Build Regional Clearing And Settlement Centres, BearingPoint Tells Banks In China

Chinese banks are about to become enormously influential, but have plenty of work to do on financial reporting, risk management, new product development, the use of It, distribution and management development. Or so say consultants BearingPoint as they launch a

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Chinese banks are about to become enormously influential, but have plenty of work to do on financial reporting, risk management, new product development, the use of It, distribution and management development. Or so say consultants BearingPoint as they launch a week-long sales conference and campaign in Shanghai and Beijing this week.

“China’s banks are poised to potentially become some of the most influential financial institutions in the world over the next 10 years, but they first need to address fundamental management issues,” said Christopher Formant, Executive Vice President, Global Financial Services at BearingPoint. “Of primary importance for China’s banks is the need to enhance their ability to manage risk. The banks can become more transparent and granular by not only investing in the appropriate technology, but also by investing in the development of their peoples’ capabilities, especially in such areas as leadership development, governance training and credit and risk management.”

BearingPoint says Chinese banks need to pursue five key goals.

First, better financial reporting and risk management to enhance balance sheet transparency, develop and install enhanced operating controls and risk management, and raise standards of credit risk in order to match global expectations. In addition, they need to develop processes for resolving the non-performing loans that have accumulated within the banking system. This will become increasingly important as they raise capital on global exchanges.

Secondly, product development. BearingPoint says the Chinese banks need to design and develop new products for the burgeoning middle class and the emerging affluent classes of China, such as new payments and customized lending services. Key to this, says BearingPoint, will be the development of consumer credit services to arrange for effective distribution of products to the mass market. The focus should also be on developing products and services that can generate service fee revenue, which are currently less than 5% of current earnings.

Thirdly, Chinese banks need to use tools like Business Process Management (BPM) to digitize data and eliminate paper-based processes. China’s banks could potentially leapfrog western banks in the use of digital tools, predicts BearingPoint.

Fourthly, Chinese banks need to move towards enterprise applications for support functions and modernize delivery and payment processing systems by creating regional centres for clearance and settlement. The focus will need to be on using technology to deploy Internet-based products and services to consumers and small business customers.

Lasztly, the banks need to focus on management development, and provide training in governance and compliance issues. BearingPoint says they should also consider tours of duty in major global financial centres to deepen functional and managerial skills.

BearingPoint says that Formant is leading a group of colleagues to discuss these issues and other challenges facing banks in China at a company sponsored conference in Shanghai and Beijing this week. Yesterday he took executives on a tour of BearingPoint’s Global Development Center in Shanghai.

The 48,500 square-foot Center aims to provide clients around the world with the flexibility of onshore programme and project management, analysis, and design and offshore development of specific software applications. The Center also aims to offer clients custom application development, enterprise resource planning programming development, enterprise application integration, as well as application support and maintenance. BearingPoint has a second Global Development Center in Dalian.

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