OCBC’s deal to buy ING’s
Asia-Pacific private banking businesses – which it has branded Bank
of Singapore – and set up a standalone bank in Singapore is a major
development for the industry here.

For OCBC to acquire this type of business from
an international private bank really highlights how domestic
players are becoming more organised and aggressive wealth
management players.

OCBC is creating a strategy with a pure-play
private banking organisation, and it really moves forward the
frontier of wealth management in Singapore. It also shows their
confidence that private banking is growing and likely to continue
growing in the Asia-Pacific region.

Professor Francis Koh, Singapore Management UniversityIt looks
like they are developing the business along the lines of best
practise we are currently seeing in the industry, keeping the asset
management business, Lion Capital, and the insurance company, Great
Eastern, separate from the newly created Bank of Singapore private

It means as a whole they are a more
diversified player, and I think they will be a group to contend
with in the coming years. If you look at the Asian scene, the
market is quite fragmented at the moment, so any aggressive bank
with the correct talent pool and organisation structure should be
able to take a dominating lead in this business.

There are many big players with small market
share in the region – ING was a good example of a player that was
sub-scale, which is why the OCBC deal makes so much sense. OCBC has
a strong domestic base, with the talent pool from its commercial
bank to draw upon and the opportunity to expand further.

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War for talent

Over the past few months we have
seen banks hiring again, and this suggests the war for talent,
which was spoken about so much before the financial crisis is
likely to become an issue again. The talent pool is not very deep
in Singapore because the industry does not have the same amount of
history as it has in Europe. As a result, we need to continuously
emphasise training and development to create a pipeline of talent
going into the coming months.

There are two main areas private banks are
looking to upgrade their relationship managers skill set at the
moment. One is relationship-building skills with clients and the
other is short, concentrated sessions on products. The main asset
classes of interest recently have been real estate investment
trusts and exchange traded funds (ETFs), whereas in the past it has
been hedge funds and structured products. ETFs in particular are
become more widely used, because there is interest in looking for
products with lower transaction costs, and more diversification
than single stock and mutual funds.

I was interested to see the comments of
Anthonia Hui in the last edition of PBI, which suggested some
clients have fallen below the threshold some private banks are
willing to offer service. This is something we have certainly seen
in the industry, and what has happened recently is there have been
two or three senior wealth managers coming to the end of their
careers at the leading private banks and setting up their own
independent businesses, dealing with this clientele further down
the assets under management spectrum. We have been seeing more of
that over the last 12 months or so.

Regulatory issues must be

Another area which we have been
keeping a close eye on here is the UBS situation with the US, and
the handing over of client details. Clearly, private banks in
Switzerland, but also those across the rest of the industry, are
unclear on what the recently signed tax exchange agreements mean
for the industry.

Whether regulators want to take a firm stance
or adopt a more lenient position with regard to the amount of
information shared is not much of an issue compared to the
uncertainty caused by not making the position clear. It is hard for
banks to make plans with these regulatory question marks hanging
over their heads, so the sooner we can see a resolution and some
clarity on policy the better.’

Francis Koh is a professor of finance
at Singapore Management University