Private bankers in Singapore and Hong Kong are becoming more cautious about travelling to China, after a UBS relationship manager was asked to delay her departure from Beijing earlier this month to meet with local officials.
UBS has lifted a 24-hour ban on staff trips to China and is now playing down the incident. CEO Sergio Ermotti said on Thursday that the Chinese request was unrelated to the bank or the unnamed Singapore-based employee. But the fact that Chinese authorities have upset an RM’s travel plans has still sent jitters throughout private banks in Asia, which increasingly view the mainland as a lucrative and largely untapped market, estimated by McKinsey to be worth about US$6 trillion in investable assets by 2022.
“Whatever the actual reasons for the UBS incident, travel to China by offshore bankers in Singapore and Hong Kong is coming under some extra scrutiny in the wake of it – and not just at UBS,” says Benjamin Quinlan, a former UBS banker, now a consultant in Hong Kong.
More specifically, the UBS news has renewed bankers’ concerns about the tough stance taken by Chinese authorities on the selling of offshore products by visiting bankers, according to two private bankers we spoke with in Singapore, both of whom asked not to be named. This is despite there being no suggestion that the UBS banker is suspected of breaking any onshore selling rules.
Although China is liberalising its finance sector, currency controls still make it difficult for mainlanders to move money overseas, and to invest in certain types of securities products, such as private equity funds. “Violation of Chinese regulations can lead to serious consequences for the bank, not just its staff,” says Liu San Li, a former private banker, now a business partner at wealth management firm Avallis.
Bankers in Hong Kong and Singapore are growing increasingly wary of Chinese regulations, because they could potentially breach them just by carrying the wrong documents, even if they never tried to sell offshore products while in China.
“As a banker, I was told never to have any marketing material, account-opening documents, or client portfolios with me on business trips. That way I wouldn’t have ‘incriminating’ documents in case of an immigration search at the airport,” says former Merrill Lynch private banker Rahul Sen, now a partner at search firm Boyden. “Going forward, I think bankers who aren’t Chinese nationals will be advised not to carry any official documents with them in China.”
None of these travel concerns, however, will hinder the hiring of China coverage RMs, who are currently mainly based in Hong Kong and Singapore. “China is a huge contributor to private banks’ AUM and revenue in Asia, so RMs will definitely still be attracted to working on their China desks,” says Lucas Yeo, head of banking and finance at recruiters Tangspac in Singapore.
“RMs who are currently covering China from offshore won’t switch markets just like that – it's their rice bowl and they’ve built networks there,” says Liu from Avallis. “And cross-border selling restrictions aren’t unique to China. Just about every other country – Indonesia, Taiwan and Malaysia, to name a few – has implemented them as well.”
Over the long term, it’s likely that banks will need fewer offshore RMs. More China-coverage jobs are expected to move onshore as Western banks take advantage of the recent introduction of majority ownership in their mainland joint ventures. UBS has already applied to up its JV stake to 51%. “UBS is pushing its onshore joint venture partly because it doesn’t want the type of problems that can happen when bankers have to travel to China,” says Quinlan.
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