Outsiders make small waves in China's banks

BEIJING, Dec 18: When an outsider cherry-picked to head one of China's fastest-growing commercial banks wanted to hammer home a key message to his staff recently, he enlisted top executives from overseas to help him.

Barely three months after taking the helm as president of Minsheng Bank, Hong Kong-raised Eddie Wang called on Citigroup's China chief, Richard Stanley, to speak at an internal conference on the perils and opportunities of looming competition.

McKinsey consultants also descended to prod Minsheng's managers to look at how lenders have cornered retail markets as far afield as Russia, while the head of an electronics payment company waxed lyrical about innovation.

''I said let's be outward-looking, let's not look inwards,'' Wang said of the kind of values he wants to instil in the bank.

''We are living in a very competitive market, and what I really want to know is what did those guys next door do to get where they are,'' the 57-year-old veteran said, describing the kind of message he was trying to drive home.

The hiring of Wang, who once worked as a private banker in Beverly Hills, is symptomatic of China's push to revamp its creaking financial system.

Outsiders remain few and far between.

But, as overseas lenders buy minority stakes in domestic banks, more and more foreigners are showing up as board directors, passing on expertise that China is counting on to help its banks square up to increasingly tough competition.

The need is urgent. Since Dec. 11, foreign banks have been able to apply to do a full range of business with individual Chinese, from taking deposits to issuing credit cards.

ABETTING CHANGE

Few outsiders can rival Wang's influence in a Chinese bank.

One who can is former US deputy treasury secretary Frank Newman, who has headed Shenzhen Development Bank since May 2005.

Brought in by Newbridge Capital after the US buyout firm bought a controlling 18 per cent stake in Shenzhen Bank, Newman has followed the practical approach urged by China's late paramount leader, Deng Xiaoping, who said it didn't matter whether a cat was black or white as long as it caught mice.

''That is very much a theme at our bank,'' said Newman, who helped turn around Bank of America in the 1980s. ''We're not trying to do things in a Chinese way or in an American way. We are trying to work out what works best for this bank.'' Wang tells things the same way.

Rather than introducing sweeping changes, he says he has spent his first months at the bank watching, listening and sharing with Minsheng's 11,000 employees the experience gained from 32 years at global giant HSBC.

''I'm bringing in a little bit of a Western and Chinese combination. So far, so good,'' he said.

CULTURE CLASH

Both Newman and Wang say they were lured by the attraction of working in fast-growing China and by the challenge of spurring innovation and sharpening the competitiveness of their banks. But their influence is an exception in a country keen not to give outsiders too much sway over such a strategic sector.

For instance, foreigners are barred from owning more than 25 percent of a Chinese bank.

The internal organisation of China's banks also ensures that reform is in the hands of Chinese, many of whom have returned from work or study stints abroad.

While analysts say banks' lending is increasingly based on commercial not political considerations, the ruling Communist Party ultimately remains firmly in charge through its political appointees, notably in important areas such as human resources.

The corridors of any complex company can be a minefield.

For a foreigner, walking the halls of China's sprawling state-owned banks can be particularly daunting.

US-born Lonnie Dounn sparked rumours of a culture clash by tendering his resignation as chief credit officer for Bank of China in April, just weeks before the bank's initial public offering. Dounn, who left the bank in September after 21 months in the job, did not respond to an e-mail request to comment.

Their influence might be limited, but outsiders are at least injecting lively debate into board meetings, according to one foreign banker who has witnessed a few.

''Foreigners typically ask questions, discuss the proposed topics and debate them to make decisions,'' he said. ''Board meetings at some Chinese banks are still very different. They aren't yet used to that kind of open forum.'' Michael Pettis, a finance professor at Peking University, said improved incentive structures would have more of an impact than foreign managers in changing the face of China's banks.

But he said foreigners were playing a valuable role, notably by spreading a culture of risk management.

''I do think that foreigners in China now do contribute,'' he said. ''Their biggest contribution is really going to be in that nebulous thing called banking culture.''

Reuters