Bank Interview: Karen Fawcett, Standard Chartered

Published: Feb 2008

Everyone has heard of Standard Chartered but do you know how big the bank is or where exactly it operates? In this interview, Karen Fawcett tells Treasury Today how this big bank is becoming the leading transactional bank for companies and institutional clients for and in Asia, Africa and the Middle East.

Karen Fawcett

Senior Managing Director and Group Head of Transaction Banking

Karen Fawcett is Senior Managing Director and Group Head of Transaction Banking, part of Standard Chartered Bank’s Wholesale Banking business. Based in Singapore, Karen is responsible for the end-to-end performance of Transaction Banking comprising Cash Management, Trade Services, Securities Services and Electronic Channels.

Prior to this, Karen was the Global Head of Strategy for the Wholesale Bank, where she was responsible for the repositioning strategy of the Wholesale business and key acquisitions including Korea First Bank.

Karen joined the Bank in 2001 from Booz Allen & Hamilton, where she was Vice President and Partner focussed on the financial services sector in Asia Pacific. Karen, who is British, holds an MBA from INSEAD and graduated from Cambridge with an MA (Economics).

Tell me a bit more about Standard Chartered.

The Standard Chartered Group was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa founded in 1863 and the Chartered Bank of India, Australia and China, founded by Royal Charter in 1853.

The bank has been in Asia, Africa and the Middle East for over 150 years. We launched our first branches in India and China in 1858 and are now the largest international bank in India (by number of branches) and the oldest international bank in China and the only one to operate continuously since opening. Today we’ve got an extensive network throughout these regions and can provide a unique mix of strong domestic and cross border services

And are you still a British bank?

We are definitely a British bank. We are listed on the London Stock Exchange. We rank among the top 25 companies in the FTSE 100 by market capitalisation and are among the largest banks in the UK. We are regulated by the FSA in the United Kingdom.

Our lead regulator is the FSA in the United Kingdom. In addition, we are regulated by the local regulators in the countries where we operate.

You say you are a British bank; that’s not really where the heart is beating, is it?

Well, we’ve now got 65,000 people, over 100 nationalities in over 1,400 branches across more than 50 countries. We are a bank focused on providing the best services for and in Asia, Africa and the Middle East, through a unique mixture of on the ground presence in Asia, Africa and the Middle East, a corporate office in the UK and strong client and sales capabilities in the UK, US and increasingly across Europe to serve major corporates and institutions.

Our clients are a very balanced mixture of local corporates and institutions in our local markets and international corporates and institutions who may be based in OECD countries, but operating across Asia, Africa and the Middle East.

Now I guess that means that you’re competing with a lot of the big international banks that may have a bigger presence in the OECD and also have some presence in Asia or Africa or the Middle East?

Yes. The competitors vary by client segment and when we are dealing with the global clients, we’re head to head with the big global banks. We have a network strength in our franchise markets which the global banks can’t match, and when we’re competing with the local banks, we have cross-border capabilities that they can’t match. So we’re sitting in the middle – being able to compete effectively both domestically and across borders.

A lot of the big international banks have been experiencing problems coming out of the US sub-prime market. Is Standard Chartered exposed to any of that?

Standard Chartered has no direct exposure to US sub-prime, Alt A or second lien mortgages. Standard Chartered has a very small, indirect exposure to the sub-prime sector through one special investment vehicle (SIV) and we have been prudently managing and restructuring this portfolio of quality assets. Relative to other banks, we’ve had few concerns with this issue. Standard Chartered is very liquid and strongly capitalised.

The credit markets in Europe are a little bit tight and a little bit nervous as a result of these problems. What are the credit markets in Asia doing?

Well, so far, we are finding actually a huge amount of business coming to us. Some of our competitors have definitely been more affected in Europe and the US than we have and, therefore, that has enabled us to continue doing more business in this area. The impact on our clients so far seems to be very minimal. I think the concerns will be in the longer term if the US does go into a slow down.

You bought American Express Bank last year. Could you tell us a bit more about why you bought that and what it does to your business?

American Express Bank provides us with two distinct businesses that fit exactly into what we are doing strategically. This acquisition gives us additional scale in our financial institutions business and it fast tracks the development of our private banking business.

On the financial institutions side, the acquisition gives us a significant number of new relationships and locations, a strong sales and service model and it doubles the size of our core dollar clearing business – we will become the number six clearer in the US. We will add a euro clearing capability in Frankfurt, which is obviously extremely important given the increasing importance of the euro, and will strengthen our yen clearing capability.

Financial Institutions is one of your three target customer segments. What are the other two?

The other ones are Local Corporates, and Global Corporates, which includes large Commodity Corporates.

Is China important to you?

We view China as an incredibly critical part of our business. The growth rates that we’re seeing there are very substantial and look as though they are going to continue. We see increasing demand from both international clients and are increasingly building very strong relationships with some of the larger, state owned and local companies within China.

We are locally incorporated and have a very active branch expansion strategy which will help drive growth in both the consumer and wholesale businesses there. We have a two pronged strategy in China; the Standard Chartered Bank subsidiary which was recently locally incorporated and a 19% stake in Bohai Bank, a new local bank based in Tianjin.

Can you tell me a bit more about what you do?

I’m Group Head of Transaction Banking, which is one of four main product areas within wholesale banking, the other areas being Financial Markets, Corporate Finance and Principal Finance. Transaction Banking represents around 50% of our client revenue, so it’s a substantial part of the wholesale banking business, encompassing cash management, trade finance, security services and what we call client access, which encompasses the electronic platforms and our network management function. Our ambition is to be number one in transaction banking for corporate and institutional clients, for and in Asia, Africa and the Middle East.

What are your main products and services?

We’ve really covered the banking space already and I think there are three others areas worth focusing on.

First is our whole approach to working capital services for corporate clients. The second would be our approach to electronic capabilities for transactions and value added services, and thirdly our capabilities in the security services space.

What does working capital services cover?

Working capital services for corporate clients is a broad subject and I think there are three key areas where we are particularly strong. Firstly, what we’re doing on the sales model. Secondly, the cash management capabilities and thirdly our new integrated capabilities across trade and supply chains services.

In December 2006 we re-vamped our entire sales force to better meet the needs of our clients because they wanted to have one person in front of them who could discuss their entire working capital process rather than having to work with two people to put an overall solution together. And, so far, that is working very well for our clients and proving to be a lot more fun and a better value proposition to attract good staff.

We’ve been a very strong provider of cash management for a long time and we have always had a philosophy of building global platforms. Our global platforms enable us to innovate and roll out capabilities quite quickly to meet the needs of local communities or different client segments. This year we are launching comprehensive multicurrency capabilities to meet the increasing needs of our clients.

Trade finance must be very important to you.

Yes, we’re now ranked first for trade transaction volumes in Hong Kong, Singapore and the UAE, which is the first time we’ve beaten HSBC in their core market, so we’re quite pleased about that. At the moment we’re the third largest trade bank in the world and we’re hoping to get to number two very quickly.

We also have a slightly different approach to supply chain management. We have cross-border supply chain capabilities in 24 markets and it’s an approach that is run globally, so if a client wants us to provide supply chain services for either their buyers or their suppliers across markets, we can do that on a co-ordinated fashion across all the countries. By the end of the year, we will be on the same platform with a global limit management system in place across all those markets.

You’ve talked about your electronic platforms, but how does that result in terms of benefits to the customer?

Well, most of our clients are across multiple countries. So the first thing is being able to give them exactly the same services in each country which we have achieved through our Straight2Bank platform launched in all our markets last year.

The second advantage is that by standardising the platforms and our operational processes, turnaround times and the overall quality of processing is significantly better. We’re also moving to a 24/7 processing approach with our hubs in Chennai and Kuala Lumpur working 24 hours a day. If a client gives us documents in the evening, it’s back on their desk the next morning. So that gives them significantly higher service levels. And we’re able to do that because we have the same platforms everywhere.

Where are you seeing the most growth?

Well, when I look at the growth in our trade, the fastest growth is between our markets and that is driven by both underlying demand of those populations and also we’re seeing an increasing trend of goods being moved between countries for different stages in manufacturing. So, something may start off in Vietnam, or start in China, go to Indonesia and then be shipped to the US.

For Africa we are seeing huge commodity flows – frequently driven by the very high demand from China. There is also demand from Africa for finished products coming from Asia. So Africa is becoming an increasingly important market for us. And with our unique and strong footprint across these two continents, we are really well placed to serve our clients along this Asia-Africa trade corridor.

Is there anything that you see that corporates tend to miss or developments in the markets you’re operating in that corporates may not be aware of?

For many of our clients, the key issue is making sure that they understand the health of their buyers. For example, if their buyers are in the UK and Europe or more so in the US, corporates need to think about whether these buyers have the liquidity and have stable operations. They also need to assess if the level of demand is going to remain the same

With a possible recession or economic slowdown looming, we are helping our clients make sure that they are managing their liquidity very tightly because we expect that as these US sub-prime issues continue to go through the banking sector, there is going to be a tightening of credit. That means really looking at banking relationships to make sure that the banks that clients are using are in the best of health and will continue to put a big focus on these regions. We saw the tightening of credit towards the end of the year in the trade space. However, we still saw a lot of business come our way. This year, we also expect that to continue.

For those clients coming into Asia, well, it’s sort of the reverse of the story. Corporates need to be sure of who they are dealing with and that target companies have a stable base of regional demand and are not relying solely on buyers in the West, contending with this more challenging credit landscape.

Thank you.

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