Don't #knowtherules? Winters Will Fix That
Standard Chartered Plc's parting of ways with its head of Asean and South Asia operations couldn't have come at a more inconvenient time.
The emerging-markets lender is about to shed 10 percent of its corporate and institutional banking staff. The decimation isn't unexpected. Nevertheless, it's occurring in a division that accounts for close to 64 percent of the bank's operating income and almost all of its identity. That's bound to shake employee morale. Why did CEO Bill Winters choose the same moment to lose a veteran banker of 24-years standing? And over disclosure lapses concerning personal investments that broke no laws or regulations, and hurt neither StanChart or its customers?
Just this month, Ajay Kanwal said StanChart's tough years in India were behind it. Gadfly agreed that getting a $2.1 billion repayment from Essar Global Ltd., one of StanChart's troubled corporate customers, was half its bad-loan problem in the nation solved. But that was before a messy battle for control of Tata Group, another large borrower, and a surprise decision by New Delhi to render 86 percent of the country's cash in circulation worthless. With banking and taxation rules changing on a daily basis, India will be a hard-hat zone for all lenders at least until early 2017, StanChart included.
If those were two good excuses to have Kanwal linger a while longer, there's a far more compelling reason to let him walk: Winters's #knowtherules campaign.
It's pain for a purpose. Take the mess in Kanwal's own backyard, with Malaysia and 1MDB.
The Monetary Authority of Singapore will probably soon penalize StanChart as part of its investigation into billions of dollars allegedly looted from the Malaysian state investment firm and laundered around the world. Since Singapore doesn't believe in punishing bank shareholders for crimes of officers, it's unlikely StanChart's regulatory expenditure, already bloated by fines from past violations, will rise materially from last year's $1 billion.
The hit to reputation may be another matter.
If the U.S. Department of Justice's claims are anything to go by, a simple sorry from StanChart won't be enough. After all, which bank allows just any Malaysian customer to open an account in the name of Blackstone Asia Real Estate Partners, when this shell firm has nothing to do with Blackstone Group LP or its affiliate Blackstone Real Estate? And what does it say about StanChart's vigilance that the same Singapore account sent as many as 20 wires -- totaling $12.8 million -- to a money changer, which, according to the DoJ's complaint, is common laundering technique?
The violations didn't occur on Kanwal's watch. But the only way a bank can credibly walk away from such bad behavior is when it stops being tolerant of even the slightest transgression. So while it would have been more convenient for Winters to ask Kanwal to say his farewells a few months later, retaining him to fight fires would have been a disservice to the bank's long-term interests.
Kanwal knew the rules, just as well as Winters knows his game.
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