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How will StanChart sink its roots deeper in Singapore?

The bank has kept the market guessing as to whether it will set up a digital-only bank in the city-state

What does it mean to be "significantly rooted" in Singapore's financial sector?

WHAT does it mean to be "significantly rooted" in Singapore's financial sector?

The steps that Standard Chartered has taken in participating in Singapore's financial sector shape this label, with the UK-headquartered lender just named Singapore's first "Significantly Rooted Foreign Bank" (SRFB).

StanChart Singapore has for now kept the market guessing on whether it intends to push more aggressively on the digital banking front. This is a clear option for it if it successfully applies for an additional full bank licence that the Monetary Authority of Singapore (MAS) can soon grant to an SRFB that substantially exceeds its criteria for "rootedness".

For context, it was the recent free trade agreement between the European Union and Singapore that paved the way for StanChart's new status as an SRFB.

Once MAS readies its enhanced SRFB framework, StanChart Singapore - if successful in its application - will be able to set up subsidiaries to operate new business models such as a digital-only bank.

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One tangible benefit under an additional full bank licence is a lower minimum paid-up capital requirement of S$100 million for the unit that operates a digital-only bank, as parent banks would have already met the S$1.5 billion capital requirement.

StanChart is the only international bank to incorporate all its businesses in Singapore, and the largest foreign banking subsidiary here with a US$80 billion balance sheet backed by US$6 billion of capital.

It can also retain its existing physical branches as an SRFB, and have up to 50 places of business.

By contrast, the eventual minimum paid-up capital requirement is S$1.5 billion for a digital full bank under the latest Digital Bank requirements, and these new digital banks can only have one place of business.

How StanChart Singapore shifts on this front can change the competitive landscape. Because this is a separate framework through which up to two digital full bank licences will be awarded by MAS, assuming StanChart takes up an additional full bank licence and sets up a digital-only bank as it did in Hong Kong, then potentially three new digital-only retail banks will start out in Singapore at roughly the same time.

StanChart is a well-established brand in Singapore - its "significantly rooted" label speaks precisely to that - so going full speed on digital banking may give them an advantage in scooping up further market share.

Even with market talk floating for nearly a year now on whether the newly named SRFB has tied up with NTUC Enterprise to gun for a digital bank here, StanChart Singapore has stayed silent. When asked by The Business Times, it declined to confirm it would set up a digital-only bank, if it secures an additional full-bank licence as an SRFB.

In its evaluation on whether banks have sunk deep roots here, MAS looks at the bank's alignment of economic interests with Singapore, local business presence, and commitment to the Republic's financial stability and development in the long term.

The bank itself has said it is fully committed to future investments, and is "aligned" with strategies to grow Singapore's stature as a global financial services hub.

It is also a significant employer here. Since 2018, it has upped its headcount from 8,000 to 10,000 to bolster the bank's digital capabilities. More than 1,200 roles are in future growth areas such as digital banking, international banking, cloud technology, artificial intelligence and application programming interfaces.

What will be watched is how it has said it is committed to develop and grow "future-ready talent" in Singapore. StanChart Singapore would have to show commitment in areas such as developing and growing a talent pipeline that create jobs for Singaporeans without eroding talent diversity - as is the stance taken by the government here.

In announcing its freshly-minted status as an SRFB, the bank said it would invest another S$5 million to boost talent development and reskilling to support employment and skills across all stages of its employees' career cycle.

Today, seven in 10 of its workforce are Singapore citizens, and reflects StanChart's unique position of housing global business and technology functions here.

Based on checks by BT last month, StanChart Singapore's proportion of employees who are Singapore citizens and permanent residents is in line with its larger international peers in the retail banking space (80-85 per cent), though it is naturally lower than that of the Big Three banks (90-95 per cent).

The reality is that a "significantly rooted" label carries broader responsibilities that the bank will shoulder.

Lawrence Loh, director of the Centre for Governance, Institutions & Organisations at the NUS Business School said: "With additional privileges, StanChart definitely carries greater responsibility; beyond the regulatory aspects, the bank will be expected to be even socially attuned to the broader business and policy landscapes of Singapore, including taking a more substantive role in community development."

This extends even into a "naturally higher" bar on disclosure - including on its plans to go into digital banking, Mr Loh said, speaking to its "contributing to its profile and standing, especially as a SRFB".

As it moves to play a discernible role in Singapore's financial system, how StanChart decides to sink its roots deeper here - and carry out its plans - will be something to watch.

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