OCBC ready for entry of Chinese firms into digital banking here

OCBC Bank CEO Samuel Tsien signalled that he favours internal candidates over external ones to succeed him when the time comes. "We have internal candidates... who are able to take over the bank in the event of a need," he said.
OCBC Bank CEO Samuel Tsien signalled that he favours internal candidates over external ones to succeed him when the time comes. "We have internal candidates... who are able to take over the bank in the event of a need," he said.PHOTO: OCBC

OCBC Bank is well placed to take on Chinese technology giants that are looking to join Singapore's digital banking market, its top executive said.

The entry of such firms would constitute "extended competition but not necessary new competition", chief executive Samuel Tsien said, when asked about the threat posed by companies such as Mr Jack Ma's Ant Financial Services Group.

The Monetary Authority of Singapore (MAS) unveiled plans this year to grant as many as five virtual bank licences to boost competition and innovation in the nation's financial industry.

China's Ant Financial and Ping An Insurance are among companies considering applications, and Mr Tsien said OCBC may join the race, both as a bank and through its insurance unit.

New entrants will face high regulatory costs in areas such as "know your customer" and transaction monitoring, he said in an interview.

They also will not be allowed to buy customers by offering unrealistic interest rates for depositors and borrowers, he added.

Singapore regulators "want to bring in the technology, bring in new thinking, bring in new ways of doing business and channels", the CEO said. They "do not want the financial system to be impacted as a result of these aggressive players coming in, forgetting about the commercial reason of existence".

MAS has pledged to evaluate the business plans of digital banking applicants to deter "value-destructive behaviour" and ensure a "level playing field among banks", according to the regulator.

EXPANDING CUSTOMER BASE

The major driving factor is not the banking business. It is the franchise of the customers of that consortium and we want to tap that.

OCBC CHIEF EXECUTIVE SAMUEL TSIEN, on expanding the bank's client base.

OCBC is plotting its own plans for digital banking in Singapore, which provides a platform to expand in the lucrative South-east Asian market.

While embarking on a digital transformation of its operations, the bank may also join one of the consortia led by non-banks seeking a virtual banking licence.

"We are talking to various parties but we have not made a final decision whether we would go in or not," Mr Tsien said. "It is attractive to us because it is the way that we can test out in the new digital economy as to what we could do."

OCBC has agreed in principle to join a group led by peer-to-peer lender Validus Capital and Temasek's venture capital arm to apply for a wholesale digital banking licence before a year-end deadline, Bloomberg reported last month.

Other companies that have expressed interest include ride-hailing firm Grab, Singtel and game device maker Razer.

Great Eastern Holdings, OCBC's insurance arm, may also join a digital banking consortium should a non-bank offer the chance to expand its customer base, Mr Tsien said.

"In the event that there are some consortia which are able to offer their client base to us for our insurance business, we will pursue that," Mr Tsien said. "But the major driving factor is not the banking business. It is the franchise of the customers of that consortium and we want to tap that."

He also signalled that he favours internal candidates over external ones to succeed him when the time comes. "We have internal candidates who are strong candidates, who have moved around in different functions, who are able to take over the bank in the event of a need," he said, without giving names.

Shanghai-born Mr Tsien, 65, is known for pursuing acquisitions that led to the Singapore lender's expansion in Hong Kong and made it a top 10 private bank in Asia. He is in his eighth year at the helm.

OCBC's local rivals have also given insights into management succession, with United Overseas Bank's boss recently expressing an openness to consider people from outside the founding family and DBS Bank grooming leaders from within the bank.

Mr Tsien said there are no immediate plans for him to step down.

OCBC will not rule out an outsider taking the reins, but it is "not actively looking" externally and the focus now is on its own people, he said. "We are looking at internal candidates, but we do not want to exclude external candidates."

The potential for further acquisitions is among the factors that have weighed on OCBC's shares, which have trailed those of its rivals during his reign.

Mr Tsien also has ambitions to further expand in insurance, which OCBC counts as its third pillar alongside banking and wealth management.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on December 03, 2019, with the headline 'OCBC ready for entry of Chinese firms into digital banking here'. Print Edition | Subscribe