Standard Chartered expects the Middle East to be a key market for its transaction banking business. Karen Fawcett, global group head of transaction banking at Standard Chartered, is confident of the bank's huge business potential in its core markets across Asia, the Middle East and Africa. With consumption in Europe and the US slowing, and likely to remain that way for a while, the bank is leveraging its traditionally emerging market-focused strategy to capture rising intra-region trade flows.
In a recent interview with Gulf News, Fawcett spoke about the growing importance of the Middle East as a connecting link in the booming trade route between Asia and Africa.
Gulf News: In view of the fast-growing trade corridor linking Asia, Africa and Middle East, what are the latest trends in transaction banking and how is it impacting Standard Chartered?
Karen Fawcett: We have always been a bank focused on emerging markets and a large part of our business is linked to regions such as Asia, Middle East and Africa. The size and growth potential of these economies and the number of countries that are going through transition are going to open up big new markets. This makes the region very exciting. With the massive share the region has in oil production, it is a critically important region on the global trading map. We have also seen a massive shift in the way the Middle East trades globally with a lot more linkage with Asia and Africa. That locks into our business. You have already seen that we are expanding our presence here and offering more products across all markets.
We are a comprehensive provider of trade finance, corporate finance with derivative capabilities and custodial service offerings. We treat transaction banking as an integral part of our overall business. We are not just trade finance. It involves all aspects of working capital, cash management, inventory financing and much more.
The market size of Asia and other emerging markets is relatively small compared to Europe and the US. Then why should there be so much focus on Asia now?
First of all, both the US and European economies are not in great shape at the moment. The forecast for these economies for the next few years is flat at best.
On the contrary we have Asia that has a sustainable growth rate above 5 per cent. These are economies where millions of people are joining the middle class; it is the domestic consumption of these countries that is driving the business.
What does it involve to offer an integrated finance solution?
At the wholesale bank level we are offering everything you need in financial services. If you want corporate finance to buy another company; if you want to do a bond on the capital market or to hedge your transactions. In transaction banking we are offering end-to-end cash management solutions.
The gradual Internationalisation of the yuan is driving many banks to offer trade settlements in that currency. You were a front runner in offering yuan settlements in the region. What are the advantages of this in trade between China and the region?
China is trying to start a trend to make the yuan an international currency. Five years ago they did not particularly care about internationalising it, it was not convertible.
Now they are taking the first steps to make it an international currency, but in a very structured and phased manner. What we are seeing is unbelievable growth. In 18 months it has grown from almost no share in Chinese trade to abut 10 per cent.
What is your outlook for Middle East in global trade flows especially in the context of declining trade volumes between Asia and the West?
We are very positive about the prospects of the region in facilitating global trade. The UAE has very sophisticated trade infrastructure with the support of a very efficient financial centre. Before the crisis hit, the trading model of the region with Asia was largely driven by consumption-driven imports from Asia. Now a new trade corridor linking Africa through the Middle East has opened.
Going forward, we expect a number of new markets that went through regime changes will join this trade corridor.