Singapore’s private bankers are facing an epic Catch-22: the pressure to source new business is growing, but the regulatory burden is worsening, making it much tougher to bring fresh clients on board.
This week relationship managers in the Republic were given the starkest reminder yet of what can happen if they fall foul of the law governing their industry.
The Monetary Authority of Singapore closed Falcon Private Bank’s local office and fined DBS and UBS in a clampdown on alleged money-laundering by Malaysia’s scandal-hit 1MDB fund. BSI Bank’s Singapore branch was shuttered in May as part of the same investigation.
“There was a lot of 1MDB money awash at Singapore, so now MAS wants to ensure that Singapore is not considered a money-laundering haven. There’s now even more compliance pressure on RMs following the Falcon closure – MAS is sending a tough message,” says one former private banker in Singapore.
“The private banking industry in Asia is under ever-increasing pressure due to tougher regulations,” adds Amelia Black, a managing consultant at search firm GRMExecutive. “And now with MAS closing Falcon Bank and BSI, and heavily fining others, it’s demonstrating to bankers that it’s taking compliance extremely seriously.”
Of all the areas of compliance, it’s client onboarding that private bankers are most worried about in the wake of the 1MDB case.
“If your clients aren’t ‘clean’, not only will the bank be penalised, you could be charged and it could mean the end of your banking career,” says Liu San Li, a former Coutts private banker, now client director in private wealth management at headhunters EMA Partners.
Some banks in Singapore now even require RMs to declare they have “full knowledge” of every new client – making RMs liable if a client’s assets come under regulatory scrutiny in the future. “It’s a depressing situation,” says the ex-private banker.
The onboarding crackdown comes at the worst possible time for private bankers because they are also facing more onerous revenue targets.
Large banks like UBS, Credit Suisse and Standard Chartered are pivoting their businesses towards Asian wealth management and demanding more revenue from their RMs.
Profit margins are tightening at smaller firms, while some players – Barclays and Coutts, for example – have decided to exit the industry in Asia.
“As an RM you need to generate increasing AUM and revenues, but that’s hard to do just by charging your current clients more – they will go to the competition,” says former Merrill Lynch private banker Rahul Sen, now head of wealth management at search firm The Omerta Group.
“So RMs are now under a lot more pressure to get new clients at the exact same time as the regulators are making it tougher to onboard these clients – it’s a Catch 22,” says Sen. “You need to be very careful that your clients don’t come with too much baggage. It’s a fine balance between meeting your targets and not breaking any regulations.”
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