Editor's letter, Risk Management

Editor's letter: China blocks bankers from leaving

By Farah Khalique
Image: Getty Images

International banks operating in China face a new type of jeopardy: human capital risk.

Two senior finance executives have been banned from leaving the country: Charles Wang Zhonghe, chair of the China investment arm of Nomura International, and Michael Chan, a Hong Kong-based executive of US risk management firm Kroll.

Gone are the days when international banking executives could feel insulated from China’s arbitrary enforcement of local laws and wrongful detentions. 

Attorney Shannon Brandao tells Banking Risk & Regulation: “In my 30-plus years of China-watching as an assistant at a Chinese human rights organisation and latterly as an attorney specialising in China I have never seen an international banking executive of Wang’s stature placed under an exit ban.”

Shannon, who publishes the highly regarded China Boss newsletter on Substack, explains how Chinese authorities now target foreign investment analysts like Chan over so-called “sensitive market and economic research”. This can be almost anything related to China’s debt-ridden economy.

Human capital risk aside, a bank’s trade secrets and customer lists, gleaned from smartphones and laptops while an individual is under travel restrictions, can be leaked to competitors, Brandao points out.

Read her tips for banks to avoid falling foul of China’s new anti-espionage and data protection laws; even carrying out enhanced background checks and conflict of interest reviews can cause problems with the authorities.

From human capital risk to robots, banks’ compliance units have their hands full. Leading executives have called on banks to radically upskill compliance teams to deal with the “existential question” of artificial intelligence, reports Ellesheva Kissin.

Senior chiefs from HSBC, BNY Mellon, JPMorgan and Standard Chartered have demanded industry-wide action around AI and new technologies at the Association for Financial Markets in Europe’s compliance conference.

Compliance teams need specialists who “really understand and are able to identify and think through the risks” in new AI and data fields, as well as in fast-evolving areas like the changing payments sector, said Petra Bukhalenkova, JPMorgan’s head of regulatory strategy for EMEA.

But with compliance departments getting bulkier and costlier, the challenge is on for banks to show the board and shareholders a return on that investment. Read Ellesheva’s piece to see how BNY Mellon is experimenting with “compliance pods” within its tech hubs.

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Stay tuned for Friday’s newsletter round-up.






Farah Khalique

Editor, Banking Risk & Regulation

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