Reporting by the Banking Insight Editorial Team

Hard on the heels of one of the greatest crises in history, banks have been rapidly adapting on multiple fronts – new regulations, emergent technologies, customer expectations – to remain solid, agile, and relevant. It is fitting then that this issue of Banking Insight taps into the knowledge bank of Ms Lee Jim Leng, Group Managing Director and Chief Executive Officer of Hong Leong Investment Bank Berhad, whose style throughout her 30-year long career is defined by the constant pursuit of innovation in all aspects of life. Beyond technical knowledge, her spirit – an unorthodoxy coupled with pragmatism – is what the industry needs to successfully transform into next-generation banks. Here are her thoughts.

Q: You’ve long been an advocate for finance to look beyond mere profit and prioritise values. In your opinion, how has the landscape for environmental, social, and governance (ESG) issues changed in the past decade and do you feel there is genuine buy-in amongst the larger banking community to the principles of sustainability?

The landscape has definitely become more robust and organised in the attempt to address ESG issues more effectively with the imposition of well-defined targets, proper laws, policies & guidelines, well-defined taxonomy and the involvement of all stakeholders, namely the regulators, the corporates, the financiers and investors, and so forth. All these are aligning the efforts of all parties towards achieving the objective more efficiently and effectively.

There is definitely genuine buy-in as evidenced by the surge in conferences, seminars, dialogues and trainings on ESG-related matters, implementation of internal ESG-related frameworks, policies by financial institutions, increase in awareness and demands by investors for responsible investment.

The pace of embedding sustainability principles was also induced by the increasing damages to the environment caused by climate related natural disasters, overdevelopment and exploration of natural resources throughout the world in recent years. These are producing more obvious and alarming threats to the balance of the natural ecosystem, supply chain of food and clean water, air quality, which will eventually have a significant negative impact on the living conditions of planet Earth in the immediate future and for generations to come.

Q: Over the past two decades, financial institutions have seen the tides turn in their favour and are perceived as safe and trusted institutions, in good part due to the hard work of banks and  organisations such as the AICB with its Chartered Banker framework towards professionalisation of the industry. Should banking be patting itself on the back or is there more that needs to be done?

Organisations like AICB have served well and will continue to play a pivotal role in ensuring the continuity of professionalisation via certification, continuous training and updates on the importance of upholding the highest code and ethics within our organisations from generation to generation. Setting the right culture and supplementing with proper training, well-crafted policies and procedures and performance measurements to monitor all staff performance and guide behaviour towards delivering the desired expectation and outcome are the foundations of a high governance institution.

Such efforts must be monitored closely over time to be able to cope with the evolvement of the industry, in terms of the products and services underpinned by the advancements in technology and changes in market requirement and demand, e.g. the new rules and regulations to govern the development and operation of fintech, digital banking, etc. 

Q: Clients demand that their omnichannel banking experience be as highly intuitive and seamless as face-to-face interactions. What must bankers do to stay ahead of the curve?

To keep abreast with the rapid evolvement and development of the ecosystem underpinned by the advancement in technology, which are reshaping the ways business is conducted, financing is raised, investments are performed and settlements are done.

Being innovative is a key driver to stay ahead of the curve and digitalisation is an unavoidable path to pursue to cope with the rapid changes in the market. In other words, we are moving towards an era of all things digital (digital data, digital money, etc.).

Q: The world is abuzz with talk of a fourth industrial revolution. One critical aspect is cryptocurrencies such as bitcoin and ethereum, its volatility and impact on financial stability. Centrally backed digital currencies like the digital renminbi in many ways balance the risks of cryptocurrencies. How will this shape banking’s future? 

There are still many issues surrounding the development of cryptocurrencies, which include its sustainability, inherent market and security risks, confidence level of users and implications on the global effort to combat money laundering and terrorist financing. To date, regulators throughout the world are still having differing views and approaches in the monitoring of transactions in this space.

Assuming the above issues could be addressed in a satisfactory and acceptable manner, many conventional ways of banking (financing and investment) and trade settlements will be phased out. The intermediary or central roles played by bankers over the past decades will diminish. Hence, to avoid being phased out, banks may be left with no other choice but to embrace this new technology and find ways to adopt digital assets in order to embrace, enhance and upgrade their financial services, i.e. an inevitable revolution transforming banking into the next generation of efficiency and innovation.

Q: On a more personal note, what are the greatest lessons you’ve learnt in your decades-long career? 

Throughout my banking career spanning more than 30 years, there have been many lessons learnt. My most memorable lessons were during the last few financial crises, which we experienced globally.

Post the Asian Financial Crisis which hit in 1997, it became clear that debts – whether country, corporate or individual – need to be controlled and monitored to avoid systemic shocks to our financial system. To create long-term sustainability and stability, we need to manage liquidity shocks to our financial systems. On a personal note, while leverage has been an important factor to enhance returns, too much leverage might cloud our judgement in executing the right decisions in our workplace and, in some instances, compromise ethical standards.

The financial crisis in 2008 further reminded us of the devastating effects of overleveraging. Easily accessible credit had created an exponential growth in mortgage lending. In turn, these mortgages were sold to investors as asset-backed securities, the so-called collateralised loan obligations or CLOs. The proliferation of such CLOs resulted in the creation of derivative structures linked to CLOs. The systemic effect was felt when the bubble burst.

Personally, the biggest lesson we learnt from these chapters is to instil discipline, ethics and governance in all that we do. We can champion what we do with great passion, but never be greedy. That is the core of sustainability.