Matthew Deakin CEO of HSBC Korea

By Matthew Deakin
CEO of HSBC Korea

Recently, lowering the loan-to-deposit ratio below 100 percent has been an important agenda item in the Korean banking industry. It is said that the government has given such guidelines to banks so that they can lend with customer deposits rather than with funds borrowed from volatile markets. Management of loans based on deposits is the core of banking basics.

During my first four months as CEO of HSBC in Korea, I have often been asked how the bank avoided government assistance during the worst crisis in living memory. The reason is simple. HSBC has not needed any government assistance in any of the 86 countries and territories in which it operates because it understands and sticks to the basics of banking. We have been doing it for 140 years.

We take a deposit and keep it safe and liquid. We know it is not our money. We only lend conservatively. And we take a deposit first and then lend some of it to people who can pay it back. As a group, we only lend 79 percent of what our customers deposit with us. And we keep plenty of liquidity on hand in case our customers want to withdraw their deposits.

This means we do not pay the best rates, because you can only pay high rates if you are taking the funds received and lending them at even higher rates, which inevitably means taking risks. But it also means that we are one of the most solid banks in the world. That was a major factor behind HSBC being named Global Bank of the Year in this year's Euromoney awards.

Banks have social responsibilities. At HSBC, this is one of our core values. Part of the profits we earn are ploughed back into education and the environment, which are well supported by various sustainable programs.

HSBC Climate Championship (for HSBC staff worldwide), Island Watch for Future Generations (environmental education for Korean middle school students), and HSBC Living Finance (financial education for Korean middle school students) are good examples, just to name a few.

Many people expect banks to extend social responsibility to fuel economic growth, and to an extent that is true. But as managers, our responsibility has to be to our depositors first and our shareholders second

We have to keep their money safe. We know depositors can always take their funds elsewhere. On a global level, since the crisis started HSBC has benefited greatly from a deposit inflow around the world as customers have realized that all banks are not the same.

Hopefully this crisis will make us all get back to basics. A few old phrases will always hold true: If something looks too good to be true, it probably is. And there is no such thing as a free lunch. Someone will have to pay eventually.