Just when you thought you’d heard the last of the princelings hiring scandal, another banker has been caught up in its aftermath. This time it’s former Hong Kong-based JP Morgan MD Timothy Fletcher. The US Federal Reserve has handed him a life ban from the industry over his role in JPM’s ‘sons and daughters’ programme, which ran between 2006 and 2013 and recruited young relatives of important Chinese officials.
Measured in headcount terms, the initiative Fletcher oversaw was somewhat of a success at the time. It hired about 100 interns and full-time employees, and the relationships it built generated $100m in revenues for JP Morgan. But just a few years on from the end of the princelings era – Credit Suisse and others also paid US fines for their mainland hiring practices – global banks in Asia have tightened up their recruitment processes and are looking for a new set of skills in their junior China-coverage bankers.
For starters, candidates from powerful families (i.e. so-called princelings) are now being put under more – not less – scrutiny than other job seekers when they apply to Western banks in Hong Kong and China.
“It’s now a bit of a double-edged sword to have a well-connected candidate. Although there may not be anything untoward happening regarding the hiring, there’s certainly greater awareness around how it could be perceived,” says Yvette Kwan, a former APAC investment banking COO at UBS, now a partner at Hong Kong consultancy Quinlan & Associates. “In the hiring process, there’s now much better documentation of assessment criteria and interview feedback. If the bank is still keen on the hire, it can put limitations on which teams and clients the person works with, to limit conflicts of interest,” she adds.
In mainland China, global banks have “ramped up their screening”, says Shanghai-based IBD headhunter Jason Tan. “The use of third-party professional background-checking firms is now on the rise. A banker’s family relationships and company directorships and ownerships are being investigated on top of the normal recruitment process,” he adds.
US fines aren’t solely responsible for the demise of princeling bankers in Hong Kong and China. The Chinese government’s ongoing anti-corruption campaign has made it more difficult for banks to employ people for their political influence. “Since the corruption crackdown in China, hiring practices have become much stricter,” adds Hong Kong finance professional Matt Huang, who wrote a novel about his experiences working in mainland financial services. “Hiring, especially for bigger financial institutions, is now based on meritocracy and ability, and not on who you know because of your family.”
Global banks are now focused on recruiting junior China-coverage bankers who can “help Chinese clients to navigate both onshore or offshore deals”, says headhunter Tan. If you can get cross-border experience (e.g. working with a Chinese company acquiring assets overseas) in the first three years of your career, consider yourself in high demand in the job market. “Banks now expect their junior bankers to work on opportunities across the region, so they look for candidates who can work across cultures,” says Kwan.
Meanwhile, as banks in Hong Kong and China have weeded out their princelings (many of whom received an expensive overseas education), they’ve also extended the pool of universities that their hire front-office staff from. “While Ivy League schools remain a primary source of candidates, there’s been a broadening of the pool to include Chinese universities,” says Kwan.
Hong Kong and mainland universities (e.g Peking, Tsinghua, and Fudan) are churning out more and better-quality Chinese finance and business graduates than they were just five years ago, giving banks better access to their ideal candidates: Mandarin speakers with finance knowledge. “But banks in Asia are also interested in candidates who understand new technology and don’t only have business and finance skills,” adds Kwan.
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