RMA in Asia

Following the 1997-1998 financial crisis, Asian banks have focused on improving risk management. They are taking their cues from international best practices as represented by the Basel Accord, which, in some form or other, scorns certain to be adopted by all major countries--some sooner, some later. The tasks remain enormous because they involve both technical development, such as risk-rating systems, and a lot of cultural change.

RMA's Hong Kong and Singapore chapters, established in 1997 under the leadership of RMA members from global banks, have built a professional community and presented a variety of home-grown and external programs on various aspects of risk. RMA also has held an Asian Senior Risk Manager Round Table annually since 1995.

Further chapter development has been challenged by the magnitude of the Asian financial crisis as financial institutions focus on the pervasive regional problems of restructuring or collecting bad and doubtful debts. However, the existing Asian chapters and RMA's excellent name recognition throughout the region are spawning a new and vigorous approach to RMA development in Asia.

Asian development has been handled by Nick Hayes, RMA's director of Global Relations, as part of his institutional member focus, but the distance and the amount of work suggested the need for an Asian representative. I was appointed in September 2003, to help Nick and the RMA team in their efforts.

RMA"s objective in Asia, as elsewhere, is to support the spread of good risk management practices through a combination of chapter activities, training, and other work. We will maintain RMA's reputation for quality and will pace development of our programs within practical and financial limits as well as market demand. The basic approach of pacing, as well as the feeling that we should be working with "the home team" in Asian countries, will involve us in working closely with Asian bankers' associations and other organizations, such as their related training institutes in most if not all countries.

Chapter development will be focused on countries where there are a large number of existing RMA members, such as Japan. The Australian banking community also has formed a chapter, which will be inaugurated in March 2004.

For practical reasons, the cooperation strategy has been initiated in Southeast Asia, where the ASEAN Bankers Association--made tip of bankers' associations in the 10 ASEAN countries--has agreed in principle to affiliate itself with RMA for risk management issues in the region. Other such relationships are being pursued across the region.

RMA's training strategy is to offer courses that fill gaps in the market, using local trainers. RMA's training capabilities are of interest in the region, and the first major course effort--two sessions of the seminar on Portfolio Risk Management by Charles Smithson--brought together 76 participants from 41 banks in 12 countries at sessions in Singapore and Hong Kong. The Hong Kong session also featured talks by Bill Ryback, Deputy Chief Executive of the Hong Kong Monetary Authority, Patron of the Hong Kong RMA Chapter, and a former Federal Reserve Governor; and Dr. David K.P. Li, chairman and chief executive of Bank of East Asia, Ltd., Hong Kong's leading locally owned bank. Mr. Rybeck provided an illuminating update on Basel Accord developments. Dr. Li strongly supported risk management development as key to Hong Kong banks' success amid continuing change, comments that could apply all across the Asian region. (See sidebar, below, for Dr. Li's text.) Smithson's program was cosponsored by the ASEAN Bankers Association, the Association of Banks in Singapore, and the Hong Kong Bankers Association.

The first continuing educational program, scheduled for rollout in March 2004, is Operational Risk 101, to be offered jointly with or through a number of training institutes in the Southeast Asia region. RMA's lead Operational Risk trainer, Jonathan Davies, will hold several open sessions of the course and also will conduct a Train the Trainer program to build a cadre of local qualified trainers.

RMA also has launched a loss given default study on a regionwide basis. Given the spread of countries, this survey will probably have a much larger number of participants than the North American and European efforts but will run on exactly the same structure, modified for Asian needs when appropriate (such as smaller minimum case numbers).

Training activities will be further developed in 2004 through some additional courses as well as the Senior Risk Officer Round Table, to be held in Singapore, and the Securities Lending Conference, to take place in Hong Kong.

Relationship development will continue to focus on Southeast Asia, but it will also move north. There may be opportunities to deploy other RMA services, such as the credit diagnostic. The Hong Kong Chapter will be particularly active in helping some of its smaller local bank members prepare for Basel, which is being mandated by the Hong Kong Monetary Authority And the Singapore Chapter will likely continue its regular membership programs on a variety of topics of interest to its members.

Phil Sherman, RMA's senior advisor for Asis, was formerly with Citibank. He is based in Singapore and can be reached at 65-68,36-1297 or by e-mail at psherman@dc.com.

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