Interview with Group Executive Director, Standard Chartered Bank
V Shankar became the second person of Indian origin in Standard Chartered Plc’s current board after he was appointed as the group executive director of the bank from January 1 this year. He is also the chief executive of the bank in Europe, West Asia, Africa and Americas. In an interview with Manojit Saha and Somasroy Chakraborty, Shankar shares his views on the state of global economy and its cascading impact on India. Excerpts:
Is the current crisis more severe than the one in 2008?
They are different. In 2008, it was a banking crisis. The current one is sovereign, with a second-order impact on banks. Also, the regulations that are being imposed are actually constraining banks from lending — both in terms of capital levels and also from the point of liquidity buffers that banks need to carry. A banking crisis is relatively easier to resolve. You pump in more liquidity in the system, banks begin to lend, you inject capital in a few banks, and life moves on. But now, in Europe, banks are in trouble because they have a large percentage of their balance sheet, as required by regulation, in sovereign bonds. The countries are going through stress and as a result the bonds are getting battered. This means your capital levels are getting deflated and you have to go to the same bankrupt creditor to pick up more capital. In that sense, it is tougher because unless the West puts its economies in a more sound financial footing, the problems are unlikely to be resolved.
How will this impact India?
India will be impacted, because Europe is a major trading partner. So, if there is a contraction in the European economies, there will be an impact on India. In terms of financial sector, 30-50 per cent of dollar value of loan syndications internationally still comes from European banks. If European banks suffer from liquidity or capital, then it could impact the dollar funding for the Indian corporate sector.
Will banks that are immune step in to bridge the fund gap?
A few banks, including Standard Chartered, will be able to fill the gap to certain extent. We are well capitalised and highly liquid. But it will be too simplistic to assume the crisis will have no impact on funding requirements since some banks will step in.
What are the opportunities for Standard Chartered Bank?
We have always been very client-focused. Some of our biggest moves in terms of client relationship happened during the last financial crisis. After the Lehman Brothers’ collapse, a number of financial institutions said there was a lot of risk and wanted to hunker down in the bunker. But we remained open for business. For, we understood the markets where we operate, we knew about the risks of our clients. That gave us competitive advantage. Today, when the market has bounced back, clients are banking with us for standing behind them at the time of crisis. In the current crisis too, we will be able to create more differentiations for clients with whom we want to do business. It cannot be like throwing little drops of water everywhere. We will pick our oasis and irrigate that.
Is Africa the next investment destination for India Inc?
There has been a fair degree of Indian investments in the past few years. But China has got its Africa act much better. In Africa, it is not enough to have B2B (business to business) relationships. There must be a G2G (government to government) relationship. There are 54 countries in Africa, and 49 of them in past two years received a Chinese delegation led by a person at least of the vice premier level.
China’s presence is more visible in Africa and their government has played a huge role in it.
Globally, many banks are reducing their workforce. What are your plans?
We are one of the few banks that have grown its staff strength. Globally, we grew our staff by 2,000. Even in 2012, our workforce is not expected to shrink. In fact, we are going to add staff. This is consistent with our financial performance. We are going to record our ninth consecutive year of profit, which no other bank has done. We are clearly in a different trajectory than many of our competitors.
Plan to form joint ventures with Indian manufacturers based on their engineering capabilities