Back in 2010, if you didn’t have the right grades or you couldn’t quite cut it during the interview process, you weren’t necessarily shut out of an investment banking job in Hong Kong or China. There was a murkier route into a global bank – if you were the child of a high-ranking Chinese official who could help the firm win clients via your family connections.
A new legal case involving an ex-JP Morgan employee in Hong Kong highlights a very direct way in which these so-called ‘princelings’ potentially had influence over the senior people wanting to hire them. And it also serves as a reminder that being from an influential mainland family is no longer a shortcut into a banking job – in fact you’ll probably face extra scrutiny.
Catherine Leung, JP Morgan’s former Asia investment banking vice-chair, has been charged with two counts of bribery by Hong Kong’s Independent Commission Against Corruption (ICAC) for allegedly offering employment in 2010 and 2011 to the son of the chairman of a logistics company that JP Morgan was wooing as an IPO client.
If the allegations prove to be correct, the case shows that senior bankers during the princelings era – roughly 2005 to 2013 – would sometimes target specific princelings for specific deals that they thought could be clinched in the very near future. Banks’ princelings recruitment, therefore, wasn’t just about taking advantage of their new recruits’ connections over the long term.
JPM’s princelings hiring – its ‘sons and daughters’ programme – extended far beyond these new allegations. Overseen by former Hong Kong-based JP Morgan MD Timothy Fletcher (who was banned from working in the finance sector for life in February by the US Federal Reserve), the initiative ran between 2006 and 2013 and hired about 100 interns and full-time employees. The relationships it built generated $100m in revenues.
Still, the Leung case has thrust princelings hiring back in the spotlight years after JP Morgan and several other banks (Credit Suisse among them) paid hefty US fines following a regulatory clampdown on the practice. And in doing so it’s shown up the efforts banks have made to change the way they hire in Greater China.
“We strengthened our compliance procedures and controls around hiring and reinforced the high standards of conduct expected of our people,” says a spokesperson for JP Morgan. “This is a historical case, which JP Morgan reached agreement on and settled in 2016,” he adds, in reference to the ICAC investigation.
After the princelings, banks have gone the other way
It’s not just JP Morgan that’s toughened up its act. Candidates from powerful families 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,” Yvette Kwan, a former APAC investment banking COO at UBS, now a partner at Hong Kong consultancy Quinlan & Associates, told us previously. “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.
Instead of hiring princelings, 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.
Image credit: visualspace, Getty
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