Universal Banking Model Weathers Global Storm
By Yoon Ja-young
Staff Reporter
Global investment banks such as Merrill Lynch and Lehman Brothers were ideal for Korea's financial industry, which has been dreaming of making a leap forward as the new growth engine of the economy where manufacturing was traditionally strong.
These giants collapsed, however, drowning the global as well as the U.S. economy with them. With an increasing number of people raising doubt whether U.S. investment banks are where we should head to, local financial businesses seem to have lost their aim.
Charles Pierron, Chief Country Officer (CCO) of Societe Generale Corporate & Investment Banking in Seoul, said that its universal banking model helped it weather the global storm. He said that Societe Generale, which has totally recovered from a fraud case earlier this year, has been doing well in the financial crisis thanks to their diversified business model.
``It affected a lot of banks. Large banks collapsed in a very short period of time. Societe Generale, meanwhile, has been resisting very well in the turbulence of the market because of this very diversified universal banking model,'' Pierron said in an interview with The Korea Times.
Universal banking is a combination of the commercial and investment bank models, and Societe Generale, which employees 151,000 people in 82 countries, has been a leader in this.
The French group strikes a balance between its three key business sectors _ retail banking and financial services in which it serves over 30 million customers in France and worldwide; global investment management and services; and corporate and investment banking in which the group has built up a reputation as the top player of derivatives, structured financing and euro capital markets.
``We were able to rely on a larger mix of business,'' Pierron said. ``We are not only resisting, but also probably one of the possible winners in the crisis,'' he added.
On top of the universal banking model, Pierron cited the bank's strong risk management as the key to survival in the global financial market turmoil.
He said that among European banks, universal banks that have a strong domestic market as well as being conservative and selective in risk management are faring well. Those that leveraged too much, meanwhile, are being shaken and depending on government money.
``The key also for me is to have not only a universal banking model but a focused business approach. It differentiates us from other competitors who spread themselves too thin without the critical mass thus taking unnecessary risk.'' Pierron added that one should remain very focused in terms of strategy, selecting the type of businesses and clients.
He also cited the group's unique corporate culture as its key to survival in the recent global market trouble. ``It's partnership, team spirit. We are a partner to the people we work with. A number of partnerships have gone very successful in Korea as for example our joint venture with IBK on the asset management side.''
Korean Market Matters for Societe Generale
Societe Generale has been significantly expanding business in Russia and Eastern Europe recently. It doesn't mean, however, that Asia and Korea are of little importance for the group.
``Korea is quite strategic for our corporate investment banking,'' Pierron said, explaining that their expertise fits the needs of Korean corporate and institutional clients.
``Korea is very much export oriented, and one of our strengths is in export finance. We are able to propose financial solutions to big Korean firms,'' he said, adding that they are closely working with Hyundai Steel and other conglomerates including Samsung and LG.
When Hyundai Steel builds a steel mill in Dangjin, for example, it needs to import a lot of goods from different countries. Societe Generale finances these imports, providing it with structured and well-priced financing. ``This type of deal requires strong competence,'' Pierron said.
He said natural resources development projects by domestic players are also attractive for the bank, which bills itself as the "energy & natural resources bank" in Asia for its hedging, financing and advisory capacities in this sector. He added that it is already working with companies like SK E&C and Korea Gas Corporation in natural resources development projects overseas.
Regional Financial Hub Plan Viable
Regarding the country's ambition to build a regional financial hub, the CEO, who has built up a decades-long career in the global financial market, said it seems viable.
``We realize that in Asia there are already very strong financial hubs in Hong Kong, Singapore. The first question should be `Why are they so strong?'''
Then, Korea should effectively understand where Seoul has its strength and start from there. ``Korea is strong in the equity derivatives market, so let's continue to put our expertise in this area. With worldwide players, we can further develop this market and take the lead in Asia.''
He explained that structured financing for the world's largest shipping industry and project financing are where Korea already has a lot of competency.
He picked Korean people, who pulled up the country from the ashes of the war, as another strength. ``People are very keen to learn, they learn fast. They are very technology minded. They are also quite hard working and disciplined.''
He said the language barrier doesn't seem to be an issue, at least in the financial industry, as the level of English proficiency among professionals is quite strong.
``Let's remain open to competition. Let's not overdo in terms of regulation. But at the same time, it's very important to remain disciplined, with a well balanced regulation,'' Pierron said.
He also called for strong discipline in terms of ethics, in terms of market behavior, and in terms of governance. ``We permanently monitor our bank's progress in these three areas. ''
Pierron supported opening the market and breaking the firewall between securities and banking. ``If you want to have a strong influential financial hub in Seoul, you need to put these businesses together.''
He showed concern over the possible global recession. ``Korea is a country which exports a lot and relies on the strength of various countries. Again, Korea has been doing well and diversified export destinations, for example, to China. It is now relying less on the United States.''
He said that facing a possible worldwide recession, economic growth in Korea will be much smaller than before. Most of the economic indices, including exports and employment, will worsen. ``But I believe that the worst of the crisis, the confidence crisis, is hopefully behind us.''
Charles Pierron has vast experience on the global financial market. Pierron joined Societe Generale in 1972, and took key positions in the bank's international networks. He served in London in charge of English corporate clients until he moved to Singapore, serving as a deputy general manager looking after larger Singapore clients. He was transferred to Chicago to take charge of the bank's Midwest operations in the United States, dealing with large clients including auto manufacturers in Detroit, and McDonalds and Caterpillar. Pierron was stationed back in Singapore as the country manager, being responsible for Societe Generale operations in Southeast Asia. He later moved to New York where the bank operates its regional headquarters for the Americas, including Canada and Latin America. He worked in Poland and then in Germany as chief country officer before coming to Korea in September. Pierron, who graduated from the prestigious Centre d'Etudes Superieures de Banque in Paris and the Kellogg Graduate School of Management at Northwestern University, has been an adviser to the French Ministry of International Trade since 1999. The French gentleman, who briefly taught literature at school before starting a career as a banker, knows how to lead a pleasant conversation.