Speaker 1: Hello, this is COI Time podcast series on markets and
Speaker 1: economies from DBS Group Research. I'm Tambek, chief economist, welcoming
Speaker 1: you to our 150th episode. Today we're excited to have
Speaker 1: with us Pirush Gupta. He was with us 100 episodes ago,
Speaker 1: and now he is with us again during his last
Speaker 1: week as CEO of DBS and what a 15 year
Speaker 1: run it has been. Push Gupta, welcome back to Cui Time.
Speaker 1: We're
Speaker 2: happy to join you again, as you can see.
Speaker 2: Uh, I'm a little differently dressed this time. time more
Speaker 2: because I have 5 more days of devious life left.
Speaker 1: Like I said, what a run it has been. Great
Speaker 1: to have you and I look forward to having you
Speaker 1: in the future as well, which will be my parting
Speaker 1: word to you later on as well. Uh, I'd like
Speaker 1: to break our conversation into two parts. First, to take
Speaker 1: stock of how banks have done since the GFC 0809
Speaker 1: financial crisis and the aftermath of that, and then to
Speaker 1: get a sense of your thinking about where banks are going.
Speaker 1: So let's start by looking back. Uh, major global banks
Speaker 1: today are definitely more capitalized than they were 15 years ago,
Speaker 1: and they're definitely much more digital. How else are they different?
Speaker 2: Well, I think the consequence of the GFC, the most
Speaker 2: profound impact was the huge increase in capital, uh, across
Speaker 2: the system. I think there was a change in the
Speaker 2: liquidity rules, so I think it's safe to say the
Speaker 2: banking system, uh, specifically is a little bit more safe
Speaker 2: than it used to be 15 years ago, uh, but
Speaker 2: I think part, um.
Speaker 2: Uh
Speaker 2: So I want to say that weather's good. I think
Speaker 2: there were a lot of attendant challenges that came along
Speaker 2: with the transition to safety.
Speaker 2: The first, I think we took enormously long to build
Speaker 2: these safety pillars, and frankly, even today, 15 years later,
Speaker 2: the work is not done because the regulators keep tweaking.
Speaker 2: Um, they call it different names. Some people call it
Speaker 2: Basel 3.5, some call it Basel 4, some call it
Speaker 2: the Basel Endgame, some call it the Swiss Finish, but
Speaker 2: in every jurisdiction, regulators are still going back and revisiting
Speaker 2: what they did. In some cases trying to lighten the rules,
Speaker 2: some cases trying to, uh, add to the rules, and
Speaker 2: it just seems to me that 15 years is a
Speaker 2: long time to try and get to where you need to, um,
Speaker 2: so I think we took too long and that um.
Speaker 2: Passage of time created a degree of uncertainty in the system.
Speaker 2: The second thing is we didn't solve everything. Liquidity in
Speaker 2: particular created some consequential challenges as well. Um, holdings of treasuries,
Speaker 2: for example, you know, the banks started running shy of
Speaker 2: doing some of that, so they started creating these saw
Speaker 2: effects in the treasury markets. We saw through the US
Speaker 2: regional bank crisis that many of the smaller banks did
Speaker 2: not actually embrace some of the liquidity rules completely.
Speaker 2: So not only did we take a long time getting
Speaker 2: to where we are, it wasn't completely consummate as well,
Speaker 2: and we left some gaps in the process.
Speaker 2: I think we could have done better as an industry. I'm.
Speaker 2: Reminded of the Asian financial crisis, so post '98, the
Speaker 2: Asian regulators and the Asian system also responded to the
Speaker 2: crisis in pretty much the same way. They added up
Speaker 2: capital requirements, they rethought some of the liquidity requirements. They
Speaker 2: became a lot more intrusive in their supervision, but they
Speaker 2: did it in a few years. They did it with
Speaker 2: a lot less song, dance and drama.
Speaker 2: And by now the Asian banks have proven over the
Speaker 2: subsequent 20 years that they became relatively strong uh uh
Speaker 2: in that period of time. So now when I say
Speaker 2: that this is a challenge, what is the implication of
Speaker 2: that been and that is bearing on how our banks different.
Speaker 2: The implication of that has been that the banks in
Speaker 2: general have won a battle which is around capital liquidity
Speaker 2: and solving for the old crisis.
Speaker 2: But I do think the banking system has not done
Speaker 2: as well as it could have in terms of the war,
Speaker 2: which is thinking about the shape and nature of banking
Speaker 2: in the future.
Speaker 2: Um, today, most banks have embraced digital, but the reality
Speaker 2: is that as late as 2016, 2017, I used to
Speaker 2: reflect on the fact that there are only a couple
Speaker 2: of banks in the world who are as focused as
Speaker 2: DBS was on the digitization agenda. Uh, in fact, when
Speaker 2: I talked about it at many global forums, it was
Speaker 2: so interesting that banks were still bothered about Basel. Nobody
Speaker 2: was talking technology or digital.
Speaker 2: So banks are not as advanced in the digital agenda
Speaker 2: as they should have been.
Speaker 2: Um, a lot of banks have great apps, but if
Speaker 2: you look at the underlying architecture of technology, uh, have
Speaker 2: banks shifted to, um, microservices, API based, cloud native technology?
Speaker 2: Very few have even now, and that says something that
Speaker 2: banks are still not as far advanced as they should be.
Speaker 2: Um, in some ways I was actually quite surprised in
Speaker 2: the last few months. The one country which has really
Speaker 2: made huge, uh, leaps in that regard is China, right? Uh,
Speaker 2: we realized that through the COVID period when, you know,
Speaker 2: nobody is watching, the Chinese leapfrogged in terms of their
Speaker 2: transition to the new technology architecture, and I find today
Speaker 2: that some of them have made even more progress than
Speaker 2: DBS has. But when we compare ourselves with many of
Speaker 2: the Western banks, I think we're still 57 years ahead.
Speaker 2: So long way to say safer banks, but might not
Speaker 2: have made as much progress on technology and digitization as
Speaker 2: you would have expected them to or would have liked
Speaker 2: them to.
Speaker 1: Right on that point that you referenced the '97, 98 crisis,
Speaker 1: it was a cataclysmic crisis. There was a lot of
Speaker 1: political dislocation and there was a lot of scarring. It
Speaker 1: took many countries years to come out of the crisis,
Speaker 1: but the banks were not considered villains in that crisis.
Speaker 1: In the 809 crisis.
Speaker 1: The banks were considered villains. I, I recall reading articles
Speaker 1: about that, you know, that there should be so much
Speaker 1: regulatory oversight on banks that their profitability should be minimal.
Speaker 1: They should be turned into utilities. But looking at the
Speaker 1: bank's performance, say the last half a decade, they've done
Speaker 1: very well with the interest rate cycle and so on.
Speaker 1: So that, that portrayal of banks being the villain, being
Speaker 1: the problem, not the solution around 809, was that overstated?
Speaker 2: I think it was. So I think partly, well, it
Speaker 2: was self-inflicted damage.
Speaker 2: So you've got to figure forget two things that I
Speaker 2: think the industry did wrong in particularly the 80s and 90s,
Speaker 2: the build up to 2000. 1 was compensation became egregious
Speaker 2: and it started attracting a lot of attention when traders,
Speaker 2: investment bankers, individuals were getting paid $10.20 dollars, $30.40 million dollars.
Speaker 2: That attracts a lot of attention and calls the basic
Speaker 2: question to account. I mean, are you really worth it?
Speaker 2: So that is one thing of our own making.
Speaker 2: And if you look at the industry, this big step
Speaker 2: up in competition only happened in the 90s and 2000s,
Speaker 2: so it was a focused period of time.
Speaker 2: The second thing we did wrong is we lost sight
Speaker 2: of the purpose of a bank, which is the fundamental
Speaker 2: of doing real things for real people. So to an extent,
Speaker 2: some of our product selection and some of the things
Speaker 2: that the industry was doing uh started looking like it
Speaker 2: was self-serving as opposed to actually having a hand in
Speaker 2: furthering the interests of the real economy or individual citizens.
Speaker 2: So I think some of it was, um, you know, um,
Speaker 2: coming as a consequence.
Speaker 2: You contrast with Asia and even though the Asian banks
Speaker 2: got hammered in '98, by that Asia has worked as
Speaker 2: Asia Inc. The banks play a more constructive role along
Speaker 2: with the rest of society and therefore you never saw
Speaker 2: the same degree of angst about banks and banking.
Speaker 2: So I mean, the point is too, the reason why
Speaker 2: there was so much political outrage and therefore so much
Speaker 2: regulatory overhead was because of that. People thought that the
Speaker 2: banks and bankers were the villains of the piece.
Speaker 2: Uh, in some ways, even now, 15 years on, there
Speaker 2: pockets of the universe where this has not disappeared. There's
Speaker 2: some places where it has, but in some places you
Speaker 2: can still see this and the underlying nature of the
Speaker 2: dialogue and the nature of regulation, so it hasn't entirely gone.
Speaker 1: The other thing that I would have expected over the
Speaker 1: last 15 years with better analytics and better credit research
Speaker 1: that banks would be expanding their sort of volume of
Speaker 1: creditors or borrowers and that we will see the unbanked,
Speaker 1: whether it is in the corporate space, the space, or
Speaker 1: the retail space.
Speaker 1: Would be, you know, captured by banks because they have
Speaker 1: better data and better knowledge, but it seems like that
Speaker 1: space has been ceded to non-bank finance companies. So what's
Speaker 1: your sense of the banking, the unbanked dynamic over the
Speaker 1: last 15
Speaker 1: years?
Speaker 2: Well, first of all, when I said the banks have
Speaker 2: not done as much on technology and digital, uh, I
Speaker 2: have to add they have not done as much on
Speaker 2: data and um AI either.
Speaker 2: I mean they have, don't get me wrong, banks are
Speaker 2: fundamentally different, but they've not done as much as they
Speaker 2: could and should have. I remember banks had a head
Speaker 2: start in the 80s and 90s, the biggest users of
Speaker 2: data were the banks in the credit card systems. And
Speaker 2: so by, you know, 2010, 2020 to figure that banks
Speaker 2: don't have the right data, don't have the right data lakes,
Speaker 2: don't have the right data protocols, uh that's telling. But
Speaker 2: so part of the answer isn't that the banks just
Speaker 2: did not do as much as they could have.
Speaker 2: But the second part of the answer is I don't
Speaker 2: think it's across the board. It depends on the region
Speaker 2: of the world. I will tell you that in India,
Speaker 2: the largest outreach to the unbank has been the State
Speaker 2: Bank of India. The Prime Minister Jandar Najar now with
Speaker 2: 300 million new accounts is all State Bank of India,
Speaker 2: and they do it all digitally on a mobile phone,
Speaker 2: and the unsecured lending on Euro is all on a
Speaker 2: mobile phone. Uh, in Indonesia, the largest amount of unbanked
Speaker 2: outreach growth is BRI.
Speaker 2: And they still continue to be the largest footfall and
Speaker 2: footprint and they're adding customers at scale in China. The
Speaker 2: policy banks, including Agature Bank of China, etc. are still
Speaker 2: doing a lot of this. So in many countries, the state, the, the,
Speaker 2: the banking, the the treasure banking sector is indeed leaning in. Now,
Speaker 2: to the extent that, you know, they're not doing as
Speaker 2: much and they haven't done, uh, new stuff like in
Speaker 2: Alibaba did or some of the new Fintechs did.
Speaker 2: Uh, that links back to my first comment. Some of
Speaker 2: the fintechs were more advanced about use of data and
Speaker 2: about use of ecosystems where they were able to garner
Speaker 2: some of that data. My views in the future, it
Speaker 2: doesn't matter whether you're a traditional bank or you're a FinTech.
Speaker 2: It really matters how much progress you've made in terms
Speaker 2: of thinking about data and analytics, how you rethought your
Speaker 2: credit underwriting process, how you rethought your portfolio management process,
Speaker 2: and then you could be an e-commerce company, a telco
Speaker 2: or Fintech or a bank. If you cracked that puzzle
Speaker 2: and you know how to be where the customers are,
Speaker 2: you will win many of these games.
Speaker 1: Uh, putting aside the data issue, um, just from a
Speaker 1: risk management perspective, despite all these buzzles, various iterations, and
Speaker 1: so on, we still have a regional banking crisis which
Speaker 1: seems like a very one on one type crisis, you know,
Speaker 1: duration risk and this bank get caught. Um, does that
Speaker 1: mean that we haven't really made that much progress on
Speaker 1: risk
Speaker 1: management?
Speaker 2: Well, first of all, the banks which went through the
Speaker 2: regional crisis were not subject to the Basel rules, so
Speaker 2: you've got to understand that.
Speaker 2: Uh, because the Fed gave them a pass, they weren't
Speaker 2: doing all the things the big banks were. So I
Speaker 2: do believe that all the banks that have gone through
Speaker 2: the Basel regime are fundamentally safer and better managed than
Speaker 2: in the past, and you see less of that, uh,
Speaker 2: but the question, will there still be risk in banks?
Speaker 2: Of course they will. The nature of banking is that
Speaker 2: you intermediate time and you intermediate risk, and I don't
Speaker 2: think that's going to change, uh.
Speaker 2: Would you believe that only banks have the risk, the
Speaker 2: other fintechs and other people who are intermediating finance will
Speaker 2: never have risk. I refuse to believe that either. So
Speaker 2: if you look at the history of the last 5 years,
Speaker 2: you could argue that the regional banks or Credit Suisse
Speaker 2: was one set of problems, but I could equally name
Speaker 2: to you half a dozen new fintech companies, token companies,
Speaker 2: tech companies, you know, etc. etc. who also had different
Speaker 2: kinds of problems.
Speaker 2: Uh, so the challenge is quite fundamentally this that when
Speaker 2: you have provided the capital use the capital, somebody sitting
Speaker 2: in the middle, intermediating intermediating risk and time, no matter
Speaker 2: how smart you are and no matter how forward looking
Speaker 2: you are, you will wind up from time to time
Speaker 2: stubbing your toes. To me, the analogy is, you know,
Speaker 2: any country, even though you say you have a great
Speaker 2: police force and you have a great legal system and judiciary,
Speaker 2: you name me one country that doesn't have crime.
Speaker 2: This is like trying to argue that if you do
Speaker 2: your job really well, there should be no crime in
Speaker 2: the country, and that can never be.
Speaker 1: Sure, um, I'm sort of conscious of, you know, the
Speaker 1: whole duration risk question even in 2025, 2026 with all
Speaker 1: the noise around the US, but we'll, we'll keep it
Speaker 1: to the past and the future as opposed to the
Speaker 1: conjuncture because I want good shelf life out of this podcast.
Speaker 1: But one question on the dialogue between regulators and banks.
Speaker 1: Do they listen? And is it a two-way communication?
Speaker 2: Again, you know, there's no one size fits all answer,
Speaker 2: it's a function of where you are.
Speaker 2: Um, um, taking a third step at the same thing,
Speaker 2: I think in the West, um, the US as well,
Speaker 2: but certainly all over Europe, UK, etc. the dialogue between
Speaker 2: the banking system and the regulators was more broken for
Speaker 2: an extended period of time. There was a going in
Speaker 2: belief that banks needed to be uh carefully and closely managed,
Speaker 2: and a high degree of suspicion about banks' motivations and capabilities, both.
Speaker 2: I never saw that in Asia.
Speaker 2: Um, right from, you know, the 9 when I first
Speaker 2: took on my job, by and large Asian regulators have
Speaker 2: been constructive in dialogue. They've been forward looking. They've tried
Speaker 2: to keep a developmental hat along with their regulatory hat,
Speaker 2: and even in Asia, obviously, you know, it changes a
Speaker 2: little bit in degree depending on which country you're in.
Speaker 2: But broadly speaking, you've not had the same degree of
Speaker 2: antagonistic engagement as you've had in several countries in the West.
Speaker 2: Now even in the West I think the dialogue is
Speaker 2: beginning to change a little bit in the last few
Speaker 2: years um as uh more and more regulators are beginning
Speaker 2: to see the world is progressing in a direction of
Speaker 2: a tokenized economy, new ways of making payments, etc. and
Speaker 2: they realize they have to engage the private sector more
Speaker 2: constructively and so it's beginning to happen, uh, but again
Speaker 2: I said that it's not entirely changed yet.
Speaker 1: Are you surprised or you think it's par for the course,
Speaker 1: the kind of credit losses we have seen on the
Speaker 1: portfolio banks from exposure to China? I mean, China has
Speaker 1: slowed quite dramatically in the past half a decade. Would
Speaker 1: you have expected even bigger repercussion, or do you think
Speaker 1: what has happened is pretty par for the course?
Speaker 2: Well, given the, my first I got to figure out
Speaker 2: two things about China. One is China slowed, but it's
Speaker 2: still growing at 45%. I do not see a steep recession.
Speaker 2: You're not seeing a complete falling off the cliff. So
Speaker 2: most countries in the world at 4 5% growth rates,
Speaker 2: you see some pain, but you know it's not a
Speaker 2: huge amount of pain. So you've got to start with that.
Speaker 2: China is in a relative sense slower, but in an
Speaker 2: absolute sense it's still growing, um, decently.
Speaker 2: Uh, the second thing about um the China situation is that, um,
Speaker 2: a large part of the credit in the system, um,
Speaker 2: is still benefited by some form of state support and therefore,
Speaker 2: whereas in the US system, by and large, you know,
Speaker 2: all the rocks show up as soon as the tide
Speaker 2: starts receding in the China system all the rocks don't
Speaker 2: show up immediately.
Speaker 2: So it could well be that you know some things
Speaker 2: are turned out 1015, 20 years in any other environment
Speaker 2: you would, you know, call them credit losses but uh in,
Speaker 2: in more supportive environments you can just term out of
Speaker 2: credit so maybe there's some of that um going on
Speaker 2: as well. um, however, even if you account for all that, um,
Speaker 2: the fact is that the total credit losses in China
Speaker 2: have been lower than one would expect.
Speaker 2: Even if you take the real estate sector, where you
Speaker 2: should expect to see the biggest damage, there has been some.
Speaker 2: Um, but not so much in the bank books. There's
Speaker 2: been some in the bank books. A lot of it
Speaker 2: is in the financial markets, the bond space, bondholders, etc.
Speaker 2: So one, this speaks to the fact that the banking
Speaker 2: system has changed a bit. So banks are holding less
Speaker 2: of the risky assets. The financial markets are holding uh
Speaker 2: more of the risky assets, and so there's been a
Speaker 2: fundamental shift in the nature of the banking system, um,
Speaker 2: as well. I should have mentioned that when you asked
Speaker 2: about how the banks changed. See, in truth I sometimes
Speaker 2: reflect that.
Speaker 2: It's not that financial sector risk um has disappeared, uh
Speaker 2: but the risk in the formal regulated banking sector is
Speaker 2: lower because it's been squeezed out and so some of,
Speaker 2: some of the risk is just shifted out. uh, why
Speaker 2: is private credit such a big market today? right? It's
Speaker 2: a big market because banks are refusing to put on
Speaker 2: that kind of credit.30 years ago, banks would have been
Speaker 2: doing structuring and putting on the credit, the banks don't.
Speaker 2: Uh, project finance. So large nature of the financing has
Speaker 2: become prohibitive for banks to do and they get squeezed
Speaker 2: out to the non-bank world, right? And therefore, when the
Speaker 2: losses are, are seen also, it's also proportionate. You see
Speaker 2: less of it in the banking sector.
Speaker 2: And perhaps more of it in the nonbank world.
Speaker 1: Let me expand on that issue because I'm really curious
Speaker 1: about that. So what's your sense? Are we pushing risk
Speaker 1: to the private side, which is by definition a little
Speaker 1: more opaque than the banking system balance sheet, and is
Speaker 1: that something that you're uncomfortable with?
Speaker 2: Well, I do think there's no question, of course we
Speaker 2: push this out to the private side.
Speaker 2: You look at the relative size of the private pockets,
Speaker 2: both private equity and private debt today. It's extraordinary. So
Speaker 2: you look at the total intermediary capital and see how
Speaker 2: much they move from public markets and the former regulated
Speaker 2: banking sector to the other side. It's huge, and which
Speaker 2: can only mean that there's more activity, action, and nature
Speaker 2: of risk happening over there as well.
Speaker 2: Um,
Speaker 2: Am I uncomfortable with it? See, the argument that some
Speaker 2: would make, you know, Macro and a reporter makes it
Speaker 2: very compellingly that people who fund those private side sectors
Speaker 2: do it with their eyes open and therefore there's better
Speaker 2: duration match. People come in recognizing that they're going to
Speaker 2: be in there for 678 years. So when private credit,
Speaker 2: private equity puts money for 678 years, it is match funded, right.
Speaker 2: Whereas in the regulated sector, the household savers come in
Speaker 2: with short term expectations. They put money into savings accounts
Speaker 2: and therefore need to withdraw money in a in a hurry.
Speaker 2: And therefore, when the bank takes on the same nature
Speaker 2: of the 678 years, this is putting on duration gap.
Speaker 2: I think I have some sympathy for that argument that
Speaker 2: when people are going into a fund with their eyes
Speaker 2: open saying it's a 6 year fund or a 7
Speaker 2: year fund or a 7 + 1 + 1, by
Speaker 2: nature you've shifted the risk to the investor depositor.
Speaker 2: Now, having said that, I think that on paper the
Speaker 2: investors deemed to understand that risk. In reality, I found
Speaker 2: that most investors, when, um, you know, things get bad,
Speaker 2: turn around and say we don't know, and they wind
Speaker 2: up standing in front of the same doors whether there's
Speaker 2: the regulator or the politician or the bank saying hey
Speaker 2: we did not know we were misled and we need
Speaker 2: somebody to make us go right.
Speaker 2: So this happened with Lehman mini bonds in the '09 crisis.
Speaker 2: It happened to a large extent in China with the
Speaker 2: P2P lending crisis. So I've seen this repeatedly that people
Speaker 2: think that the risk is better understood, but actually it's
Speaker 2: never better understood. And therefore by squeezing the discount and
Speaker 2: leaving it there, I do think that the fair amount
Speaker 2: of residual risk, which is not adequately thought through or
Speaker 2: accounted for.
Speaker 1: So I find it interesting that we always worry about,
Speaker 1: you know, depositor funds and the need to insure depositors.
Speaker 1: That has systemic implications, but a large asset price decline
Speaker 1: also has systemic implications. But somehow we don't worry that
Speaker 1: much about, you know, controlling that risk, but we always
Speaker 1: worry about the deposit side of the business.
Speaker 2: That's my point. I mean the assumption is that the
Speaker 2: large asset pools are held by rich people who know
Speaker 2: what they're doing, so you know everywhere. In reality, it
Speaker 2: doesn't always work that way.
Speaker 1: Well, they're the ones with, I guess, bigger purse strings
Speaker 1: to actually lobby even more so than the average depositor. Um,
Speaker 1: let's look forward. Uh, already this has been at play
Speaker 1: for more than a decade, but it'll be a big
Speaker 1: issue going forward, traditional banks versus pure play digital banks.
Speaker 1: What are your thoughts?
Speaker 2: So I alluded to this just not time or I
Speaker 2: think that's um artificial bifurcation. I think the real bifurcation
Speaker 2: is that, you know, providers who get digital and get
Speaker 2: data and those who don't, and those could be anybody.
Speaker 2: It could be a traditional bank, it could be an
Speaker 2: e-commerce company, or it could be a pure play digital
Speaker 2: bank part of a system.
Speaker 2: Uh, I like to believe that DBS has done fairly well,
Speaker 2: you know, we've been able to digitize, we use data well, uh,
Speaker 2: you know, 18% ROE doesn't come from nowhere. So a
Speaker 2: lot of it comes, I think we hold our own
Speaker 2: against any pure play, uh, digital bank today, um, but
Speaker 2: you know, it's not across the board. So I think
Speaker 2: the thing to look for is those people who can
Speaker 2: embrace digital and those who can't.
Speaker 2: One of the advantages that traditional banks have is, um,
Speaker 2: obviously a lot an install customer base and a lot
Speaker 2: of inertia in our industry. Um, the switch away from
Speaker 2: our industry market share moves gly, and they take a long,
Speaker 2: long period of time, much longer than, uh, brick and
Speaker 2: mortar e-commerce versus e-commerce.
Speaker 2: And I think that's a lot to do with people's
Speaker 2: attitude to money and the sense of security that they need,
Speaker 2: which comes from a physical brick and mortar presence that
Speaker 2: they can see.
Speaker 2: So even though the banking sector started getting unbundled and
Speaker 2: digital started happening about 2010, so it's been 15 years,
Speaker 2: if you look at the market shares of any new
Speaker 2: banks anywhere in the world, they're less than 1%, 1, 2%, right?
Speaker 2: So after 15 years, you hardly see market share shifts,
Speaker 2: including in country where you say the traditional banks have
Speaker 2: lost it, they're not doing very much. You look at
Speaker 2: the UK with some of the first new banks were
Speaker 2: there like Starling, Monzo, A.
Speaker 2: And then you could argue that a lot of the
Speaker 2: high street banks were on the back foot, but you
Speaker 2: fast forward 1015 years, you know, the high street banks
Speaker 2: are still high street banks. So the, the old banks
Speaker 2: have benefited by an installed customer base and tremendous degree
Speaker 2: of inertia, uh, in the system.
Speaker 2: Uh, new banks, um, interestingly, the big advantage is obviously
Speaker 2: a low cost structure, right? They can focus on what
Speaker 2: you want to do, but by now the disadvantage because
Speaker 2: they tend to be relatively narrow in the product offering.
Speaker 2: The very few new banks which are full purpose, large
Speaker 2: scale full purpose, most tend to be either in the
Speaker 2: wealth space or in the lending space or in a
Speaker 2: microcosm of the system, and that's one of the reasons
Speaker 2: why they find it hard to get incremental share very quickly.
Speaker 2: People like to be able to go to a full
Speaker 2: service offering.
Speaker 2: Uh, the other thing I found that new banks, traditionally,
Speaker 2: my view was that the cost of customer acquisition would
Speaker 2: be much lower because they acquire customers digitally. Uh, in reality,
Speaker 2: I found that there's not that much difference between uh
Speaker 2: traditional acquisition model.
Speaker 2: Maybe a couple of percentage points, but after you wind
Speaker 2: up building your technology systems, your marketing, uh, systems, and
Speaker 2: start paying Facebook, Google or YouTube for the uh uh
Speaker 2: marketing dollar and then you multiply it by the click
Speaker 2: through rate, it's not that advantages. There is some but
Speaker 2: not huge.
Speaker 2: So, um, the best performing new banks to me are
Speaker 2: the ones who have the capacity to leverage some other
Speaker 2: ecosystem because if you already have hundreds of millions of
Speaker 2: customers coming to you through another ecosystem, then the marginal
Speaker 2: cost of converting the customer to a banking relationship is lower,
Speaker 2: that's for sure.
Speaker 2: But there are not that many companies which have a
Speaker 2: large and robust ecosystem which they can then market banking
Speaker 2: services on the back of.
Speaker 2: So long way to answer your question. I think new
Speaker 2: banks do have some advantages, but I think the advantages
Speaker 2: are often overstated, and um I think as long as
Speaker 2: the traditional banks are able to embrace both digital technology
Speaker 2: and data in a meaningful way, by and large I
Speaker 2: think they will hold their own.
Speaker 1: Let me
Speaker 1: hold on to a subset of that discussion which is
Speaker 1: the wealth angle. You just touched upon it briefly.
Speaker 1: Um, even in Singapore, we now have these, uh, startups
Speaker 1: which offer pretty impressive breadth of wealth offerings aimed at
Speaker 1: not necessarily the ultra high net worth individual, but definitely,
Speaker 1: you know, let's say less than $10 million wealth, uh,
Speaker 1: customers and so on. Is that a big threat to
Speaker 1: a bank like DBS,
Speaker 2: you know.
Speaker 2: See, look at all of the operators in Singapore. They
Speaker 2: all have 1 or $2 billion in AUM, right? DBS
Speaker 2: has $400 billion in AUM. Every year EUMs are increasing
Speaker 2: by $50 billion. The AUMs are increasing by a billion
Speaker 2: dollars if you're lucky, $50 billion. And so it speaks
Speaker 2: to the fact that if you have scale, if you
Speaker 2: have credible offerings, the trust element counts for a lot.
Speaker 2: The fact that you have presence counts for a lot.
Speaker 2: Um, if you look at the biggest growth in the
Speaker 2: wealth industry in the last 10 years across the board,
Speaker 2: not just the high rate, but into this thing, is
Speaker 2: the traditional banks which have mobbed up most of it.
Speaker 2: So yes, you know, the endaas and stash away, etc.
Speaker 2: they're credible, they're good offerings, but the ability to scale
Speaker 2: is still, um, um, limited.
Speaker 2: OK,
Speaker 1: I'll keep that in mind. I sometimes look at some
Speaker 1: of these shiny new apps that they offer. Pretty impressive.
Speaker 2: Don't get me wrong. I'm not saying they're bad. They're
Speaker 2: good apps. They're credible. All I'm saying is that, you know,
Speaker 2: if you had to bet to me 10 years from now,
Speaker 2: will one of them be bigger than DBS? I think
Speaker 2: that's a hard call because there's just too much inertia
Speaker 2: in our system. If the traditional banks do nothing at all, right,
Speaker 2: and so you're still in the 1980s banking world.
Speaker 2: Then yes, I think the market shifts will be faster,
Speaker 2: but most banks are doing enough, certainly in Singapore, most
Speaker 2: banks are doing enough to be able to hold their own.
Speaker 2: I
Speaker 1: guess
Speaker 1: that's the key. Um, to switch the topic to digital assets.
Speaker 1: There's a lot going on on the token side, the
Speaker 1: crypto asset side, and then all these CBDC as well. So,
Speaker 1: your thought on that, and one specific question in that
Speaker 1: regard is the future of stable coins and is that
Speaker 1: a threat to bank deposits? So both of those issues.
Speaker 2: So as a general rule, I think you will see
Speaker 2: more tokenization of assets.
Speaker 2: Um, it has always been that the value of money
Speaker 2: tends to follow technology, you know, we started off with
Speaker 2: cowry shells, then we moved to metal, gold and silver.
Speaker 2: Then after the printing press, we moved to bills and
Speaker 2: then currency notes. And then in the 20th century when
Speaker 2: plastic became good, we moved to credit cards and plastic.
Speaker 2: So it is logical to assume that in the world
Speaker 2: most people will look for new forms of value and
Speaker 2: changing value and already in the last 10 years, certainly
Speaker 2: in our part of the world.
Speaker 2: Everybody pays on a mobile phone and everybody pays by
Speaker 2: QR code, right? And so obviously you've seen that evolution.
Speaker 2: I think there are 2 or 3 other reasons why
Speaker 2: a tokenized world where tokenized assets or tokenized money will
Speaker 2: be prevalent. Um, one is that the minute you tokenize,
Speaker 2: you can fractionalize, so you can go down to 0.0001
Speaker 2: of anything, which means you can distribute more widely. A
Speaker 2: lot more people can participate, so fratalization is quite important.
Speaker 2: The second thing with the tokenization is that you can program.
Speaker 2: So today, if I give you some money, $10 I
Speaker 2: give you the money, but in a tokenized value this thing,
Speaker 2: I can program saying you will get this $10 provided
Speaker 2: 123456 things happen.
Speaker 2: So today conditionality moves separately from value. You can actually
Speaker 2: layer in conditionality into value that has immense, immense potential
Speaker 2: and power, right? When you can layer conditionality into value,
Speaker 2: then you're not looking at two streams, an information stream
Speaker 2: and a value stream. You marry the information stream and
Speaker 2: the value steam, and then you put conditionality on top
Speaker 2: of that. A third thing tokenization does is lets you
Speaker 2: do atomic settlement in real time 24/7 atomic settlement.
Speaker 2: Whether it's PVP DVP, you know, uh, and exchange trade
Speaker 2: versus uh foreign currency trade, it can all be done
Speaker 2: in real time. So there's a lot of value that
Speaker 2: technology brings that can take out inefficiency in the current
Speaker 2: clearing settlement system processes. So my general view is that
Speaker 2: tokenize money and tokenize value, in fact, tokenize every kind
Speaker 2: of asset form will happen.
Speaker 2: It happened over time. Now that's different from um.
Speaker 2: Money in the sense of will it will it replace
Speaker 2: fiat currency right so I do think it's a token,
Speaker 2: but I do think that eventually certainly in our construct
Speaker 2: for the next few years, um, money will still be
Speaker 2: feared in the sense it'll be state backed.
Speaker 2: I think private money and the world has experimented with
Speaker 2: private money in the past. In fact, it, you know,
Speaker 2: in the 19th century, there are a lot of issues
Speaker 2: of private money. It has all of the weaknesses that
Speaker 2: we've seen historically with private money, um, that's compounded by
Speaker 2: the fact that today the Westphalians and the nation state
Speaker 2: means that if you're running a government, you want to
Speaker 2: control monetary supply, you want to control monetary policy. Why
Speaker 2: would you let abdicate the control of the monetary system
Speaker 2: to some private player, right?
Speaker 2: So one, the inherent weaknesses in private money. Second, nation
Speaker 2: states won't let private money succeed because it undermines the
Speaker 2: capacity to function as a government, as a nation state.
Speaker 2: So I don't think you'll see private money, you know,
Speaker 2: privately issued money, um, and so it could be a
Speaker 2: store of value, but as a medium of exchange and
Speaker 2: a unit of account, I don't see that happening, uh,
Speaker 2: anytime soon.
Speaker 2: What store of exchange, store of value, yes, of course.
Speaker 2: There is about $12 trillion of gold in the world.
Speaker 2: There's some 4 or $5 trillion of Bitcoin or crypto
Speaker 2: coin in the world. Already's 40% of the total value
Speaker 2: of gold. So the minute you have that stock of
Speaker 2: demand and supply, there's a market. And the minute there's
Speaker 2: a market, people will use it to store value. So
Speaker 2: I do think it will continue to be in that form.
Speaker 2: Um, going back to this, so if I say private
Speaker 2: money won't exist, but tokenize will exist, what does that mean?
Speaker 2: That means I do think you will get tokenized money
Speaker 2: but linked to the current feared banking system, and that
Speaker 2: by and large can happen through tokenized deposits or central
Speaker 2: bank digital currencies.
Speaker 2: I think central bank digital currencies will occur, but mostly
Speaker 2: in the wholesale space because there's a real problem to solve,
Speaker 2: which is what the multi currencies have the same dollar,
Speaker 2: the sterling, the US dollar, we never got around to
Speaker 2: a single global currency. If you can use a central
Speaker 2: bank digital currency and an exchange process to get around
Speaker 2: this multi currency thing, you can get all the benefits
Speaker 2: I talked about instant settlement, more money with this thing.
Speaker 2: So I do think there's a problem to solve, and
Speaker 2: you will see that.
Speaker 2: There are several experiments going on right now, but eventually
Speaker 2: I think you'll see some kind of wholesale CBDC with
Speaker 2: a clearing house which will work.
Speaker 2: In the retail CBDC, I'm less certain because to me
Speaker 2: the detailed CBDC, if you have a very good efficient
Speaker 2: payment system in the country, instant payment, QR code based
Speaker 2: like our pay now, pay you can pay at point
Speaker 2: of sale, it's not clear to me what problem the
Speaker 2: retail CBDC is really solving.
Speaker 2: Um, and actually it winds up creating incremental challenges because
Speaker 2: the minute you go to retail CBDC then you have
Speaker 2: two choices. Does the central bank issue the retail CBDC
Speaker 2: and open up accounts for all the citizens in the
Speaker 2: country with the central bank. Now if you do that,
Speaker 2: you undermine your current banking system. Uh, more than that,
Speaker 2: you take on the onus for credit creation, and no
Speaker 2: central bank wants to take on the onus for credit creation.
Speaker 2: So there's some challenges with the retail CBDC.
Speaker 2: You could do an intermediate CDC. You don't go directly
Speaker 2: to the consumer. You go through the banking system, but
Speaker 2: then that's like a tokenized deposit, you figure.
Speaker 2: So my own view is that I think the prevalent
Speaker 2: form of tokenization will be tokenized deposits. So you have
Speaker 2: a deposit, but you tokenize it, then you get all
Speaker 2: the benefits of programmability, atomic settlement, etc. etc. without actually
Speaker 2: bastardizing the current fiat currency system. I think that's where
Speaker 2: you get to.
Speaker 2: You are especially about stablecoins.
Speaker 2: The thing with stablecoins is that um they actually don't
Speaker 2: function to serve anything that a tokenized deposit does except
Speaker 2: one thing, they can be privately issued outside of the
Speaker 2: regulated banking system. So somebody that a coin base, etc.
Speaker 2: can say, OK, I'm creating a reserve against a bunch
Speaker 2: of assets. I'm going to issue a stable coin against it.
Speaker 2: Now that flies in the face of my first thing.
Speaker 2: Why would nation states let you do that easily.
Speaker 2: And therefore, if you look at BI has published a
Speaker 2: paper recently, I remember, comparing a tokenized deposit in a stablecoin,
Speaker 2: and obviously argued that the tokenized deposit is a much
Speaker 2: better way to approach all the benefits you want as
Speaker 2: opposed to stablecoin which is privately issued.
Speaker 2: Also, the fact that stablecoins, some of the stablecoins, you know,
Speaker 2: as you saw, which were linked not to a reserve,
Speaker 2: but linked to an algorithmic balancing, uh, ran into trouble.
Speaker 2: So that obviously took some of the sheen of the
Speaker 2: algorithmic rebalanced stablecoins.
Speaker 2: Um, when it comes to stablecoin back reserve, they will exist, uh,
Speaker 2: but then you get to the question of how, how
Speaker 2: often do you audit the reserve? How often do you
Speaker 2: make sure the reserve exists and operated away? How do
Speaker 2: you make sure that all the other controls are there?
Speaker 2: So for my money, I would argue that as long
Speaker 2: as again the traditional banking system leans into tokenizing deposits
Speaker 2: and availing of the benefits of the digital uh asset universe.
Speaker 2: I think that will be the game to back. If
Speaker 2: the banks don't do that and you know and they
Speaker 2: leave a big vacuum, then yes, private players will come
Speaker 2: in and try to disintermediate that inefficiency through other forms
Speaker 2: of
Speaker 1: stablecoins, right? Your views are very much aligned with Augustin Carstens,
Speaker 1: the former general manager of BIS. I remember him writing
Speaker 1: this essay that even the Dutch East India Company for 50,
Speaker 1: 60 years maintained very successfully a copper-backed stablecoin.
Speaker 1: But after a while, because it's privately issued incentives get
Speaker 1: misaligned and you want to issue a little more with
Speaker 1: a little less copper and erode the value and then
Speaker 1: the trust collapses, whereas if you have state backing that
Speaker 1: theoretically at least, you know, not necessarily on the table.
Speaker 2: Now again, the caveat to all this, all states are
Speaker 2: not the same. Sure, right, and so of course you
Speaker 2: would argue that where you have states where the state
Speaker 2: is not doing a good job but doesn't have the
Speaker 2: trust of the people.
Speaker 2: The currency is getting devalued, inflation is sky high. Of
Speaker 2: course that creates a huge opening for an alternate provider
Speaker 2: who gives you greater trust, greater efficiency. So you could
Speaker 2: see situations of this sort, but I'm talking about in
Speaker 2: general if you assume that you have a well functioning
Speaker 2: government and which is supported by the people.
Speaker 2: I think it's hard to displace that.
Speaker 1: Can I ask you a supplemental question on the issue
Speaker 1: of uh technology making banking seamless and transactions seamless. Should
Speaker 1: there be some friction in banking? Back in the days
Speaker 1: when there was bank runs, you would give a bank holiday,
Speaker 1: let people just calm down.
Speaker 1: RTGS and 24/7 settlement, does that add to volatility or
Speaker 1: does it actually create a greater good?
Speaker 2: I think they're asking a more philosophical question. Should people
Speaker 2: continue progressing or should we put friction across different parts
Speaker 2: of the value chain, right? And it's a good question.
Speaker 2: It's not a nice question. I think a large part
Speaker 2: of what we're doing with technology, we're hurtling down this
Speaker 2: path without having thought through the other, you know, attendant
Speaker 2: and consequential challenges that you get with it.
Speaker 2: Um, one simple example, we made payments instant and what
Speaker 2: happens with that is that you know you do something,
Speaker 2: the money leaves the bank instantly, and if 10 minutes later,
Speaker 2: 20 minutes later you had a second thought, you had
Speaker 2: an afterthought, you suddenly figure maybe you got scammed. There's
Speaker 2: no stopping it's all gone. It's like free flow, but
Speaker 2: when you look at the reverse and say, OK, so
Speaker 2: should we therefore.
Speaker 2: Uh, building so much friction to them that you don't
Speaker 2: get the efficiency and speed. People don't like that either.
Speaker 2: There's a lot of value from instant, right? So it's
Speaker 2: a hard question to answer, you know, where do you
Speaker 2: draw the line? What we're trying to do these days is.
Speaker 2: Um, let most transactions proceed frictionless, but use AI and
Speaker 2: data to pop up the ones which look like there
Speaker 2: might be a challenge, and then see if we can
Speaker 2: put some friction only in those. How successful we'll be
Speaker 2: with that, uh, demarcation is anybody's guess.
Speaker 1: Because related to this is the question of cybersecurity. Uh,
Speaker 1: I had Goutam Kirti on my podcast a few months ago.
Speaker 1: He scared the bejesus out of me detailing the kinds of,
Speaker 1: you know, attacks that institutions like DBS get on a
Speaker 1: daily or minute by minute basis.
Speaker 1: So your sense of the whole move toward digital and
Speaker 1: seamless banking and the trade-off with cybersecurity.
Speaker 2: Well, you know, for the time being, I think.
Speaker 2: Cybersecurity is OK, right, and so as you said, we
Speaker 2: get hundreds of attacks every day, but we do, um,
Speaker 2: number one, our peripheral defenses are quite sound. We have
Speaker 2: multi layers like an onion ring of peripheralral defenses, and, um,
Speaker 2: you know, we, we, we've been able to keep people out.
Speaker 2: We do our pen testing regularly. We have third parties
Speaker 2: trying to hack us and attack us deliberately and people
Speaker 2: can't get in. So and by and large I think
Speaker 2: that's true for a lot of the financial system.
Speaker 2: I'm not sure equally to all other infrastructure providers, though
Speaker 2: informed governments like Singapore have actually designated various other critical
Speaker 2: infrastructure providers and pushed them to get the same level
Speaker 2: of safety safeguards.
Speaker 2: Uh, but on top of peripheral defense, the other thing
Speaker 2: that we've done is relied a lot on, um, building
Speaker 2: up strength within, you know, we call it inside is
Speaker 2: the outside. You assume somebody is inside because sooner or
Speaker 2: later we leave a window unguarded and somebody will get in.
Speaker 2: So how do you protect if somebody's inside?
Speaker 2: And there are techniques for that as well. Microsegmentation is one.
Speaker 2: So if you come in, you only hit a particular segment,
Speaker 2: you can't go everywhere else. Uh anomaly detection is another.
Speaker 2: We use a whole bunch of algorithms and AI to detect, hey,
Speaker 2: something's happening which is not consistent with what you would expect,
Speaker 2: so you can quarantine and shut down very, very quickly.
Speaker 2: Um, but the truth, time is, you know, the bad
Speaker 2: guys have the same technology too sometimes smarter than you,
Speaker 2: and they continue to proceed at a rapid pace. And
Speaker 2: so you're constantly hoping that you can keep up with them,
Speaker 2: if not stay ahead of them. One of my current
Speaker 2: big nightmares is obviously quantum. And so with the amount
Speaker 2: of um technology power available with quantum and the ability
Speaker 2: to crunch through everything and unravel everybody's keys instantly.
Speaker 2: Uh, that's a nightmare, uh, possibility. Our hope is that
Speaker 2: quantum will guard against quantum, right? And so we're trying
Speaker 2: to work on that as well, uh, but, uh, you know, it, it,
Speaker 2: it could be challenging. One of the things is you
Speaker 2: know in Singapore that we did in the last year
Speaker 2: or two as an industry is this whole thing called
Speaker 2: money lock or, um, you know, we call a DBS vault.
Speaker 2: So even though all your accounts, etc. are digitally available,
Speaker 2: we encourage you to take some of it and park
Speaker 2: it in a section of the account where digital is not,
Speaker 2: does not work. So at least you have a corpus
Speaker 2: of savings which, you know, cannot be digitally impacted. I
Speaker 2: chafed at the bit when we started that. I said
Speaker 2: this is really going backward. You create a digital capability
Speaker 2: and then you say, OK, I'm putting this aside so
Speaker 2: it cannot be digitally, uh, touched. But I began to
Speaker 2: think the same question is, you know, sometimes friction necessary.
Speaker 2: I think because the changes that are happening are so
Speaker 2: acute and nobody knows where it could go, it's not
Speaker 2: illogical to say let's produce fiction in the sky and
Speaker 2: lock some money away and not make it digitally available.
Speaker 1: My wife always says that the jewelry that she has
Speaker 1: is immune from cyberattack, actual theft, yes, but not cyberattack.
Speaker 1: Um, I've left your favorite topic for the very end.
Speaker 1: So looking ahead at banking and the potential of artificial
Speaker 1: intelligence and particularly the advent of the large language models,
Speaker 1: how do you see that changing banking?
Speaker 2: Well, you know, in the short term, the changes are immense, right?
Speaker 2: And you think, by the way, it's not just banking,
Speaker 2: you think about any white collar jobs or what do
Speaker 2: white collar jobs entail? We read stuff, then we sort
Speaker 2: of synthesize them in our brains and put them together.
Speaker 2: Then we produce some output to either send an email
Speaker 2: out or you do a PowerPoint presentation or you do
Speaker 2: a pitch book to someone.
Speaker 2: Um, and then maybe you'll act if you're sitting there, you,
Speaker 2: you know, maybe pass some transacting entries or you still
Speaker 2: got to send a follow up to somebody you have
Speaker 2: to call somebody, right?
Speaker 2: Today's um GEI with the LLMs in the back of it.
Speaker 2: uh forget domain specific ALM broad LM, they do all four.
Speaker 2: They read, they read better than we read, they synthesize,
Speaker 2: they can produce a 4 page summary like this of
Speaker 2: everything they do synthesize it. They produce output, visual output,
Speaker 2: audio output, pitch books.
Speaker 2: And with agentech, they do your actions. They will pass
Speaker 2: your entries for you. They will send a follow up email,
Speaker 2: they change for whatever. So if you think about the
Speaker 2: nature of uh GEI, it does everything a white collar
Speaker 2: person does in banking, 70% of our jobs are of
Speaker 2: this nature. So you'll find that increasingly the computer can
Speaker 2: do a lot of this more efficiently, better and more effectively,
Speaker 2: and so there's one big change. The second big change
Speaker 2: we've already seen, which is the capacity to predict.
Speaker 2: Right. And so exactly as Netflix and Amazon, we predict
Speaker 2: what will the customer want to do, what, what can
Speaker 2: we tell the customer to a large extent it's very
Speaker 2: helpful because you can give the customer a much better
Speaker 2: level of experience and service because at, uh, you're not
Speaker 2: dealing with the customer the segment of one and you
Speaker 2: know the customer intimately. You don't, but AI knows the
Speaker 2: customer intimately and can therefore, whether it's new products or
Speaker 2: just service, do a much better job than you could before.
Speaker 2: So I think the way banking will be done will change,
Speaker 2: efficiency will increase, your um um the customer experience will change,
Speaker 2: the customer outcomes will change, um, all of this, and
Speaker 2: this will happen in the, in front of our eyes
Speaker 2: in the next 3 to 5 years.
Speaker 2: The big question is, do you get a step beyond that?
Speaker 2: So at um um recent um an offsite meeting we had,
Speaker 2: we had the COV Bank and he said they're speculating
Speaker 2: about a purely AI driven and design bank where the
Speaker 2: customer designs the bank. You don't even need a bank, right?
Speaker 2: So you have the AI moves and the the customer
Speaker 2: can pull it together. The customer creates his own AI
Speaker 2: bank and each customer creates the 9 billion people have
Speaker 2: 9 billion banks all created by themselves using AI tools
Speaker 2: who can do all of the things I talked about
Speaker 2: but for the customer.
Speaker 2: Right, can do the management so it's a customer agent
Speaker 2: which is working in the world of finance directly for
Speaker 2: a customer. Now I haven't thought enough about how this
Speaker 2: will function, but I can see the underlying philosophy. If
Speaker 2: you can get to where I'm talking about, could you
Speaker 2: take it to the next level? I think it's not impossible.
Speaker 1: And from a risk management perspective, are we thinking sufficiently
Speaker 1: about the disruptive impact of AI, whether it is cybersecurity
Speaker 1: related or just overall trading related or bank behavior related?
Speaker 2: I think to an extent everybody is, for example, we
Speaker 2: have a whole bunch of people focusing on the tech challenges,
Speaker 2: you know, hallucination, wrong information, AI is a life of
Speaker 2: its own, and we have whole committees and model reviews, etc.
Speaker 2: to do that.
Speaker 2: But in truth, I would also say that we don't
Speaker 2: know what AI can do. We frankly don't even know
Speaker 2: how the models always work, but more important, we don't
Speaker 2: know to what extent AI can go. Does AI get
Speaker 2: to a stage where it's almost sentient and therefore it
Speaker 2: is now doing things you hadn't thought about, not impossible.
Speaker 2: So are there a risk that will come along the pike?
Speaker 2: I think there might be. And so we've got to
Speaker 2: be quite thoughtful and cautious about, you know, how do
Speaker 2: you put things to work. One thing you take GEI
Speaker 2: over 18 months we've used a lot of GEI and DBS.
Speaker 2: And until this month we basically said we won't go
Speaker 2: direct to consumer, so we will put a man in
Speaker 2: the middle, a human in the loop just because I'm
Speaker 2: not sure what else is going on over there. But
Speaker 2: eventually you get a greater degree of confidence and say, OK,
Speaker 2: let's try this. Let's do a low risk and you
Speaker 2: start building from there. Um, we will have to do
Speaker 2: trial and error and make sure you do the low
Speaker 2: risk things and not bet the farm as you go forward.
Speaker 2: In addition to the risk in the banking system itself,
Speaker 2: you know, the model is they do model it right
Speaker 2: and so on that even human beings can make a difference.
Speaker 2: But the bigger challenges to me are the social challenges, right?
Speaker 2: And so I talked about a new way of working.
Speaker 2: I talked about, you know, a new nature of work,
Speaker 2: but what does that mean for society? What does that
Speaker 2: mean for the workforce? What does it mean for labor markets?
Speaker 2: What does that mean for, you know, uh, the old equation,
Speaker 2: the capital and labor, this thing, productivity.
Speaker 2: I don't really thought about any of those things and
Speaker 2: when you push the argument people say, OK, we all
Speaker 2: work 3 days a week and rely on UBI universal
Speaker 2: basic income, but I don't know whether people have thought through,
Speaker 2: you know, how this works and what it means if
Speaker 2: you're just sitting and working 3 days a week. So
Speaker 2: I think there are a lot of uncertainties out there,
Speaker 2: and this has been one of my big challenges in
Speaker 2: the last couple of years as CEO. How do you
Speaker 2: calibrate and get that balance right? One part of me.
Speaker 2: Responds to the Chuck Prince uh statement and the music
Speaker 2: on you got to get on the dance floor, and
Speaker 2: I think as CEO I would have been remiss if
Speaker 2: I had not led DBS into embracing data, AI, GEI,
Speaker 2: new ways of working we'd have got left behind and
Speaker 2: we owe it to our shareholders and our customers to
Speaker 2: do well by them.
Speaker 2: But at the same time I've been acutely conscious of
Speaker 2: all these big issues the ethical problems, the moral problems,
Speaker 2: the humanistic problems, the risk problems. So while we've been
Speaker 2: embracing this, we've been trying to make sure that we
Speaker 2: get the balance right through our oversight committees through, you know,
Speaker 2: one step at a time, um, say, OK, we don't
Speaker 2: have to be first to market for this, we can
Speaker 2: be 3rd to market because we just need to understand
Speaker 2: what is going on.
Speaker 2: I'm hoping we have the balance right so far I
Speaker 2: think we have, but we've got to continue to make
Speaker 2: sure it's a balanced approach.
Speaker 1: OK, since you mentioned the banks for, maybe I'm going
Speaker 1: to ask you one more question. Pius have the banks,
Speaker 1: which seemed very enthusiastic with respect to carbon pricing and
Speaker 1: helping their clients to go through the journey, have they
Speaker 1: really managed to move the needle on green transition? Well,
Speaker 1: you know,
Speaker 2: I think it's not a reasonable question. What I've always maintained.
Speaker 2: That to put the monkey on the back of the
Speaker 2: banks saying they will make the green transition happen is
Speaker 2: kind of short sighted. There's a macroeconomy, an industrialized economy
Speaker 2: that we've all collectively built up over 150 years, very
Speaker 2: carbon carbon intensive economy, but that is industry after industry.
Speaker 2: So the notion that the bank would sit here and say, OK,
Speaker 2: I will now change this by deciding whether I give
Speaker 2: you money or don't give you money.
Speaker 2: Is a little bit um short sighted. I mean it's
Speaker 2: it's unreasonable. Who's the I say who's the bank to
Speaker 2: play God? If an elected government of the country says
Speaker 2: I still continue to need fossil fuel energy for my
Speaker 2: people because the people who elected me still need electricity, power,
Speaker 2: and the GDP is only $2000. Who's the bank sitting
Speaker 2: outside to say, hey, you know what, I know better
Speaker 2: than you. I don't think your people deserve energy and
Speaker 2: so I'm going to turn off the tap on this
Speaker 2: and you figure out how to get renewable energy, right?
Speaker 2: So it's not straightforward to say the banks should do it.
Speaker 2: Have the banks been able to help with the process?
Speaker 2: I think they have, but the whole transition itself has
Speaker 2: been slow. So, you know, yes, the banks have, you know,
Speaker 2: we've got $80 to $90 billion in sustainability link loans.
Speaker 2: Do those loans make a difference at the margin, yes,
Speaker 2: I give somebody cheaper money if they're doing green stuff.
Speaker 2: It's more expensive money. And so hopefully that incent the
Speaker 2: right behavior to do more.
Speaker 2: Activities to do less brown activities and so on. We're
Speaker 2: giving people money for transition as we move from brown
Speaker 2: to green, we'll give you more money. We'll create more programs.
Speaker 2: So I think we are being facilitated. We're trying to
Speaker 2: make sure that we help people go from one end
Speaker 2: to the other, but can we be the principal driver
Speaker 2: of the change? I don't think that's realistic.
Speaker 1: Finally, what makes you hopeful?
Speaker 2: Or humanity, and if you think about the 5000 years
Speaker 2: of known human history, uh, whether it's geopolitics or whether
Speaker 2: it's innovation and tech change, this is not the first
Speaker 2: time we've, uh, come to this. People say that geopolitics
Speaker 2: is unprecedented even in my lifetime, forget the, you know, the, the,
Speaker 2: the 20th century.
Speaker 2: I can name half a dozen times when geopolitics was
Speaker 2: more fractious than it is now, and if you go
Speaker 2: back to the 19th century, I mean, people are constantly
Speaker 2: warring with each other all the time, so this has
Speaker 2: not been the worst. And if you look at the
Speaker 2: pace of change in the 1880 to 2000 period, uh,
Speaker 2: to the 1900 period with that went to electricity, power, steam, transport,
Speaker 2: globalizing world came together, and the world saw some massive,
Speaker 2: massive changes at that point in time as well.
Speaker 2: So even from an innovation standpoint, where there's a lot
Speaker 2: of innovation happening now, we have seen that before and
Speaker 2: I am heartened and hopeful about the fact that we
Speaker 2: as humanity have been ingenious enough and creative enough to
Speaker 2: see our way through these issues and by and large
Speaker 2: the world is in a better place today from a
Speaker 2: uh uh um quality of life standpoint, uh, if you,
Speaker 2: you know, um uh um park the environmental challenges for
Speaker 2: a minute.
Speaker 2: You know, healthcare conditions are better, life spans are longer,
Speaker 2: you know, infant mortality is lower, educations are higher, poverty
Speaker 2: is lower, and now the world has progressed, uh, well.
Speaker 2: If we can see a way to addressing some of
Speaker 2: the big planetary challenges climate and biodiversity for sure, um,
Speaker 2: I think we're still, um, in a good place in
Speaker 2: terms of where mankind needs to go.
Speaker 1: Well, on that note, Piush, thank you very much for
Speaker 1: your time and insights. I'm not gonna say goodbye to
Speaker 1: you because I look forward to having you back on
Speaker 1: coffee time. All right,
Speaker 2: maybe the 200th episode we'll go again.
Speaker 1: So very good. Thank
Speaker 2: you very much. Take care. Thank you.
Speaker 1: Thanks to our listeners and viewers as well. Copy Time
Speaker 1: was produced by Ken Delbridge at Spy Studios. Violet Lee
Speaker 1: and Daisy Sherma provided additional assistance. It is for information
Speaker 1: only and does not represent any trade recommendations. All 150
Speaker 1: episodes of the podcast are available on YouTube and on
Speaker 1: all major podcast platforms, including Apple, Google, and Spotify. As
Speaker 1: for our research publications, webinars, and live streams, you can
Speaker 1: find them all by Googling DBS Research Library. Have a
Speaker 1: great day.