Transcription
Hi everyone, I'm Nicolola Tangan, the CEO of the Norwegian Southern Wealth Fund and today I'm joined by Bill Winters, the group CEO of Standard Charter Bank, one of the world's most distinctive banks headquartered in London. You have most of your activities in Asia, Africa, and the Middle East. And we own more than 2% of the company worth a billion dollars. We are really proud shareholders.
So, Bill, um, the bank opened its first offices far away in Mumbai, Kolkata, and Shanghai in 1853. Long time ago, and you've been CEO in, uh, for 10 years, which is only 5% of the >> That's right. >> of the duration of the bank. So, tell us what is it that makes Standard Charter so special?
>> Yeah, first it's great to be here. Thanks for having me. Uh, so you're right. Standard chart actually started as a standard bank of Africa. It was started in in Port Elizabeth in South Africa. today South Africa and uh and the charter bank of India, China and Australia which first branch in Kolkata and obviously at the outset it was two banks it only came together in 1969 still a long time ago uh but to finance the empire it was to finance trade within the empire.
>> And those are still our roots and people sometimes refer to us as an emerging markets bank that's not quite right because we have big operations in the US and Europe and I'm not sure that places like Hong Kong and Singapore are are emerging markets anymore in any U or they refer to us as a trade bank which is true. We are a trade bank and and the second largest trade bank in in Asia of course which is the biggest trading center of the world.
>> But uh really we're a connector bank uh we just connect markets to markets and people to people because we have multiple home markets and what attracted me to standard chartered was the this unique culture of of being a connector uh with no single home market that of course the UK is our home market in many ways is where we started and where we're headquartered. Uh, Hong Kong is our biggest single market. Hong Kong, China, which is increasingly a single market, is is our by far our biggest profit source. Singapore is our major operational hub. India is our operation center. And then we're a big bank in India as well.
>> But who who are your clients then?
>> Our clients so roughly twothirds of our businesses are our corporate and institutional clients, including governments. Uh, they're almost all multinational. If they're not multinational, they don't really need us. And of course we can deal with some local clients as well but but for the most part they're multinational. They have some crossber nexus. One-third is retail. Uh all of the retail is Asia Middle East and Africa but the corporate is is truly global and uh and the clients use us to connect them to markets and investments.
>> Why are you still headquartered here? You got all your activities so far away.
>> Yeah, it's a it's a question. It's a good question and we ask >> it's not the first time you got it either.
>> No, not the first time. Uh do you know what? So, so when we when we reflect on this from time to time, we say first of all uh we're we're quite quite a complex bank, difficult to regulate and uh the UK regulators are extremely sophisticated. So they they've been managing global banks for a long time.
>> Uh so they especially for us we we deal actively in financial markets, derivatives and things like that that are quite difficult to regulate actually. So the P Bank of England is extremely sophisticated.
>> Uh second it's the UK has always been a a fantastic financial center. So it's it's got the underlying infrastructure. It obviously is a good time zone because we're we're active throughout Africa and in the west Europe and Americas where where the UK is fine.
>> Um but you know our name is on the banknotes in Hong Kong. Uh our largest shareholder is Tomasc in Singapore.
>> Um we don't ever have want have to choose between the two of them. Uh so that's and you can think about some some other location. Uh today Singapore and Hong Kong could regulate us uh because they've become extremely sophisticated regulators as well. 20 years ago, I'm not sure they could, but in the meantime, we were we're firmly entrenched here.
>> So now I'm I'm an international company uh and I've got businesses in all these places. What do you do for me?
>> We take care of your your local operations, financing for your local operations in countries where in some cases we'll be the only bank that you could deal with. in others will be one one of the few international banks that's truly local.
>> Uh so we're going to take care of your business in those local markets. Uh we're also going to connect you to local players who may be part of your supply chain or they may be your distributors or they may be your partners or one day they may buy you or or buy part of you. Uh so that's for the multinational companies. We're offering them access to these local markets.
>> When you took over the bank 10 years ago uh the state of affairs were very different. What did things look like back then?
>> You know, I I had I had left banking at that point. I had worked at JP Morgan. I I was I had set up a what today we would call a private credit fund. Then we just called it an asset manager. Uh it was fine. It was a good life. You know, the asset management life is a good life.
>> Uh not always, but some.
>> I'm going to say I'm going to say it's a good life. That's how I remember it. And uh and then I got this call from Sander Charter. I knew the bank pretty well from my time at JP Morgan because Standard Charter was a client and a partner.
>> Uh that we're still clients and partners. Uh and the chairman said, "We've got a problem." Uh I said, "Yeah, I'm aware that there are some problems. Uh but he said, 'I think we've got a really good underlying franchise and we just need to clean it up.'" And and the problems that they were very clear at that point were were compliance problems largely with the US, but also with the UK and elsewhere. Uh but it was also clear that there were some credit problems. Uh I don't think anybody was aware how substantial the problems were, and I wasn't uh when I arrived, I have to confess despite my due diligence.
>> How how bad were they?
>> We wrote off a quarter of the book equity of the bank and and had to fill that up with the rights offering uh which, you know, took the share price down. It had it had peaked at, you know, almost double the price that it was at when I was announced, but it it dropped by another half uh again. So that's now 75% down. Peaked drop. So that's um yeah, but my the bet I made uh which I I questioned at a few points, but I fundamentally I'm sure today was right was that there was a really good underlying franchise with a really interesting and thank you for calling this distinct at the outset. That's a it's a neutral term. It could be distinctively positive or negative, but it is in fact distinct.
>> And it's a positive now.
>> It is a positive now. And and people have wondered at times whether it is a positive because sometimes it's expensive to be distinct.
>> Uh or it's tough to get to scale when you're distinct. But uh I I took the view that we were distinctive and that that distinction was a strength and that we could leverage that strength and that we just had some problems that we had to clean up.
>> So So first day in the office, you come in there and you say, "Hi guys, Bill Winter. I'm uh you know coming to save you and let's have a look at the books. Wow, not so good. Uh write off a quarter of that. Uh have to take in some new capital. Just how do you go about fixing something which is so big and complex?
>> We took a little bit of time. We took I I had the luxury first of all of having three months between the time that I was announced and the time that I started. So I was just an observer. I was also selling as it happens my my previous business. uh I was on the board of some other companies that I had to step off. So it took a little bit of time to transition uh which was which gave me a chance to understand without having to make decisions. Uh so by the time I started 3 months after announcement uh I was pretty familiar with the bank and we could get right down to to business. You know the first order was to was to pick the team uh actually. but even before we dealt with the problems and uh we you there's one person that had been on the previous executive team that we carried over uh about half the people that that formed the core team at the outset came from inside but we bumped them up an organizational level or two and the other half came from outside. Took a little bit of time.
>> During those three months how many people did you meet with?
>> Oh hundreds. Hundreds and >> working inside the bank and meeting people.
>> Yeah. Yeah. you know, I was in almost every day and I and I took uh you weeks on the road to to go visit the the key centers in Hong Kong, Singapore, Dubai, uh Seoul.
>> And how do you and how do you pick the people? How do you see who is fit?
>> I you know, when when I reflect back on that on that period, uh I didn't have a 100% success rate, but it was I'm I'm surprised that the initial instincts were as correct as they seemed. What what >> what were you looking for?
>> I I was first and foremost was looking for integrity. uh you know there had been I would say very substantial control lapses in the company. It wasn't completely clear whether all those control lapses were completely honest and uh I don't have a lot of evidence that there was a lot of dishonesty but there were some bad examples of selfserving behavior I thought and that had got I think that contributed a lot to to the state of the company at the time and I wanted to make sure that that we had a team that was completely focused on the team and not focused on themselves.
>> How many people did you bring in from the outside?
>> Right. the the the first hire from the outside was a chief risk officer and which was a really natural place to start. Uh it brought in a the head of our corporate bank came from outside whereas the head of our retail bank I promoted from within. Uh the bank actually had just hired a new CFO before I arrived uh who had had a very experienced CFO from Vodafone uh who obviously stayed and the had just hired a general counsel to clean basically to clean up some of the mess with with the US authorities in particular who's also very strong. So, so we had you know we had some good endowments uh at the outset. Uh and in fact the bank had just hired a head of technology and operations who started the same day same day I did. But you what I found was that the talent in the bank was actually very very good and much of it long-serving and they understood what was really good about center charter and what was not. But I also realized that that group of people was they were shell shocked because I mean a little bit of the history center charter was just three years earlier they were the darling of the city uh trading at a multiple of their book value and uh had subsequently dropped down to something around book value that subsequently fell down to 30% of book value but that in 2012 they were heroes and and told that they were great and you know very big investors came in and put a lot of money with the at a very high price saying you guys are great and you're >> including us.
>> I don't think so. I think you were much much much more astute at the time but uh no notice was was was involved but I don't think outsized at the time.
>> When you come in there and the bank is in trouble and you're like a fallen star and you're a new person, what how do you communicate with shareholders?
>> What's the what are the key what are the key things and key messages?
>> You know the very first and most important communicators were with regulators because the bank had lost the confidence of of regulators, >> right? And uh so my my first interactions were just to to be be very clear that that the regulators actually were the very single number one priority even at the expense of shareholders not because that can sustain for any period of time but because that was necessary for existence at that point.
>> Stupid question. Why is it important to be friends with the regulators?
>> Because regulators give you a license to operate and without the the support of the of the regulator you can't operate. uh you know there there were there were questions back in 2012 when standard charter was first uh identified as having violated some of the financial crime rules in in the US. There was a question whether the US would would remove our banking license. Uh I don't know how close that ever came but it was certainly considered and >> and a bank without a banking license that's not a good place to be.
>> It doesn't exist.
>> It doesn't exist. uh not necessarily in every country, but if that country is the United States and you're one of the largest clearers of US dollars and that means you can no longer clear US dollars, it's it's as essential. So,
>> but but how do you communicate with shareholders when just what do you what do you tell them? Do you tell them your dreams or your plans or your specific targets? Just how do you
>> I started by I I so I gave shareholders my assessment of why I took the job. And it it was pretty clear I think to anybody I was speaking to that I didn't have to take that job. uh I wasn't an internal person that was that was brought into you know to to carry on. I was I I I dropped a really nice comfortable life outside to go do something new. Uh and I explained why and I explained that I thought that the underlying franchise was a super franchise that we had some problems that we could fix them.
>> I had been at JP Morgan uh at the time that JP Morgan sold itself to Chase. Uh that bank JP Morgan Chase which is hard to imagine today given how powerful that bank is. That bank had had a really difficult time in 2001 on the back of the the bankruptcy of Enron and and WorldCom and and other associated failures during that you know the dotcom bust and and other things and uh we as a team pulled together and fixed that bank you know Jamie then came in four years later I guess and and then continue to fix the bank and obviously has taken it on to to what it is today. Uh so I had some experience with really bad situations with really bad relationships with regulators >> that had worked out really well for shareholders and I tried to play on that history.
>> When did you first start to think that everything hey now things are going well we sorted it.
>> well but you know interesting when I thought things were going well was a little bit different than when the market thought things were going well. So uh we we took you know really severe medicine in 2015 and 16 both management and and and sure you financial uh I think 17 and 18 were definitely rebuilding years. We also had a big technical deficit so technology gaps obsolescence that needed to be closed. I was feeling very good about things in 2019 and we had set at the outset uh three-year performance targets as as as we all do and you know performance plans were linked to that so it was all public and um you know the the big delivery year was going to be 2019 as it happens we fell a little bit short of the targets in 2019 largely because interest rates had had fallen relative to what we expected but we were on track and so so 2020 was going to be the delivery year.
>> uh that was not reflected in the market at all for us at that point um not long enough to be too frustrated. We know what we know what happened in 2020 with with COVID and interest rates going to zero uh which is very bad for any bank. It's it was particularly bad for our bank at that point. So for two years we had to kind of tread water uh with continued to progress but but it was not very visible. Uh so I felt things were in in good in good nick in 2019 but I don't think the market finally came around to that view until probably 2022 or 23.
>> what took it so long.
>> covid was two years uh we had a credibility gap uh which I think was the credibility gap that came from the problems in 2014 15 16 uh we're relatively small uh so that not every investor has to spend a lot of time understanding a relatively complex bank like center charters and uh so I think there there's a very wise uh sharehold well actually non-shareholder but a portfolio manager a very large asset manager who said you know the way this is going to work is you're going to have to outperform form for 2 or 3 years before anybody really pays attention and then people will crowd in. And I thought and he probably said that to me in 2018. I thought that was a a little bit histrionic at the time. It turns out I think he was he was exactly correct which you know I don't think it would necessarily be the same if it was a much bigger bank even a bank like HSBC much bigger than us. Similar kind of business profile but they're in the indices they're in all the indices. uh you can't not own HSBC or if you don't own HSBC you have to be very aware that you don't you cannot own it standard chartered and it's not going to fundamentally change your your portfolio.
>> If you were to take over a bank in the same situation again what would you do differently?
>> But the biggest mistake I made and it was a big one was to not realize that the risk appetite inside the bank had already collapsed before I arrived. So I showed up on day one. I saw many indicators of of loose controls on the compliance side, on the conduct side, and then on the financial side. So, credit losses. Uh, and I hit the brakes hard. Uh, and that was I overdid it. Uh, and I overdid it because I acted before I be before I investigated. So, you the indicators were very negative. And, uh, so I said, you know, this is you're out of control. Basically, you can't do anything without my approval for a little while. And >> and they were already scared to death.
>> But they were already scared to death. and and they had been scared to death for six months. So So you know the balance sheet shrunk by the better part of a third in my first year. Probably half of that was unnecessary. I I may be a little bit harsh on myself on that one, but but I I think I I over I overindulged on the uh the risk messaging and and maybe even more harmful than the damage that I did in the short term was that it meant it was that much harder to get out of that that risk averse position.
>> Um, what were the most important things that you took from your time at JP Morgan to bring into this bank?
>> You know, JP Morgan was was several different banks in my time there. I started there in 1983. It was a US commercial bank, but but very a very preeminent US commercial bank, but a commercial bank. And then Morgan Stanley and Goldman Sachs were these other things that we just heard about. Uh, shortly after I arrived, Lou Preston, legendary leader of of JP Morgan, who went on to run the World Bank, said, you know, we've got to make a decision. Do we follow our clients into the products that they're pursuing or do we follow our products into a new group of clients and that was because the our clients were going into capital markets uh which we as a US commercial bank were unable to access because of the glass act and Preston said prophetically we will follow our clients and therefore we need a new set of products. So we developed some conventional investment banking products like debt and equity capital markets first debt then equity u but then also gave ourselves license to get into some new areas like the very early days of the derivative markets. So my the first big lesson was you ask yourself the question why are you there? Are you there to serve your clients or are you there to push products?
>> The answer the right answer is almost always serve your clients but but perhaps in some cases it's not. Uh second was and this the huge lesson for me was I just got very lucky and got got put into this derivative area or swaps as we called it in 1987 when it was just getting started and I rode that wave for the next 25 years uh as a and it it gave me an opportunity in in the outset in sort of the back room in the in the dark the dark room that nobody paid too much attention to to innovate and create and then later to industrialize something that started from an innovative process. the most fabulous learning experience of my life. I was just I was just you know how things happen just a confluence of of things and events that allowed me to glom onto that at that point and and just ride that wave. But we did some we did some really interesting things at JP Morgan and you know maybe the we then sold the company to Chase that cleanup was absolutely fascinating. Uh you know I I can blame us for having done very bad due diligence at the time that we sold the company because we sold the company at a huge premium to a company whose stock was hugely overvalued as it turned out. It's okay. Like as as you see today with JP Morgan Chase, it worked out. Uh but there it was a very bumpy road, but that cleanup process was fascinating. Uh and then Jamie came and you know, I learned as much from Jamie as I've learned from anybody in my working life. He's just a highly disciplined, very focused manager. And we didn't always get along uh for sure. And uh and it didn't end well my relationship with Jamie at JP Morgan, but it's end it's carried on very well. I mean, I would put I put him in the category of good friends. uh to this day despite the bumps we had along the road. He's a fabulous manager.
>> How would you define your leadership style?
>> I would define my leadership style as as very collaborative. Uh I'm uh not particularly directive. I mean, I can get deeply into the details if I need to, but I would prefer not to. I'd prefer that the people that are that are working for me are really taking care of the details themselves. I try to push accountability down at every opportunity. uh I try to create a team that is a team rather than a team that has a series of bilateral relationships with me. Uh I probably some would say that I overindex optionality so that that that I'm I that I carry too many options uh at too high a carry cost. Some would say that others would say the fact that you're prepared to back non sure things is what has changed the organizations for the better that you work for over the years. Uh I would accept that I I probably overindex optionality. I unbiased on balance. I think that's a good thing. Uh but that that's probably the most controversial of the things that are attributed to my leadership style.
>> Some people say I just can't make a decision sometimes.
>> And what would you say?
>> I say I love optionality and I'll make a decision when it's the right right time to either exercise, sell or shut down that option.
>> Yeah. Optionality is often um underpriced and worth a lot sometimes.
>> Sometimes. How do you read today's world?
>> Uh it's it's obviously super tense today and uh you know I wake up each morning wondering what happened overnight in China or or or in Asia or depending on where I'm sitting and I go to bed each night wondering what's going to happen when I sleep. And you know what we find in the between dawn and dusk is things are going pretty well. So uh I happened to be in Vietnam on April 2nd and I had met with the prime minister uh on the evening of the first and then uh or at the evening of second actually and then woke up to find this you the Vietnam was at 46% on the on the tariff chart. We we were all remember the tariff chart >> and >> so this was a liberation day where they introduced >> that was the day the tariffs were introduced >> and uh I had said to the prime minister the night before uh I don't know what's come today in this press conference but I don't think you need to worry because at the end of the day I don't think the president of the United States is really keen to trash his economy and uh then the 46% number came out and and I met with him in the finance minister the next morning and he said what kind of advice was that you gave me last night because we're worried here today I said I'm Well, I'm a little bit more worried than I was yesterday because it was quite dramatic this whole thing. But uh but I still don't think you need to worry because I really don't think that the United States wants to destroy its own economy through inflation or or through uh through uh suppressed economic activity. So what what I would suggest is that you identify those things that are really sensitive to the US. The obvious one for you in Vietnam is is trans shipments. you're you're a very large trans shipment point or at least allegedly for Chinese goods that are that are basically stamped made in Vietnam on the way through. Uh I don't think you make a lot of money at that. I don't think it's a big employer of your people. It's just a thing that you do. I think you could probably focus on that and and and cut a pretty good deal with the US on the way back. Anyway, we we had the view that tariffs would end up at 10% for the world, 25% for China, and I will still maintain that that I never change that view. I would still maintain that's where we're going to be once we've factored in all the exemptions and the new you know India has to cut the deal etc. So uh if but if you take the view that the US doesn't want to to engage in self harm and China doesn't want to engage in self harm but they're in an intense competition that's going to persist for my entire lifetime uh and and beyond I suspect then uh you just have to ride with with that tension.
>> and you know what I reflect on more broadly is that in the history of the world we've never been at a time where there was less major conflict than right now. So, of course, you don't feel that way if you're in Gaza or southern Lebanon or Ukraine. Uh, but broadly, this is a really peaceful time in the world. And, uh, I'm hopeful that we can sustain that. And I'm I'm hopeful that it's fundamentally it's the self-interest of the United States, China, even Russia, uh, Europe as as the major military powers in the world that that continue. So, uh,
>> when you when you talk about resetting globalization, what do you mean by that?
>> We mean uh enga extracting the benefits of globalization without leaving key parts of the population behind as we did last time. Uh so we all know that globalization was a tremendous enricher and and generator of prosperity for billions of people around the world. Uh we also know that there were extremely important chunks of the electorate in democracies that were left behind as their markets de-industrialized or partially de-industrialized and hence we get the the the populist backlash. So resetting globalization and that's just one example of of people that were disenfranchised. I think there were also you know incidents of human rights or indigenous people abuses uh that came with globalization. There was a a lack of focus on on sustainability and and and managing greenhouse gas emissions that came with globalization. So resetting globalization is is getting as much of of the benefit that we have always recognized from globalization while taking maybe a slightly store slower step from time to time uh to to bring those other populations along.
>> Are we moving towards a word world with um with separate financial systems?
>> I fear that we are uh although I think there will be a big chunk of the world that operates in both. So at the for the time being the dollar is the dollar and the Brettonwood system is still preminent.
>> U China is is steadily building up a a financial infrastructure that is an alternative to the US dollar. I don't think their objective is to displace the dollar certainly not as a reserve currency but I don't even think as a as a currency of trade but they do want to have a facility to continue trading if their access to dollars is shut down. And uh so whether it's the and and we play very actively in both call it financial systems they're completely interoperable today but of course we could imagine a time when they're disintegrated.
>> as Russia was disintegrated from from the global financial system after they invaded Ukraine. So so I fear we're heading that direction bit by bit and I fear we're heading the same direction in technology and and underlying uh technical infrastructure. But we've also seen that that very important countries in the world starting with with India, Brazil, South Africa, the Middle East uh aren't going to choose sides and I don't think they can be compelled to choose sides. Uh so they'll be operating in both financial systems and as as soon as as long as you have somebody in the middle then you've got the bridge between the two.
>> which will render them interoperable even if they're technically not interoperable.
>> So um let's spend a minute on the big regions where you operate. Uh and let's start with China. How do you see the longer term outlook for China?
>> Uh longer term, I'm very optimistic about China. I think they've clearly have some some huge technical and technology advantages. Now, they're coming from behind in some of the cutting edge technologies we know, but we've also seen how quickly they can catch up even in things like chip design where the where the gap was enormous even two years ago.
>> So, I think technically uh technologically, China's in a good place. Uh China's going through a major transition right now. And I I've at SFU lived through major transitions in in economies as they develop and they're quite ugly. They're usually associated with things like real estate crises or or bubbles bursting which is often associated with stock market crashes, recessions or depressions in some case. Uh and these are extremely destabilizing things when they happen in the United States or the United Kingdom or Norway or anywhere else. Uh, China, I think, is desperately keen to avoid the the adverse consequences of the deflation of, in their case, a property bubble, which was also a little bit of an equity market bubble, but really it was a property bubble. And so far so good in the sense that they've not had a financial crisis following from the the property crisis.
>> The I say so far so good because it's not over. The property market hasn't yet begun to recover. The financial system is intact, but it's it's completely sapped consumer confidence and investor confidence. uh it's tough to reignite the consumer confidence in China. So as we sit here today at 4.8 or so percent growth uh which is below potential for China. It's still a just a middle-inome country. 4.8% is is not the the appropriate long-term uh growth rate for a country of that size. Uh they've got they've got a real challenge. And as the property market stabilizes, the equity market has begun to stabilize, uh I think they can expect I think then they'll they'll inject some some of the stimulus that's lacking today in particular into the consumer economy and and get a little bit of lift, but that could be another three or four years. In the meantime, the the techn the technical base looks quite good. And the other obvious challenge is they've got an export-led economy and they're they're so strong on the export side that that they're being shut out of key markets almost entirely shut out.
>> of the discretionary markets in the US and now I think increasingly in Europe.
>> How do you read India?
>> India is is uh is a powerhouse uh and I think the reforms that that Prime Minister Modi initiated 10 years ago and has is carrying on have been extremely effective. uh it's still a poor country so there's you know there's there's a ton more to go 8% GDP growth figure in the most recent quarter is very encouraging getting closer to what we would think is its real potential.
>> uh the um there's still much more structural real form to do there's much more infrastructure that needs to be built uh and I think there's ongoing cultural adjustments that will be necessary to make it easier for foreign investors to operate in the country but but the wheels are in motion I think India will carry on for some time.
>> middle east major hope for you.
>> middle east is is is has been booming on the back of of obviously oil prices helped but that's less of a of a tail.
>> And a little and a lot of English people are moving there.
>> Well, the Dubai in particular is uh is is is certainly picking up actually the bulk of the wealth that's moving into Dubai is Indian or South Asian. uh it started during co because it turned out it was a really nice place to to seek refuge and uh uh they they've been very welcoming to people with money in in the UAE but that's uh yeah chunks of the asset management industry are moving and and with that a few a few tax tax exiles from Britain I'm sorry to say but um you know I think the region is I mean the most interesting thing about the Middle East is that it's transforming from being an an oil and creditor economy to being a developing.
>> diversified economy. it's actually hugely capital consumptive and um it's interesting to see at the at the annual uh jamberee that they have in Riyad uh that you know people used to go thinking they could walk away with money for their business and now they the people who go are people who are coming with money in their pocket to invest in the exciting projects there and it's a big change in just 5 years.
>> talking about money you've been an industry leader in um digital assets. what role will this play in the future of banking?
>> I I think it will be absolutely central. I our view is uh well it's probably quite controversial a few years ago less so today but and we have a a an underlying view which is that eventually all things will settle on blockchains and all things certainly means securities uh but also means money so payments and uh and then eventually will mean real world assets like property and art and wine or whatever else people might want to invest in. And you know why do I why do we think that? Because blockchain based settlement is cheaper. It's easier. It's more transparent. It's more traceable and it's real time. So when you've got all those advantages, it's hard to see why that wouldn't ultimately prevail. Now the the obstacle the obstacles have been technical. There's the there are no longer technical obstacles. We've piloted everything.
>> The real obstacles are regulation. Regulators are understandably quite nervous about a whole new financial infrastructure. And why are they particularly nervous about this?
>> So I think they're nervous for different reasons. Uh number one, the blockchain technology, the only place it's been deployed at scale is cryptocurrencies and cryptocurrencies which have nothing to do with with with real money other than the fact that you can convert them from one to the other. Uh but cryptocurrencies became a domain for the criminal and and it was wonderful for moneyaundering or for disposal of of illicit gains or whatever. And uh so that already makes I think law enforcement and and regulators nervous. But second is as you think about moving that that blockchain technology moving into payments. So using things that aren't cryptocurrencies but are digital assets as for your question as a medium of exchange for payments. And it's quite a natural medium of exchange for payments. It means that that the deposits are no longer sitting in banks. the deposits are sitting in in stable coins which today the big stable coins are invested in government bonds and uh as a bank regulator and Andrew Bailey head of the bank of England and but also chairman of the FSB has been very clear and not him not just him many of the bank regulators have been very clear that a system that that drains deposits out of the banking system basically to fund government deficits is an unstable system. Uh now it doesn't mean it won't happen. Uh and or it doesn't mean that that bad things can happen anyway, but I think the the benefits of a payment system that's based on stable coins, which would include also tokenized bank deposits, i.e. you keep the money in the banking system or central bank digital currencies, which the central bank gets the money, but they've always said we'll keep it we'll keep it quite small so as not to drain too much by way of deposits from the banking system. uh but the benefits of a stable coinbased payment platform are inexurable in in our opinion and therefore we've been investing in in that area for seven years and have the leading institutional grade platforms for those mechanisms.
>> Talking about changes, AI, how will that change your bank?
>> It's a I think AI is going to be a huge game changer. Uh yeah, we I think we've all been using large >> is it already or is it just it is in some areas. So in in areas like you know fraud detection, anti-moneyaundering, compliance. So so where where we've always been trolling big data >> for for patterns or or incidents. Um, it has already you know dra drastically improved our ability to fight financial crime. You know PS we still only capture 3% of the financial crime that we think is committed in the world. So it's like we've hardly broken the back of the criminal, but but it's but it's a huge improvement. U I think uh I think pretty much anybody that builds large scale systems is using AI for code generation. So programming uh that's already that's but that's productivity. I think the productivity investments will be meaningful and will allow companies to grow with improved profitability. the uh the big changes will come with uh with product development uh with customer service when when we were deploying agents in scale to improve the the customer outcomes and advice.
>> and that I think we're very early stage in those applications.
>> Uh, let's move on to corporate culture. Um, you talked about a bit about your your leadership style but how do you how would you describe the corporate culture in the bank?
>> I think our culture is highly collaborative and uh I say that would be the big positive and based on on diverse inputs. So we're structurally diverse as as a company and by that I mean you operate in in 55 markets physically another 120 via via uh you know fly in fly out and contact and we have people from all those countries.
>> What what are the what are the parts of the culture which you are trying to change?
>> So the negatives of the collaborative culture are the slowness of decision-m and getting things done. So some of that will come from the risk aversion that I that I mentioned earlier and you there's some legacy hangovers from that. But I think the the bigger issue is in a very diverse organization where people don't always connect. You can't you don't have the eye contact that means that I know exactly what you're saying and what you're saying that you're not saying uh or something like that. Uh we have it's a little bit too hard to get things done in our bank. So some of that is simplifying process, but a lot of that is culture.
>> And how do you go about changing that?
>> We uh so so we're we're tackling the the relative complexity of our bank by streamlining our processes mechanically. And then that's that's that's the hardware. The software is better feedback systems so that that we can the people who are who go beyond collaboration into actual execution and getting things done and and helping their partners are recognized as such. And that flows through to prospects for promotion or pay or or whatever else is is good in one's life. But we've got to have an equal focus on hardware and software to to really shift the culture of the place.
>> How do you benchmark speed?
>> It's a really good question. How do we benchmark speed? Uh >> because we also work on getting speed up. Speed is a an obsession of mine. You know, I I think organizations which make fast investment fast decisions generally make better decisions.
>> Yep. So we uh one of the measures that we look at carefully is what our colleagues tell us about their sense of speed. We measure in in terms of processes, we measure turnaround times. Just how many minutes or hours or days does it take to get from from where we start to to point B.
>> Uh so when it comes to onboarding a new asset manager, we want to know that we can get that time down from 60 days to six and then down to to six hours and eventually to six minutes. probably never happened but given the the screening that needs to be done.
>> but but benchmarking speed generally in in one sort of universal metric uh you've given me a good challenge.
>> You mentioned the the risk aversion just how do you handle mistakes in that environment.
>> I think I'm quite tolerant of errors of judgment and I'm completely intolerant of errors of principle. So when we find an error or principle, it's an instant out. And when there's an error of judgment, there's there's a unless it's material or very frequently repeated, uh it's it's indulged. I I insist on understanding what the root cause of the of the problem was.
>> and understanding how what wherever the mistake came from, how you're going to deal with it to make sure it doesn't come again or to take best steps for it not to come again.
>> Uh but yeah, that's I wouldn't say we embrace failure. That's that's a that's a that's cliche. Uh but we have plenty of it. So for example, we have a we set up a venture lab. Uh the venture lab has been extremely successful. We've created, you know, the the best digital banks in Hong Kong and Singapore. We've, you know, monetized ventures in in India and and in the UK. Uh we've got a good return on invested capital in our venture lab. Now, at the top of the funnel is 2,000 investments or 2,300 investments that we've looked at. At the bottom end of the funnel, we've got 40 that we've materially commercialized.
>> and uh we've got five that we've completely commercialized. So that's there's a lot of failure in that 1,960 um not all failures. Some of them we just decided to discontinue.
>> but the uh so perfectly happy to to try and and then not succeed.
>> sometimes is failure.
>> Uh and that actually has helped to change the I think the tone within the company that that you know better to try uh and fail than to not have tried at all.
>> Yeah. So Bill you are everybody in the bank would look at you right you are the role model. How do you how do you use that role model to uh breathe and live the corporate.
Culture that you want other people to replicate?
You know, this role model question is interesting because I I one I'm not keen to be a role model. A the role, I'm not keen to be the role model, especially in a bank that's as diverse as ours because like, what am I? I'm I'm an American guy who's lived in the UK for 32 years and and spent a lot of time around the world. Uh, but when I, what I would like the role model to be is the aggregation of the senior managers, who's the the person from Hong Kong who's been in the bank for 25 years, the person from Europe who's been in the bank for two years, uh, the person from India, the person from Africa, etc. And collectively, we're a role model. And and and we're really collectively a role model if we work together as a seamless team despite the fact that we come from very different backgrounds, both culturally, linguistically, uh, and uh, and and organizationally.
So, but yeah, but what what I would like people to see for me is that it's okay to take risk. Uh, it's okay to to, I mean, you've got to be curious. I'm I'm super curious and I want the people that work with me to be extremely curious themselves and I want them to be extremely empathetic. Those to me are the two defining terms, uh, for leadership are are curiosity and empathy.
>> What do you say that drives you now?
Curiosity and empathy. I I'm I'm extremely curious. I I love learning. I I mean, and that's also very cliche, but it just happens to be true.
>> And what are the kind of things you try to learn now?
Uh, so I learn in lots of different realms. Uh, I, of course, the environment that we're operating in is changing every day and I'm learning a lot about geopolitics at the moment. I'm learning a lot about innovation and I've always been curious whether innovation can be taught or it's a character trait.
>> What do you think?
I don't know. Uh, I think some people are innately curious and I think other people can adopt, uh, sorry, innately innovative and I think other people, uh, can adopt innovative characteristics through training.
>> Why are some people more curious than others?
Uh, more curious. Uh, I probably starts in the womb, more or less. But I, I know I I grew up in an extremely curious household and, uh, we didn't have a lot of money to travel around, but we, but when we scraped a little bit together, we tried to see the world because it was something new and something different. And now I'm getting paid to do the same thing. It's fantastic.
>> Do you think ambition and curiosity go together?
I do. I do. Ambition is a bit of a curse.
>> Tell me.
Well, I think ambition, uh, lead leads to perpetual dissatisfaction unless you're unless you lose the ambition at some point. And so I think it's a bit of a curse. So sometimes I wish I wasn't ambitious. Sometimes I wish.
>> Are you like perpetually dissatisfied?
Well, I always I want always want to keep on going. Yeah.
>> How long do you think you you would keep going for?
As long as you let me.
>> Uh, when do you wake up in the morning?
I usually wake up about 5:30. Um.
>> And what do you do then?
I I read. I read in bed for a bit and, uh, so I so I kind of clear all my emails and the research and and news that comes in overnight.
>> Still in bed.
Still in bed. Yeah. And, uh, maybe.
>> You got one of these kind of tables that sits over your bed. So you.
I I have this this iPhone thing that that's pretty good for for that. Uh, my wife also gets up about the same time. If I'm lucky, we get up together, have a cup of coffee before I head off to work. And, uh, and then, uh, of course, I travel a lot. So a lot of times I'm alone in that bed in which case I can I can hang out a little bit longer.
>> What do you read?
Uh, so well, for for for work, it's whatever comes in overnight, which is a lot of research and and news and and emails. In my free time, and I do try to get a little bit of free time every day, I typically read fiction and, uh, I, uh, typically fiction that's that's kind of hard to get through. I want to be challenged. I don't know why, but I do.
>> Give me an example of a hard fiction book.
All right. So, uh, what am I? So, I mean, right now it's actually not fiction. Well, it's So, I'm reading George Saunders. He's a fabulous, uh, American short story author, but he's also written some novels, is one pullet surprises, things like that. And I actually, uh, attended a lecture of his in upstate New York about 15 years ago. He's fabulous. So, he's he's written a a a book on the Russian short story, which he considers to be the perfect form. Uh, so it's six Russian short short stories, a Chekhov, Turgenev, and others. Uh, and then he analyzes them and it's actually a an it's a university lecture and analyzes it page by page. So it's kind of fiction because the story is fiction. U but the rest is a lecture. Why do I read that? Because it's just really interesting.
>> Now you and your wife are very into uh theater and your wife runs the Cornet Theater in Notting Hill where they, by the way, sometimes put on Norwegian plays in Norwegian. Can you imagine.
And they are sellouts?
They are. They are.
>> Why why is theater so important for you guys?
Well, this is my wife's theater. I'm moral support and and I, and but I love it because it's obviously it's it's an alternative, it's it's an alternative life for me actually. When I go into the Cornet Theater in Notting Hill in London, uh, I'm's husband and period, full stop. And if I'm wearing a business suit, they say like, why are you the only guy here in a in a gray suit? And so don't worry about that. There's my wife, uh, but, uh, no, it's, um, I think it's extremely important for all of us to to give back to our communities in our own ways and that can come in lots of different forms, forms. Uh, this is a theater that focuses on international work. It features prominently Norwegian work. Uh, I think we had, I think we were the first theater to put on Jan Fosse, the famous Norwegian playwright after he won the Nobel Prize. That's right. And, uh, which if I'm not mistaken, you may have helped with. And, uh, that's a, uh, it's very special, uh, to to have that kind of a position in, uh, in in a local community.
>> What's the play that everybody should see?
Oh, there's so many plays that everybody should see. The, um, well, everybody should see Hamlet, just I think most people have seen Hamlet, but if you haven't, it's because it's it is just the the classic story of the tragedy of life and death and power and and and empathy and curiosity and and insecurity, etc, etc. But, but, uh, but not very modern, uh, although, but maybe say timeless. Uh, maybe Ibsen is frequently referred to as the as the European Shakespeare or the.
>> Well, I think is the number who played, uh, playwright after after Shakespeare.
Yep. And for good reason. And and whether it's the, you know, Doll's House would be would be a pretty good one or, uh, probably probably I'd probably stop there.
>> Yeah. So, Bill, in in addition to seeing this, uh, plays, what is your advice to young people?
My advice to young young people is, uh, stay on the path, but not for very long and find a way. There was a famous American called Yogi Berra who said, "When you get to a fork in the road, take it." Which you have to think about a little bit to realize how ridiculous that is. But, but, but the gist of it is, you know, when you when you do come to a a turning point from time to time, go the reckless route. And if you go the reckless route early, uh, you can recover very easily.
Don't go the reckless route right at the end of your working life. But in the beginning, and then you ask about young people, take a risk. And I can I can say I only made two or three decisions my whole working life. You know, one of them was to come to Standard Chartered. Uh, one of them was to go into that derivative business that I talked about earlier, which was 40 years earlier, 30 years earlier. And those are two of the best decisions I took because they were very, they were reckless, actually. It was reckless for me to give up my cozy life and asset management and and go work for this struggling emerging markets trade bank. But it's worked out really well for me. Uh, and I did it because I thought it would be a great challenge and I quite enjoy risk. And the same thing back in my earlier days.
>> Yeah. Well, I would say they have worked out very well indeed. Uh, and it's been really really great talking to you. Big thanks. All the best.
Thank you.