Governance is becoming a big issue in Banking, especially with the intense focus on anti-money laundering. Kai Nargolwala, Stanchart group executive directors (governance) Asia, shares his views on aspects of governance, and on banking as a whole.
What does your portfolio on governance involve?
It's interesting because for Stanchart, operating in 55 countries round the world and some very difficult countries, governance has always played an important role.
It's probably quite difficult to explain to people what that's all about...however, after what happened at Enron, Worldcom and Ahold in Europe, there is no doubt what governance means.
In our case, what we've done is we have clustered all our countries under two directors – the West (basically, Middle East, South Asia, all the way into Europe and the US) under Chris Keljik; and then myself who looks after everything that we have in Asia and India.
The principles of governance are around good corporate citizenship ensuring that we operate to the highest ethical standards, are completely in accordance with all the regulations and deal with our employees and clients in a transparent way.
We have to implement the various anti-money laundering regulations and know-your-customer procedures.
It means having processes in place for dealing with clients in terms of reputational risks and environmental policies that are consistent with the policy that the bank has set.
It means dealing with our employees in a way that we are seen as an equal opportunity employer not discriminating on any grounds except performance.
What is the growth potential in the banking sector?
There is no doubt that topline growth for banks around the world over the next couple of years is going to be quite tough because the general conditions in the world economy are very uncertain right now and banks can only grow when customers grow.
A number of countries in Asia which were predominantly export-led have realised that they need to broaden out the growth of their economies by not just relying on exports but also harnessing consumer expenditure.
Korea did that very effectively, Thailand did it last year and so would Malaysia. The result is that you're seeing a growth in consumer expenditure which is more robust than the overall GDP growth.
Banks that are focussed on consumer banking will see better topline growth than those just focussed on corporate banking.
At Stanchart, outside of Hong Kong which has its unique problems right now, consumer banking grew last year by 19% which is incredible when you consider the sort of depressed conditions.
In Malaysia, it grew 13% and that's about three times GDP growth last year.
How do you see the potential for further growth of consumer banking?
The overall banking revenue pool for Asia excluding Japan is about US$30bil. About US$5bil of that is in Hong Kong and Stanchart has 20% share of that US$5bil. In the rest of Asia, there's a US$25bil pool of revenue and Stanchart, a leading consumer bank in Asia, has only 4% share of that.
Banks that are focussed on consumer banking, good modern products and customer service are the ones that will see above average revenue growth.
We want to be a well-balanced bank and if you look at our results as a group, it is almost 50:50 between consumer and wholesale. If you look at the growth opportunities, there are more in consumer banking.
Last year, our consumer banking grew 19% out of Hong Kong and it would be very difficult to see that kind of growth in corporate banking as it is, in terms of Asia, a more mature business.
Consumer banking is experiencing a surge in the middle class using consumer credit for the first time.
Within wholesale banking, we have over 12,000 customers spread out over Asia and we are a leading bank in the debt capital market.
In Malaysia last year, we were voted the loan house of the year as rated by IFR. We are a big player in local currency bonds in Thailand.
Good customer service is a hot topic in Malaysia. Please comment.
That is not just serving the customer with a smile and answering the phone politely.
The fundamentals of a good customer service is understanding the needs of your customer and having information on him that allows you to focus your sales efforts on him.
So we have to look at the end-to-end process from how you acquire the customer, service him and deal with his problems. It is how we proactively sell to them. It needs huge investment in systems, processes and training.
Looking at what we aim to do over the next two to three years, excellent customer service is the bedrock of that.
So in the meantime, what do you do with customers who may be disgruntled?
When you are dealing with consumer banking, there are hundreds, thousands and millions of customers. It is inevitable that you meet with problems. How do you deal with those problems is important.
Most customers would expect that occassionally, things go wrong.
They want to be able to, with one phone call, have their problem explained and the bank to respond. There are organisations that don't respond to the customer in a timely fashion or they ask the customer to call several places within the institution.
We have a process where we have a great focus on customer complaints, we track them.
We may not be able to solve your problems in 24 hours, but we at least respond and say we received your complaints and are dealing with it. We have different service standards for solving the problem in a few days, weeks or a month.
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