Asian Private Banker sits down with Credit Suisse’s Benjamin Cavalli to speak about his dual role, his key regulatory concerns and the private bank’s increased focus on onshore Southeast Asian markets.
Asian Private Banker (APB): Given your fairly new role as Credit Suisse’s Singapore CEO in addition to being head of Southeast Asia, how have your responsibilities changed?
Benjamin Cavalli (BC): Before I took on the Singapore CEO responsibilities, I already had two roles as both head of private banking Southeast Asia and Singapore location head for the private banking business, where I devoted a noteworthy amount of time on regulatory responsibilities. The Singapore CEO role expands my oversight to the other business activities of the bank in Singapore, such as investment banking, asset management, as well as our support functions that not only serve Asia but Switzerland too, among others. It is an interesting and challenging role given that Singapore is Credit Suisse’s biggest hub in Asia, where we now have close to 4,000 staff members.
APB: How do you plan to strike a balance between the two roles?
BC: I take both roles very seriously. I’m known to be a meticulous person, so it will be important to find the right balance between the two. One of the first steps for me has been to sit down with all the business heads in Singapore, including corporate services and risk and compliance functions, to better understand their current challenges.
Are there areas for us to further improve? Absolutely. There is always room and areas for improvement.
APB: What is top of the agenda for you?
BC: Since my appointment, my focus over the last few months has been to explore ideas about how to further improve the collaboration among the different business lines in Singapore, particularly the partnership between private banking and asset management. We have a strong asset management franchise in the US and Europe and we want to replicate this model in Asia. The result of increased focus on asset management has translated into opportunities to develop and successfully launch products such as the fixed maturity bond fund.
APB: Have you set yourself AUM and revenue targets for the Singapore business?
BC: Our success will be reflected in our Asia Pacific divisional financial results, where in recent quarters we have started reporting on ‘wealth management and connected activities’ which includes wealth management as well as advisory and underwriting activities of our Investment Banking and Capital Markets (IBCM) business and our Asia Pacific Financing Group (AFG).
APB: What are your key concerns on the regulatory front?
BC: As a CEO I take accountability and responsibility for the front-to-back responsibilities, including on the regulatory side. The regulatory environment is a fast-moving reality to deal with – we need to be nimble to adjust to the ongoing changes and constantly stay on top.
Some of my priorities are to continue to ensure a regular and transparent dialogue with regulators on the efforts we are making and promote a sound risk culture where the changes are well understood and embraced. On the private banking side, like other players, we are very active on CRS [common reporting standard].
APB: Have you noticed any concerns from your international-domiciled clients?
BC: In general, no. Our clients know that we have a strict policy on tax compliance and that these changes are applied everywhere. What is also important is how banks help clients fulfil their reporting obligations.
Indonesia is a good example. I would claim that we are among the first to furnish our clients with a tax reporting infrastructure post-amnesty. We are an active participant in industry working groups and so we know where the industry is at. In the last few years, we have invested a significant amount of time and resources in building the infrastructure to furnish our clients with tax reporting.
APB: How has the bank fared since the Indonesian tax amnesty?
BC: As I said, we have invested a lot of time. The amnesty came almost in parallel with the OECD CRS implementation and it was a good opportunity for clients who had a need to address any tax legacies. As you know we have been very transparent in reporting quarterly results, and have also stated any outflows recorded as part of the regularisation of client assets.
APB: With Hong Kong looking closely at investment suitability, will you prepare for something similar in Singapore?
BC: Investment suitability is a big topic. It is our responsibility to make sure that we as a firm understand what the client’s risk and objectives are, and their corresponding risk appetite and ensure that this corresponds with their risk profile. We have enough checks and balances in place to ensure that whatever investment ideas being proposed correspond to their profiles. There are of course situations when mismatches occur but as long as you can explain and articulate that properly, and clients understand the underlying risk, that is perfectly fine.
APB: With the series of tech rollouts – from Digital Private Bank (DPB) to Canopy to CS Invest – how will you address the various regulatory concerns regarding technology and risk?
BC: Well, we are building an infrastructure that takes investment suitability automatically into consideration and allows us to have the necessary alerts in place through a digital platform.
Even on the Digital Private Banking platform, where clients are given the opportunity to trade directly on the app/portal, there are notifications and alerts should there be any mismatch between investments and a client’s investment profile.
APB: Moving on to your second hat – the Southeast Asia onshore role. This has been a big focus for Credit Suisse PB, particularly last year when the private bank opened its onshore Thailand operations in Bangkok. How has that business developed over the past year?
BC: Expanding our onshore footprint continues to be a priority and something we believe strongly in, knowing that the bulk of wealth sits in the respective home markets of our clients. In terms of setting up a domestic wealth management operation, Credit Suisse has had an advantage because of our long-standing presence in a number of Asian countries through securities brokerage licences (for instance in Malaysia, Thailand, Indonesia, and the Philippines). This gives us a leg up when it comes to fleshing out those relationships with clients and with the local regulators.
We now have a good wealth management setup in Thailand, where we have been present for 17-plus years already. It’s been one year since we went onshore in Thailand and we are very happy with the growth of our onshore assets and the domestic team in place.
As we announced last week, our wealth management setup in Thailand has seen a tenfold increase in assets and fivefold growth in client accounts. We do not disclose AUM figures on a country basis, but what I can say is that our onshore Thailand business has been a material contributor to our APAC NNA [net new assets] success. Also, our team of investment planners has grown and we are aiming to have a client coverage team of more than 10 by the end of the year.
We are clear that we are not competing with the local banks but aiming to bring our international investment expertise and content into a domestic market.
APB: What were the biggest roadblocks that slowed you down in Thailand?
BC: We were the first international wealth manager to establish this setup in the market – it took us more than a year from conceptualising to implementing the domestic operation. In Thailand, tax-related issues and market access were the biggest topics to address. If we enter a new market, we must be in a position to operate as unrestricted as possible and offer our clients a reasonable range of investment solutions. In the absence of that, it may not be viable to pursue the opportunity.
Will we ever have a full-suite offering in Thailand, as we do in Singapore? I am confident we will do so in the future.
APB: Has it been difficult to source talent for the onshore Thailand business?
BC: With the exception of one case, we want to employ local talent who have offshore private banking or investment banking experience who have a desire of going back to Thailand and be based there. All of our staff members have spent a vast amount of their careers outside their home country. We see this as a huge opportunity to attract new talent to our onshore franchise. Indeed, we have bankers joining Credit Suisse Private Banking in either our Hong Kong or Singapore hubs, knowing there is an opportunity to go back to Thailand.
APB: Does Credit Suisse plan to move onshore in other Asian jurisdictions and replicate this model?
BC: If you look at our history, Credit Suisse established onshore businesses in Australia in 2007, India in 2008, Japan in 2009, and Thailand last year. The contribution of these domestic markets including Hong Kong and Singapore to our regional bottom line has increased from 30% to 40% approximately over the past few years. We’ve become less and less dependent on cross-border activities. As you can see, there is a clear tendency for onshore businesses to pick up and we are constantly screening the possibility to go onshore in any of the markets we operate in.
Hopefully, we can share more details in the coming months.
APB: Given that Singapore is your largest booking centre outside of Switzerland, how successful have you been in capturing the lion’s share?
BC: Singapore, being the largest private banking booking centre for Credit Suisse outside Switzerland, has captured the lion’s share of our clients’ assets in Asia Pacific.
In addition, our Singapore market domestic business has also grown very rapidly. Looking at our Southeast Asia RM headcount, we have the highest number of RMs covering Singapore. We’ve hired extensively in the last 18 months and have invested a large amount of resources in our domestic franchise.
APB: How do you keep your cost base low if you are hiring extensively?
BC: The payback of the larger parts of our investments has certainly come through in 2016 thanks to our successful RM hires. It is a marathon and not a sprint, so we are cognisant of the fact that every RM that comes on board takes time to produce results.
Importantly, Credit Suisse has been the advisor of a number of high profile corporate transactions here and this has fuelled our growth in the domestic Singapore market extensively. This is the key advantage we have over other players. Of course you can grow through the traditional route of private banking activities, but if you want to be relevant to successful entrepreneurs in Asia, make quantum leaps and grow at a substantially higher pace than the industry, you need a strong investment banking arm and strong lending capabilities.
