Bloomberg News

Standard Chartered Sees Funding Pressure in Some Banks, CEO Says

September 30, 2011

Sept. 30 (Bloomberg) -- Standard Chartered Plc, the U.K.’s second-largest bank by market value, sees funding pressure globally in some banks amid the euro debt crisis, Chief Executive Officer Peter Sands told reporters in Hong Kong today.

“It’s clear that some banks are finding it more difficult to access funding and liquidity,” he said. “That will have an impact on the cost and availability of credit. How much of an impact will vary a lot by country and by currency.”

BNP Paribas SA and Societe Generale SA, France’s two largest banks, are trimming about 300 billion euros ($406 billion) off their balance sheets to help rebuild market confidence in their capital strength. The two lenders have been forced to act after concerns about their sovereign debt holdings made funds reluctant to lend to them, crimping liquidity options.

“If you look at the fact that there has been basically no unsecured debt issuance in Europe by banks since roughly the end of May, that does put pressure on those banks that are dependent on regular unsecured issuance,” Sands said. “They will have funding challenges. It will be more difficult for them to maintain the pace of lending.”

Europe’s deepening debt crisis is also slowing economic growth in Asia and causing short-term fluctuations in the region’s flow of funds, the CEO said.

“There has been a degree of some repatriation of western investments going back, which is affecting the currency market and markets in Asia,” Sands said. “However, I think the fundamental attraction of investing in the growth opportunities across Asia will remain robust.”

Hiring Continues

London-based Standard Chartered, which earns most of its profit in Asia, said it will continue to hire next year and beyond. The lender has said it plans to hire a net 1,000 people this year, even as U.K. rivals announce job cuts. HSBC Holdings Plc said it would eliminate 30,000 posts by the end of 2013, while Barclays Plc said it planned to cut 3,000 employees this year as the banks seek to improve profitability and prepare for stricter capital rules.

“We are supportive of much of the regulatory changes,” Sands said. “However, there is a profusion of different versions of all the regulations and they sort of overlap and interact with each other in a very complex way.”

Britain’s government will force lenders to insulate their consumer and investment banking units by 2019 as Chancellor of the Exchequer George Osborne tries to shield customers and taxpayers from another financial crisis.

The Independent Commission on Banking on Sept. 12 also recommended that ringfenced banks hold more capital than required by the Basel Committee on Banking Supervision. The Basel III rules require banks to hold 7 percent of risk-weighted assets in core capital, and the biggest lenders, so-called systemically important financial institutions, to hold as much as a further 2.5 percentage points in additional capital.

--Editor: James Gunsalus, Linus Chua

To contact the reporter on this story: Stephanie Tong in Hong Kong at stong17@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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