coming in from China stimulus policies. And of course, the instability from geopolitics,” he explained to Asian Banking & Finance.

Healthcare, telecommunications, financial institutions, and natural resources and renewables are expected to continue to be most active and carry investment banking activity over 2024, as they have been for the past couple of years, he added.

“Interest rates are expected to remain elevated. We do expect issuers therefore to consider tapping the international market at opportunistic windows,” Puntambekar concluded.

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S AT H A PA N A M A K E S Y O U R L I F E B E T T E R . info@sathapana.com.mm

www.sathapana.com.mm ASIAN BANKING & FINANCE | Q2 2024 25

ANALYSIS: CUSTOMER EXPERIENCE

Empathy deficit erodes customers’ trust in banks

Customers who feel valued are willing to spend more for banking products.

APAC

B

anks in Asia’s financial centres are facing a trust issue. Less than 3 in 10 banking customers in Hong Kong and Singapore indicated that they hold “high trust” in their banks, according to a study by Forrester Research. In Hong Kong, of the 988 respondents surveyed, only 16% indicated that they have high trust in banks — the lowest in the region — whilst 71% of customers surveyed indicated that they have weak (22%) or very weak trust (49%) in their banks.

One of the biggest reasons is the perception that banks lack empathy. Customers do not think that banks are putting enough effort to understand their needs and act in their best interests, according to Tom Mouhsian, principal analyst for Asia-Pacific at Forrester, and one of the authors of the APAC Financial Services Customer Trust Index.

“Empathy is a combination of three things. Number one, you need to understand a customer’s needs.

Number two, you need to care really, genuinely care about those needs.

And number three, you need to act, you need to do something to help [the customer] with those needs,”

So you’ll walk away with the feeling like they didn’t really give empathy, because they just said, ‘oh, we feel we feel your pain’ but they didn’t do anything

Tom Mouhsian

Citi is Singapore’s most trusted bank, according to the Forrester study

26 ASIAN BANKING & FINANCE | Q2 2024

Mouhsian explained to Asian Banking & Finance.

As an example, Mouhsian noted a scenario in which a customer lost a job, and asked the bank for options to help refinance their debt. Unfortunately, the bank’s representative that they talked to, whilst expressing sympathy over the customer’s bad luck, refused to help them refinance or was unable to do anything about their request.

“So you’ll walk away with the feeling like they didn’t really give empathy, because they just said, “oh, we feel we feel your pain” but they didn’t do anything,” Mouhsian explained.

“Real empathy needs [the bank] to understand, care and act, because the number one most important driver of interest is this perception that my bank or my insurance company is acting in my best interest. When somebody is acting in your best interest at heart, genuinely, you tend to trust these people,” he added.

Mouhsian and Forrester’s study posits that trust is measurable, with empathy as just one of the factors that Forrester measured in determining customers’ trust levels in their banks.

They broke trust down into seven

categories: accountability, competence, consistency, dependability, integrity, transparency, and empathy.

Singaporeans are ‘hard to please’ Singapore banks fared better in that 30% of the 1,010 customers surveyed indicated a high level of trust. But more than double of respondents (69%) said that they only have moderate trust in their bank.

This is on par to how Singaporean banks have always fared in terms of trust, noted Mouhsian. “In the history of our CX index in Singapore, the industry as a whole has never been good or excellent. It’s always been historically, either poor or sort of in the middle,” he said.

Since 2018, the average trust score ranged between 59.9 to 62 for the six banks that Forrester studied: DBS, Citi, HSBC, Standard Chartered, OCBC, and UOB. The latest Forrester study notes Citi as the city’s most trusted bank.

“You see that the banks are struggling to get the majority of their customers to rate their experiences as good,” Mouhsian said.

Why is that? “It’s a tough market,” Mouhsian admits. “It’s difficult to impress customers with excellent experience all the time.”

As a result, Singapore is standing at a stalemate: without any single bank standing out in terms of customer experience.

So how can Singaporean banks impress their customers? To start, they must leave an emotionally positive customer experience.

Forrester’s study found that the two top-ranked brands in this year’s CX Index–Citibank and DBS, had average emotion ratios (the number of positive interactions for each negative one) of 7 and 9, respectively.

For the last two brands, OCBC and UOB, this ratio was 5 and 4.

Walking away happy It all comes down to this: the customer must walk away happy from the interaction they got, or at least walk away without feeling frustrated.

“For example, you could be very effective in your website, and the mobile app could be very effective in making one transaction, or transfering money. But it’s emotionally neutral.

You don’t feel any great or unhappy, it’s just… neutral,” he said.

COUNTRY REPORT: SINGAPORE

Why Singaporeans are okay with locking away over $4b of their money Customers can only access ‘locked’ money with a physical card or by visiting a branch.

I

n late 2021, a series of phishing scams rocked one of Singapore’s largest banks by assets, changing the way banks do business. Clickable links were promptly removed from messages. Transfer notifications were made available for transactions as low as S$0.01. Limits were put in place, and default fund transfer values were made even smaller at just S$200.

Over two years later, banks in the Lion City rolled out the simplest and strictest of all defence measures: the money lock feature.

Launched in November 2023, it was as straightforward as its name suggests, enabling bank customers to lock funds in their bank accounts.

For OCBC in particular, funds can be locked via its app, but cannot be unlocked the same way.

Locked money also cannot be withdrawn or transferred via the online banking portal or through ATMs. Unlocking can only be done via ATMwith a physical card, or via visiting a physical branch.

Over $4b locked up The extra friction may be the “harshest” yet in terms of accessibility, but if reception was any indication, Singaporeans are more than willing to take on the extra friction for protection.

Just three months into its launch, the feature has been activated by 38,000 accounts in Singapore, with a total value S$3.2b locked up, according to data gathered by the Association of Banks in Singapore (ABS).

“Whilst the money lock approach taken by various banks varies, they share a similar objective of protecting customers from scams by adding a layer of safeguard should their digital access to bank accounts be compromised,” Ong-Ang Ai Boon, director of ABS, told Asian Banking & Finance when asked about the rationale behind the feature.

Banks have all taken different approaches on how or where to apply the feature. OCBC, for example,

Customers’ funds can be locked via banks’ mobile apps, but cannot be unlocked the same way

Ong-Ang Ai Boon

Beaver Chua

Jacquelyn Tan

launched the service in their time deposit accounts apart from just their digital and internet banking apps. In February 2024, OCBC’s total value locked up had already surpassed that reported for the whole industry just a month earlier: at $4.7b in value across 42,000 OCBC accounts.

“Customers like the convenience of being able to use our OCBC digital banking platforms to easily lock excess funds in their existing bank accounts without ‘losing out’ on attractive interest rates, such as the bonus interest earned on their account balances in the OCBC 360 Account,” Beaver Chua, head of anti-fraud, group financial crime compliance, OCBC, said when asked about why customers may have been keen to adopt the feature despite the extra friction.

Banks have also assured customers that “locked” money won’t lose out on interest. UOB, for example, offered an interest of up to 5% per annum for deposits up to S$125,000 that were locked under its UOB LockAway Account. The offer was available until 31 March, which may also have helped encourage customers to take up the service.

“They also recognise that the

unique features of the account, such as the withdrawal of locked-up funds only at branches, are effective in keeping their hard-earned monies safe,” said Jacquelyn Tan, head, group personal financial services, UOB, speaking about the UOB LockAway Account.

Anti-scam features Banks were mum on whether the money luck feature would become a mandatory requirement for all customers in the future. Instead, representatives said that they will continue to encourage their customers to adopt money lock and roll out other security features.

“We rolled out multiple antiscam measures such as disrupting digital banking when unauthorised or risky apps are detected, instituting a cooling period of 12-hours for adding new payee, and SMS notifications when new payees are added,” Tan said.

OCBC, meanwhile, introduced a “kill switch” — an emergency feature that enables customers to immediately freeze all their accounts, their digital app access, and all their cards, according to Chua.

ASIAN BANKING & FINANCE | Q2 2024 27

EVENT: ASIAN BANKING AND FINANCE FORUM HO CHI MINH

Banks flip the tables on disruption by becoming the disruptors themselves

Companies are facing not just tech transformations but also shorter skill lifespans for their workforce.

A

APAC

midst an era of disruptions– from generative AI to a worsening talent dilemma, and rising costs– one way that banks can stay ahead is not just by aligning with disruption, but by choosing to be the game changer themselves.

Speaking at the Asian Banking & Finance Forum held at Ho Chi Minh City, Vietnam, Bain & Company partner Sen Ganesh enumerated the different “game changers” that is impacting the banking and insurance industry, as well as the different ways that financial institutions are adjusting their strategies to keep up with these disruptors.

“What we’re seeing now is that, as the pace of technology has been increasing and developing very quickly, most organizations are having to balance two forces. The first is really around the technical debt that’s built up over the last few years. Secondly, we’re seeing a lot more pressure on cost,” Ganesh told attendees during his keynote address.

Three strategies To balance these, FIs have adopted three distinct strategies. One is to be the disruptor themselves.

“Effectively, you abandon legacy and go [to the] greenfield. You build an entirely new stack on the greenfield and then transition the customers across. Sounds very attractive, [but also] incredibly expensive and high risk. Some have tried to do that with digital banks” create an entirely new stack, separate, and then migrate customers across,” Ganesh noted in his speech.

Another strategy that banks have adopted is to invest money to overhaul their legacy product processing systems to be leaner and more efficient. The second strategy, and reportedly the most popular, is to focus on creating new digital experiences and what Ganesh called “intelligent” engagement.

“Few want to modernize the entire stack end to end. So, they break

28 ASIAN BANKING & FINANCE | Q2 2024

In his keynote speech, Bain & Company partner Sen Ganesh urges banks to overhaul their legacy product processing systems

Effectively, you abandon legacy and go [to the] greenfield.

You build an entirely new stack on the greenfield and then transition the customers across.

SCAN FOR FULL STORY

down their technology, typically into a series of microservices. These are standalone services that have their own logic, their own data, that enables them to be very scalable,” Ganesh observed.

Shorter talent relevancy Ganesh also highlighted the creeping problem of talent” the half-life of a skill is approximately 5 years today, ​down from 30 years, according to Ganesh.

To counter growing talent gap, Ganesh advised FIs to adopt a new talent management system, characterised by a “talent delivery system”, with employees deployed to their best use case.

He further noted that workers need to constantly learn, unlearn, and relearn– as employees are now perpetual apprentices.

“Placing your top performers in the most critical roles is crucial.

An interesting finding from this research, related to NASCAR teams, showed that if one member of the pit stop team underperformed, the time taken for a pit stop doubled.

If two members underperformed, it doubled again. Having the right talent in the right roles is key to success,” Ganesh said.

Keeping employees inspired is another way to make them more productive. “Lastly, something perhaps underestimated in financial

services, is that employees who are inspired are 55% more productive than an average employee. They believe in the company’s goals, feel valued, and this leads to higher performance. When you put it together, what we found was that on average, a company could take one person at 100% and create about 102% productivity. That’s a decent uplift, but the best companies go from 100% to 144%.” the Bain & Co expert shared.

“Most companies focus on hiring better, maybe doing a bit of learning and development, a bit of performance management, benchmarking some compensation.

But they often miss out on or underinvest in other factors to drive an inspired and productive workforce,” he added.

Disruptive forces Ganesh also touched upon two of the factors that are disrupting banking: namely, generative AI and ESG. Whilst Ganesh recognized the potential of generative AI in opening up new business models and change the way companies can interact with customers, he also noted a plethora of challenges connected to regulation and its overall effectiveness.

Whilst top performing employees won’t see many gains from using gen AI, it might benefit the “average” and “bottom” performers more.

Leading the way to a sustainable future and nation-building projects to committed to building a bright future for all Filipinos.

Together, let us invest in a better tomorrow.

The BDO, BDO Unibank and other BDO-related trademarks are owned by BDO Unibank, Inc. All Rights Reserved.

ASIAN BANKING & FINANCE | Q2 2024 29

OPINION

PENNY CHAI

APAC leads global fintech amidst rising digital divide and threats

D

igital growth in Asia Pacific (APAC) is skyrocketing, with the region set to lead global non-cash transactions by 2023. However, despite this digital surge, a significant challenge persists - the digital divide. According to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), more than two billion people in the region lack access to digital technologies.

Moreover, the rapid digitisation has also given rise to more sophisticated fraudulent activities. The proliferation of digital infrastructure has paved the way for advanced methods such as deepfakes, underscoring the importance of addressing both digital expansion and the evolving landscape of digital threats to ensure a secure and inclusive digital future for all.

As the region navigates through these complexities, the fintech sector remains resilient and set for continued growth. As a matter of fact, according to Boston Consulting Group (BCG), APAC is poised to become the world’s leading fintech market by 2030, outpacing the United States (US) with an impressive projected compound annual growth rate (CAGR) of 27%. With 2024 approaching, three trends will likely play out in the industry.

PENNY CHAI Vice President of Business Development for APAC Sumsub

Stronger efforts to support the increasingly connected financial ecosystem As the APAC fintech ecosystem undergoes dynamic expansion, financial activities are expected to rise as more people gain access to financial services and embrace digital transactions. Notably, as of 2023, APAC is on track to comprise more than 50% of global noncash payment volumes and likely register an accelerated 19.8% CAGR for 2022-2027.

APAC is also forecast to be the region with the highest growth (19.8%) of digital payments by 2027, exceeding regions such as Europe (10.7%) and North America (6.5%). This surge in transactions, both within and beyond the region, is breaking down borders in fintech interactions, as seen from the surge in cross border payments.

As financial networks look to become increasingly interconnected within and cross borders, the imperative to ensure their seamless and stable operation grows more vital. The establishment of rules and regulations governing crucial areas such as data transparency and verification will likely follow suit.

An example of this includes the adoption of the Travel Rule in APAC following the Financial Action Task Force’s recommendation in efforts to enhance transparency among virtual asset providers who are engaging in transactions. Just in 2023, APAC countries like Hong Kong and Japan have incorporated the Travel

30 ASIAN BANKING & FINANCE | Q2 2024

Rule into their legislation, joining the bandwagon with countries such as Singapore, South Korea, and Australia. However, it is crucial to apply these rules to all financial activities, not just crypto, to strengthen trust and security for the future.

A stronger call for industry players to tackle evolving risks The dynamic evolution of technologies, notably Artificial Intelligence (AI), has undeniably propelled industry innovation. Taking the fintech sector as an example, AI has interestingly become a valuable tool, aiding in monitoring and fraud detection. Yet it also serves as a double-edged sword, as seen from how fraudsters have been misusing it for illicit activities.

A recent report revealed a staggering 1530% surge in deepfake cases in APAC from 2022 to 2023. The report also found that crypto and fintech are the two sectors most impacted by deepfake globally, making up 95.4% of all deepcake cases in 2023.

More critically, fraudsters are continuously adapting, finding ways to evade these safeguards. This dynamic creates what we refer to as an ‘AI arms race,’ where overcoming challenges posed by deepfakes and AIgenerated crimes may become increasingly difficult.

The evolving nature of risks is something that will be a huge focus for the industry. One can anticipate more stringent rules, especially regarding identification for fintech companies. Identification tools such as network analysis and transaction monitoring will likely become more commonly adopted, and governments are placing emphasis on the need for Regulatory Technology (RegTech) solutions for fintech companies.

For instance, the Monetary Authority of Singapore (MAS) is committing up to S$150 million for technology and innovation in the financial sector.

Specifically, MAS will focus on promoting RegTech adoption for smaller financial firms.

From reactive to proactive regulatory stances, compliance will take a front seat Learning from recent anti-money laundering (AML) incidents in the region, countries have recognised the importance of being proactive in implementing necessary regulations to safeguard the future of fintech, rather than adopting a reactive approach to regulations. As a result, one can expect more regulatory developments in the region in the upcoming year — establishing essential parameters for fintech companies to abide by.

Again, Singapore led the regulatory developments by establishing most recently a new stablecoin framework to regulate cryptocurrency.

ASIAN BANKING & FINANCE | Q2 2024 31

OPINION

MANISH JOSHI

UNLOCKING THE POTENTIAL OF SUSTAINABLE LENDING IN ASIA

E

nvironmental, Social, and Governance (ESG) principles have transitioned swiftly from being a ‘nice to have’ to an essential component of corporate strategy and sustained business success. The banking sector stands at a crucial crossroad in this context. It’s not just about banks needing to evaluate the ESG influence of their own internal operations; they must also be able to showcase their commitment downstream through responsible and sustainable lending practices.

Indeed, the pressure for businesses and their supporting banks to embody ESG principles in all their activities is growing among customers, employees, investors, and other interested parties. Given the rising pressure from stakeholders including NGOs, it’s critical for banks to examine the composition of their loan portfolios carefully.

MANISH JOSHI Managing Director, APAC, Lending Finastra

Expanding lending opportunities in Asia The good news is that there is an expanding pipeline of debt opportunities across the sustainability spectrum for banks in Asia to capture. S&P Global Ratings recently reported that global green, social, sustainable, and sustainability-linked bonds (GSSSB) issuance volume in Asia Pacific could increase 20% to hit US$240b in 2023, outpacing global growth, with China, South Korea and Japan being the most active markets. Moreover, despite a challenging lending environment more generally, market participants expect green bond issuance in regional economies to pick up in the second half of 2023 as interest rates begin to peak around the world.

Asia has also seen some significant and innovative green financing deals in recent years. In 2022, Ant Group announced the conversion of a syndicated credit facility into a US$6.5b sustainability-linked loan, marking the largest of its kind in the region at the time and the third largest globally. In the same year, Sembcorp secured a five-year $1.2b syndicated sustainability-linked revolving credit facility, the first and largest SORA-based sustainability-linked loan for an energy company in Southeast Asia.

This is not to mention the sheer volume of debt financing also flowing into renewable energy and green infrastructure assets in the region. It was estimated that energy and buildings combined accounted for 79.5% of the cumulative use of proceeds of green-labelled debt, encompassing green loans and bonds, issued from the ASEAN region between 2016-2021.

Many of these projects would have likely found it hard to secure funding a decade ago, but now enjoy lending options with advantageous terms from a variety of traditional and non-traditional lenders looking to position their portfolios for the green transition.

32 ASIAN BANKING & FINANCE | Q2 2024

Practical challenges stand in the way Despite all this momentum, green lending is still just a fraction of total bank lending. For all the assets that can be defined as ‘green’, there are several times more that are ‘greening’ or working to improve their green credentials.

Then there is also a proportion that isn’t making any plans for change. To meet ESG objectives, banks must be willing to extend their funding beyond projects that are already deemed green and back industries and companies striving to improve their ESG performance.

To accomplish this, banks need to document the rate of improvement over time. Assessing a company’s position on the ESG spectrum can be challenging, given that not all firms receive a rating from a sustainability agency. Banks need a uniform and systematic evaluation method, eschewing ‘greenwashing’ by applying definitions too flexibly. Assessments should focus on tangible improvements companies are undertaking presently and in the immediate future. These insights are far more worthwhile than targets set a decade or more in the future.

Stranded assets Another concern involves lending to companies active in sectors now considered unsustainable. By refusing to finance polluting assets and industries with a lifespan of 20+ years, we risk creating ‘stranded assets’ that nobody wants to fund. Regulators and governments must prevent the emergence of a parallel industry that neglects ESG principles. They will also want banks to incentivize businesses to reform their practices wherever possible.

This is easier said than done. Assessing a company’s position on the ESG spectrum is like trying to hit a moving target. There are a variety of methodologies to assess ESG performance and even if a company has an ESG rating from a reputable third-party there is little consistency between agencies. Banks need a uniform and systematic evaluation method, that avoids ‘greenwashing’ by applying clear and consistent sustainability criteria to the credit decisioning process.

Assessments should focus on the tangible improvements’ companies are undertaking presently and the plans they have for the immediate future. These insights are far more worthwhile than targets set a decade or more in the future and will be imperative in bolstering confidence in the green transition.

The need for consistency and standardization is also reflected in the Monetary Authority of Singapore’s recent proposal for a code of conduct for providers of ESG ratings and ESG data products, stressing the importance of quality, reliability and transparency of ESG ratings and data products in Singapore.

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