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February 25, 2010updated 04 Apr 2017 3:54pm

OCBC’s giant leap for Singapore

OCBCs deal to buy INGs 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 in the city state. 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

By Francis Koh

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 bank.

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.

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 resolved

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

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