- Carole Berndt
- Managing Director, Global Transaction Banking, ANZ
An Executive Interview with Carole Berndt, Managing Director, Global Transaction Banking, ANZ (until June 2016)
In this edition it’s a great pleasure to welcome back our friend Carole Berndt, who until recently worked for ANZ as Head of Global Transaction Banking. In this feature, Helen Sanders, Editor, talks to Carole about some of her impressions.
What attracted you to ANZ originally?
If you’d told me eighteen months ago that within a year, I would be back in Asia, and heading up transaction banking at ANZ, I would have been very surprised. On further reflection however, I had been very aware of the changes taking place in transaction banking for some time, and when I was approached by ANZ, I was quickly able to crystallise some of the thoughts and ideas I had had, and recognised what a marvellous opportunity it is.
How would you characterise these changes, and what does it mean for banks’ strategic positioning?
Transaction banking became fashionable subsequent to the global financial crisis, and many banks redirected resources from investment banking to corporate banking, including transaction banking. By 2012 – 3, regions such as Europe had become overbanked, exacerbated by the harmonisation of payment and collection instruments across the Single Euro Payments Area (SEPA). This was untenable given that transaction banking relies on economies of scale to be profitable. The growing regulatory burden, both in-country and at a regional and global level, such as Basel III, was also increasing the cost and complexity of doing business and setting the stage for change.
In the past, banks made the strategic decision whether to be a local, regional or global bank. Increasingly, it became obvious that the concept of global banking was no longer a realistic proposition for many. As a result, we have seen some high profile exits from product lines, individual markets and whole regions as banks redefine their strategy to focus on markets and products in which they can perform well. At the same time however, local banks that act in individual markets find it difficult to achieve the economies of scale and invest at the level required to offer a robust, secure and scalable transaction banking offering, and to provide larger corporations with the connectivity they require.
Regional banks are playing an increasingly important role in transaction banking
In contrast, regional banks are playing an increasingly important role in transaction banking. Clients are recognising the value of working with a bank that has a proven and long-standing commitment to a region, with specialist expertise and market-specific products. At the same time, they benefit from streamlined connectivity and cross-border solutions, whilst diversifying their counterparty risk. When ANZ approached me, therefore, it was already clear to me that regional banks represent the future for transaction banking and it was very humbling to be approached by a bank that I knew well (given my Australian roots), with such a strong reputation and positive business culture.
I met with the senior team, and was very impressed by the progress the bank had already made transitioning from a local to a regional bank. In only eight years, ANZ had achieved a comparable level of scale and sophistication as the large ‘global’ banks, and I recognised the opportunity to strengthen our position further as an Asian bank. In addition, after a number of years in Europe, it’s nice to be back in a warmer climate and closer to home!
How would you say the banking environment in APAC differs from Europe, for example, and what opportunities/ challenges does this create?
While I think everyone is aware of the differences at a high level, I had under-estimated how dynamic the business environment in Asia had become over the past eight years. Despite the slowdown, Asian economies, including China, are still delivering 6 percent growth or more, which contrasts sharply with zero or sluggish growth in many western economies. Along with growth, it is also a region of significant complexity, which is inevitable as it does not have a construct such as the European Union, so ultimately it is a geographic grouping of quite different countries with diverse regulatory, tax and cultural requirements. These are issues to consider when doing business, but they have not stopped multinational corporations from establishing their businesses in Asia.
When we talk about multinational corporations, it is important to remember that we are not only talking about organisations headquartered in Europe or North America: indeed, it is often corporations headquartered in Asia that are demonstrating the more rapid rate of international growth. To meet the expanding needs of both local and foreign multinationals, we have expanded our presence into countries such as Myanmar, in addition to building onto an existing presence in Cambodia, Laos, Vietnam and others.
China continues to be an essential destination for international businesses, and we have built up substantial operations in the country. The country has changed almost beyond recognition over the past decade. Ten years ago, it was still considered a ‘frontier’ territory, and an emerging market in almost every respect. Now, doing business in China is effectively ‘business as usual’ and it is impossible to define the country as ‘emerging’. Although complexity still exists, the difference is remarkable, and corporations have considerable flexibility in the way they manage RMB, and the financial and operational sophistication that they can achieve.
What impact is regulatory change, particularly Basel III, having on transaction banking in Asia, and how do you anticipate this evolving?
As we have seen in other regions, Basel III is likely to cause some disruption as banks reorientate their business to meet the new requirements, and focus on returns rather than revenues. Banks are becoming more selective about their business and moving out of ‘hobby’ business lines that offer low returns. However, trade flows are particularly important in Asia, so there are considerable opportunities for growth in trade finance and supply chain finance, which are areas in which ANZ has particular strength, and this translates into solutions that offer considerable value to customers.[[[PAGE]]]
Just as banks are making strategic decisions about which client segments and solutions they are best equipped to support, corporates are going through a similar decision process. In particular, they are seeking to rationalise their banking panel to a small group of partner banks that are committed to the relevant markets and solutions, leading to more rewarding relationships on both sides.
How would you characterise ANZ’s transaction banking ambitions in Asia?
We have established a clear strategy to continue to be a leading retail, commercial and corporate bank in Australia and New Zealand, and eight years ago we started to expand our footprint with the intention of becoming a leading corporate bank for Asia. We have already progressed significantly in achieving this, and as we look ahead, we want to continue growing and consolidating our Asian presence, both to bring a wider range of solutions to our clients, but also to invest further in the efficiency, security and scalability of our platforms, and ultimately increase returns.
Clients are no longer looking for ‘products’, but solutions to address their cash, treasury and working capital challenges.
We have a new CEO, Shayne Elliott, joining the bank this January. While it can seem unsettling in the short term to have new leadership, he has been very clear that we are, and will remain a bank for Asia, and an essential partner to our clients as they pursue their Asian strategy. Currently, a large proportion of our 7,000-strong base of significant clients (from commercial banking to large corporate clients) are headquartered in Australia and New Zealand, but a growing number of corporations headquartered across our Asian footprint are attracted to our solutions and footprint as they expand their business into Australia and New Zealand, but also into other parts of Asia.
Clients are no longer looking for ‘products’, but solutions to address their cash, treasury and working capital challenges. In this context, solutions such as supply chain finance have become increasingly important to increase the resilience of the supply chain and enhancing working capital for every participant within it. Clients choose to work with ANZ for supply chain finance as we are a ‘local’ bank for both buyer and seller, offering local expertise and solutions for both ends of the trade corridor, with a highly professional onboarding process.
We hear a great deal about opportunities for fintech – what does this mean in Asia?
Asian corporations, and their banks, are frequently in a position to bypass whole generations of technology, without the legacy technology constraints of their western peers. When looking at bank connectivity for example, the discussion is not about banks’ host-to-host solutions and proprietary formats, but about bank-agnostic connectivity solutions and industry-standard formats with a view to reducing complexity and cost, and enhancing automation and control.
New technology is providing opportunities not simply to conduct legacy processes in a more efficient way, but to devise entirely new business models, both B2B and B2C, and create competitive advantage. In some cases, these technologies are ‘home grown’ in Asia, while others are best-in-class innovations adopted from other regions. New ways of deploying technology, such as blockchain, differ significantly from their original purpose, and become more relevant as it morphs and evolves over time.
Banks and financial technology companies have a crucial role to play in facilitating these new business models, particularly looking at transaction settlement, whether at a retail or wholesale level. For example, alternative payment providers, not only PayPal and ApplePay, but Alipay in particular in Asia, are not replacing card payments or electronic transfers, but represent many consumers’ first experience of electronic payments, with huge potential in countries such as India.
An issue you have always championed is to create an equal environment for women in industry, not only banking. What observations would you make since relocating to Asia?
This is an interesting issue that I hope we can explore and discuss more in the future. I have been very impressed by the number, and quality of women who are running regional and global treasury functions and holding very senior banking roles in Asia. This was very noticeable at the recent Adam Smith Awards ceremony in Singapore, and it seems that we are entering a period in which organisations recognise the value that different genders, nationalities and backgrounds offer in adding new perspectives, talents and experiences to their business. Asia seems to be taking a leadership position in this respect, making it an even better time to be doing business in Asia and being part of the transformation that is taking place.
