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The President’s plan and US banks in Asia: too many ifs and buts

For at least a year now, we’ve been hearing how US banks see Asia as key to their future growth, but will President Obama’s new regulatory plans change all that? What are the future employment implications for the Asian operations of large American banks?

The trouble with answering these questions right now is that the potential effects of the US proposals are just too diverse. We could see an influx of hedge fund talent, but perhaps headcounts could be cut across the board.

Banking-sector analysts, headhunters, financial newspapers….none of them know for sure. They all, we all, need more detail – especially about the global reach of the US plan – and that detail isn’t likely to come any time soon.

“There needs to be a whole lot more clarity about the specifics before too much can be read into it about US operations, let alone those in Asia,” says Matthew Adamson, manager, WH Marks Sattin.

However, for those of you who love a bit of speculation, we’ve summarised some of the possible outcomes for Asia. Be sure to leave you comments in the box below.

The fundamental question, but nobody can answer it with any certainty

The key debate in this part of the world is whether or not the proposed change in US regulations would impact US firms in Asia. In other words, will American banks still be allowed to carry on their “risky” prop trading, hedge fund investing etc here? Those who think they will, generally see the Obama plan as positive for Asian employment.

Good news, but isn’t it happening anyway?

Some experts believe that Hong Kong and Singapore could gain from Obama’s proposals by inviting Wall Street banks to set up hedge fund and private equity investment operations in their cities.

“If global banks reorganise and relocate some of their global business lines or functions to Asia, then we are likely to see a significant talent migration to Asia. This in turn would benefit local banks and local executives here by creating more opportunities and a more vibrant market,” says Fabrice Desmarescaux, head of Asia Pacific financial services at Spencer Stuart.

But before we get too carried away, hedge funds were already in growth mode in Asia before the Obama plan was revealed. The US proposals probably won’t be the main driver for this industry’s future growth, just a potential contributing factor.

“Hedge funds are ramping up here again and there’s no shortage of interest from US-based companies and candidates, however this is more due to the fact that Asia (and especially anything associated with China) is seen as having high-growth generally, rather than problems doing business in the US,” says a Hong Kong headhunter who asked not to be named.

And on the other side of the coin…

If (and we can’t help stressing that little word) the regulations were applied to the Asian operations of US banks, these firms would have to cut back their prop trading and hedge fund/private equity investments.

“This would impact the job scene by making the opportunities for people in this area smaller in number,” comments Farida Charania, chief executive officer, banking and financial services, Nastrac.

Large European banks with a huge presence in the US as well as Asia (HSBC springs to mind) could be impacted if the regulations were adopted globally, as could UK banks if a new Conservative government there enacts a law similar to the American proposal.

The really bad option

An even worse scenario might occur regardless of whether the regulations actually apply in Asia. The Obama plan sets out to limit the size of US banks, which could limit their Asian expansion, or even force them to trim headcounts, not just in prop trading, hedge funds etc, but overall.

“With less capital and profits to invest, growth of US firms globally, and therefore within Asia, may be affected, indeed some of the larger firms may well reduce in size,” says Adamson.

While Asian or European banks might conceivably pick up some of the discarded talent, a shrinking Goldmans Sachs is hardly good for overall employment in Asia.

And finally, more good news, but it’s a bit general

Even though they are far from becoming law and we don’t know the details, the US plans (among many other things, like the UK bonus tax, rocketing Chinese growth etc) are already reinforcing a general perception amongst job seekers that Asia, not the West, is generating jobs growth in financial services.

“We are indeed seeing more senior candidates interested in relocating to Singapore and Hong Kong. However, the demand for these executives is limited, particularly if they do not have prior experience in Asia,” adds Desmarescaux.

Daily Dispatches will return on Monday.

Comments (1)

Comments
  1. And now Obama is a movie star? He is in a movie–called “Stock Shock.” … exposing greedy hedge funds and market manipulation. Even though the movie mostly focuses on Sirius XM stock being naked short sold to hell, I liked it because it shows the dark side of Wall Street. DVD is everywhere for sale or rent but cheaper at http://www.stockshockmovie.com

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