East Asia

How should financial authorities contain the risk of bank defaults? Two Swiss academics have sketched an answer.

Banks are pushing hard to hire more women at every level, from graduates to seasoned managing directors. Executive search firms can help, by scouring the market for top female talent. But banks must change too.

The truth is that domestic banking of small and medium-sized enterprises is not a core priority for any of the megabanks – it is to a large extent still served on the ground by regional and local banks – but SMBC shows the clearest sense of direction among the top three.

Rakuten Bank is shaking up Japanese financial services by doing what people said could not be done: turning cash-loving Japanese towards digital applications, wallets and smartphone apps.

Notwithstanding the grand ambitions for private wealth management in Japan, it was a tough year for these businesses, all of which saw declines in profitability during our review period in the face of difficult market conditions.

A few foreign investment banks are smiling in Japan right now, benefiting from a new wave of corporate governance and investor activism that has led to conglomerates starting to hive off non-core businesses and focus on what they are really good at. The result: vibrant M&A opportunities.

The combination of Morgan Stanley and MUFG, forged from the global financial crisis, has delivered extraordinarily well in Japan, where the two groups formed a surprisingly successful joint venture that has confounded expectations of insurmountable cultural challenges.

The last 12 months could have been a tricky time for MUFG, with the transition from Nobuyuki Hirano to Kanetsugu Mike in the chief executive and president roles at the group level. But when one meets the two men, one is struck by the similarity: internationally minded and influenced, fluent in English, big thinkers, willing to shake things up.

The last year has been an interesting one for small and medium-sized enterprises in South Korea. According to the government, SMEs account for 99% of the country’s businesses, 88% of its total employment, 38% of exports and 51% of added value. In 2018, South Korea’s Financial Services Commission announced that new rules governing loan-to-deposit ratios would go into effect at the start of 2020 for the country’s banks, encouraging more lending to small businesses. With such support, SME banking has boomed.

As traditional banks compete to lead the way in digital banking, one internet-only bank has stood out for its innovation, its presence in the market and its offerings to customers: kakaobank.

Korea’s saturated market means tough competition for both the established domestic banks as well as for international banks seeking a toehold. Of the foreign banks that have succeeded in cracking the market, Citi has gone the furthest, building on more than 30 years of banking experience in Korea to operate a popular commercial bank, in addition to a wealth management business and an investment bank.

KB Financial Group is not only one of the biggest investment banks in Korea, it is also the top player across the board. It ranks fourth among domestic investment banks, according to Dealogic, with a market share of 4%.

South Korea’s banking sector is dominated by a handful of big players that have close relationships with the country’s conglomerates. But of these players one in particular stands out for its breadth, its consistency and its eye toward future growth.

Corporate social responsibility and sustainability are central to the Bank of America ethos, from the top executives down to the scrupulously regimented office bin policies. The bank’s drive has one of its most important advocates in Reiko Hayashi, the deputy president for Japan and a long-standing figure in the development of the country’s debt capital markets.

As Korea’s top domestic bank, Shinhan is in a position to lead the way for corporate social responsibility in the country. And the bank has done just that, under its motto of ‘Compassionate finance’.

When super-typhoon Mangkhut roared through Hong Kong in the middle of last September, the most intense such weather vent to strike the territory since records began 73 years ago, it devastated the MacLehose Trail, the much-loved track that traverses 100 kilometres across Hong Kong’s New Territories.

With its nifty ‘SC Keyboard’ application, Standard Chartered Hong Kong has solved those tricky problems many of us have when dining out with friends – the embarrassing lack of actual cash for the bill.

Angel Ng’s nimble Citi Hong Kong operation was busy – and profitable – in 2018, her first year in charge as chief executive, thanks in large part to Chris Laskowski’s investment banking division.

Hang Seng Bank’s chief executive, Louisa Cheang, has just come through her second year of running Hong Kong’s quintessential grassroots bank, and things seem to be going swimmingly for the former head of retail banking at HSBC. Small and medium-sized enterprises are Hang Seng’s core business, particularly the aspiring stallholders, traders and shopkeepers that line Hong Kong’s teeming streets. As they – and Hong Kong – have grown bigger and richer, Hang Seng has helped them along that prosperous journey to China and beyond – and this last year was no exception.

In Hong Kong’s buoyant, brand-conscious private-banking sector, inevitably it’s a tussle between the Swiss: Credit Suisse and UBS. UBS has the bigger operation, with nearly double the headcount of relationship managers, according to industry data – or 1,138 at UBS versus 586 at Credit Suisse – in the Asia-Pacific region.

Such was HSBC’s supremacy across Hong Kong’s investment banking sector that some of its competitors for our awards left the bank off their self-promoting submission tables, arguing (unconvincingly) that HSBC was a local bank and thus doesn’t qualify in Hong Kong’s international capital markets.

In Hong Kong, HSBC is the bank others are measured by and, in many cases, aspire to be, notably the big Chinese state banks in their forever-quest to usurp it. Yet again, ‘The bank’, as it’s known, led the Hong Kong market in all the key measures: overall customer accounts, mandatory provident fund accounts and mortgages, in a market where property is paramount.

Corporate and social responsibility hasn’t gained much traction in industrialized, ultra-capitalist Taiwan, but E.Sun is one bank that takes it seriously. Chief executive Joseph Huang says it is part of E.Sun’s ethos.

In an era when legacy banks are challenged to win Asia’s so-called K-Pop market (and in media-flooded Taiwan, that’s a bigger challenge than in many other markets), Standard Chartered thinks it may have got it right. Its smart in-app keyboard aims to extend and enhance its digital offering, providing tailored social media channels for the island’s affluent millennials.

With their close links to the US, Taiwanese have long regarded Citi as their go-to international bank, a status that the likes of HSBC and Standard Chartered are normally accustomed to in much of Asia.

With their close links to the US, Taiwanese have long regarded Citi as their go-to international bank, a status that the likes of HSBC and Standard Chartered are normally accustomed to in much of Asia.

E.Sun likes to cite the Taiwan government’s annual gongs honouring this heavily industrialized island’s ‘outstanding small and medium enterprises’ as validation of its SME business. The awards are assessed by the economics ministry and, since 2014, a third of the winners have been E.Sun clients.