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Singapore’s top 3 banks play key role in China’s reforms
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THE three leading banks in Singapore — DBS Bank, Oversea-Chinese Banking Corp and United Overseas Bank — have played active roles in China’s financial reforms as economic ties have tightened between the two countries over the years.
Earlier this year, the three banks established branches in the China (Shanghai) Pilot Free Trade Zone, the special economic zone in China that is deemed the front line of the country’s financial reforms. Since the FTZ was established last September, foreign banks scrambled to pin their flags in the FTZ, catching windows of opportunity amid financial reforms such as cross-border yuan business and capital account convertibility.
One of the most outstanding advantages of the foreign banks in China is their regional and global network, as Chinese banks have low internationalization levels relative to their size. As the economic ties grow stronger between China and Singapore, the Asian network of the Shanghai-headquartered Singaporean banks’ subsidiaries becomes a convenient doorstep instrument for Chinese enterprises that seek overseas expansion.
The banks continued to expand their networks in China since they become locally incorporated in 2007.
DBS China is the largest among the three subsidiaries with total assets of 96.9 billion yuan (US$15.7 billion) by the end of last year. It is followed by OCBC China’s 59 billion yuan and UOB China’s 42 billion yuan.
Last year, the Chinese units of both OCBC and UOB saw double-digit growth in assets, while DBS China’s dipped 1 percent.
DBS currently operates 10 branches and 20 sub-branches on China’s mainland and employs over 2,000 staff. The other two operate a branch network half that size.
DBS was among the first to complete a series of yuan foreign currency derivative transactions, such as European-style options and yuan cross currency swap, for corporate clients earlier this month. The new products launched under new rules by the foreign exchange regulator allow the clients to hedge against currency volatility, as the government speeds up internationalization of the Chinese currency.
Last month OCBC said it was the first Singapore-based bank to successfully upgrade the existing China National Automatic Payment System (CNAPS) to the second generation, which is also known as the Super Online Banking System. The new system will provide strong middle- and back-office support for the bank’s business, according to Wang Ke, head of operations and technology at OCBC China.
UOB is the only one among the three that operates a sub-branch inside one of the historical building on the Bund in Shanghai, an area that records stories of the city’s financial powers past and present. The rental and maintenance fee of the branch is an astronomical figure compared with that of the other branches. The banking group’s deputy chairman and chief executive officer, Wee Ee Cheong, said at the opening ceremony of the Bund branch last year that it’s money well spent for branding in China, in order to build confidence between the bank and its clients.
The three are among the most prudent and robust foreign banks in China. Their higher-than-required capital adequacy ratios add evidence to that. They embarked on more aggressive expansion plans after the world financial crisis, and saw income growth in China.
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