Do you expect there to be further consolidation in the world banking industry? Will there be large scale cross-border – as well as domestic – bank mergers?
Williamson: I have no doubt that there will be increasing consolidation over the coming years. We have already seen the start of this process in the developed world. Now, one of the effects of turbulence in Asia will be that commercial realities, and government pressure, will encourage consolidation of smaller banks there. This will not just be a domestic phenomenon, and I do expect to see the emergence of significant regional players within the next five years.
So far, Europe has been dominated by national banks. As monetary union gathers pace, I am sure we will see increasing cross-border consolidation in Europe.
Do you see banking consolidation putting any downward pressure on professional salaries?
Williamson: There is already some downward pressure on salary increases for bank staff in the developed world, as consolidation takes place and branch networks are rationalised. This will continue. On the other hand, as banking products and technology become more sophisticated, highly skilled professionals will still be able to demand a significant premium.
What is a bank?
Williamson: The distinction between banks and other providers of financial services is indeed becoming blurred, but for the immediate future, I do not see all the distinctions disappearing. If nothing else, governments do need to continue to maintain some control over their economies, and a well-regulated banking sector is an integral part of this.
As securities markets continue to grow worldwide, is there a future for bank lending to companies?
Williamson: I do not believe that the securities markets will be able to meet all the credit needs of all sorts of companies. Clearly, larger companies are increasingly able to access the capital markets directly, but it will be some time before this is possible in all currencies globally. Furthermore, it is not realistic to expect small and medium-sized enterprises to access the markets directly; they will need some form of intermediation by banks or other providers of credit. However, these providers will increasingly have the option of bundling and securitizing the assets which they generate, rather than holding them on their own balance sheets.
How important will the securities business be to your bank in the coming years?
Williamson: We intend to be at the forefront of providing debt finance to our customers. We have developed sophisticated credit methodologies, which will ensure that we are able to participate fully in the securitization and trading of credit in all its forms as the markets develop.
How important is it for your bank to expand in non-banking areas, such as insurance and asset management?
Williamson: We believe in providing a wide range of services to our customers, to make their financial lives easier. This includes insurance products and mutual funds. This does not, however, mean that we have to manufacture these products ourselves. We do not see ourselves becoming an insurance company, and we do not believe that fund management is one of our core competencies. Indeed, by working with selected partners, we believe we have an opportunity to provide our customers with a wider range of better products than we could on a stand-alone basis.
What, or where, is your bank’s biggest risk?
Williamson: Naturally, like all well-managed banks, we keep a very close watch on all aspects of credit, market and operational risk. We believe that we have done a great deal in establishing a “no surprises” culture within our organization, but this will be heavily tested over the coming months as the implications of the turbulence in Asia unfold. I see risk, however, in a wider frame. In the longer term, we could do considerably more damage to our shareholders’ wealth by failing to seize opportunities. Our strategic capability will also be strongly tested by the emerging situation in Asia.
How important will proprietary trading be to your bank going forward?
Williamson: Our vision for Standard Chartered is to be a company that makes its money out of helping its customers by meeting their financial needs. We do not focus on proprietary trading as an objective in itself, but naturally serving customers does generate a deal flow which creates opportunities for trading on our own behalf.
What is the most important qualification or quality needed to be a bank CEO? Do you see this changing in the future?
Williamson: I guess the most important qualification is an ability to form a clear vision of where the organization wants to be, and to build a common purpose within the organization to achieve that vision. This fundamental requirement is timeless.
What do you worry about?
Williamson: Ensuring that the top 30 people in the organization are all highly competent and working as a team to deliver the bank’s short-term results and medium-term goals.
How important is it for a bank CEO to have an intimate understanding of derivatives and risk management?
Williamson: Any chief executive must have a thorough knowledge of all the activities that the bank undertakes, and the relevant risks. There must be no “no-go areas” where he relies entirely on experts who speak a language that he does not understand. We have all seen the results of abrogating this responsibility.
How would you like to see the regulation and supervision of banks improve?
Williamson: The sheer complexity of regulation places enormous burdens on all financial institutions. This is particularly true for international banks like ourselves, which have to comply with regulations not only in their home countries, but in every other country in which they operate. Naturally, one would like to see regulators having a better understanding of the particular risks in each institution, and focusing their regulation on those key areas. The Bank of England’s rate process is a step in this direction. Furthermore, it would be very helpful if international co-operation between regulators could reduce burdens in individual countries. On the other hand, there is also a significant responsibility on financial institutions themselves. If we can demonstrate that we can manage our activities in a more responsible way, regulators will have less need to try to “fill the gaps”.
How will the introduction of the European single currency affect your bank?
Williamson: We see the single currency as a major opportunity for ourselves. The euro will become the world’s second trading currency after the us dollar, and this will be a very important development for trade between Europe and the emerging and newly industrialized countries in which we primarily operate. We will be a euro clearer, and will demonstrate to our customers how we can make their banking arrangements simpler by providing a wide range of services which they currently have to obtain from a number of separate European domestic banks.
Why have banks been much more profitable in the 1990s than they were in the 1980s? Will this continue?
Williamson: Banks have, indeed, been remarkably profitable in the 1990s. In part, this has been achieved through much better housekeeping, with management developing a better understanding of the cost dynamics of their businesses, and driving out unnecessary expenditure. Furthermore, we have seen some better understanding of the necessity of pricing appropriately for the risks incurred. This is not, however, been achieved by all banks, and I am sure there is further to go. Nevertheless, there are limits to what can be done in terms of organizational efficiency, and in the future the most profitable banks will be those that most effectively meet their customers’ needs.
How will technological developments change the shape of commercial and retail banking?
Williamson: I am sure that the trends which we are already seeing will continue and accelerate. More and more, both commercial and retail customers will want to obtain their financial services electronically, in ways that are convenient to them rather than to the providers. Many services will become commoditized.
On the other hand, there will continue to be a need for real human bankers to lead their customers through the financial maze. I see Standard Chartered as a leader in this role.
