Asian banks are gaining ground on their global counterparts by improving their service quality in corporate banking, according to the latest study from financial research firm, Greenwich Associates.
Banks in the region have reportedly increased their service levels to, “fill the void left by retrenching foreign European banks,” says the report, Asian Companies Forge New Ties With Local Banks.
According to Greenwich, the global financial crisis and its fallout have provided Asian banks with the opportunity to make headway in the corporate banking and cash management relationships spaces, traditionally claimed by European banks. However, these banks have come under pressure due to balance-sheet constraints and face difficulties in securing USD wholesale funding, says the report. This has led some global banks to reduce their Asian strategies and resources devoted to the area, allowing local banks to take on new business.
These new opportunities in the market have resulted in Asian banks making significant investments in technology and talent, leading to some local Asian banks emerging as a more stable and reliable option in the local market. Managing director and head of Asia, Greenwich consultant, Markus Ohlig, says, “By closing the quality gap with global banks, Asian banks have made the prospect of partnering with a local provider an increasingly viable alternative.”
According to the report, by taking advantage of these new opportunities, Asian banks have seen considerable gains; in 2009 Asian banks held 57% of corporate banking relationships with large companies in the region, compared to 17% for European banks and 17% for US banks. By 2012 Asian banks had grown their share of relationships to 61%, versus 16% for US banks and 13% for European banks.
Fion Tan, Greenwich consultant, says, “That growth is all the more impressive in light of the fact that it occurred during a period in which currency mismatches and associated swap costs were affecting the ability of non-US banks to provide US-dollar funding.”
In corporate cash management, up to 2008, the top five cash management banks in Asia were made up of European and US players, controlling 46% of market share. Today, this is 37%. The report says that companies still perceive foreign banks in aggregate as delivering superior cash management service quality overall and foreign providers remain dominant in international cash management and continue to hold a larger share of Asian companies’ fees and compensating balances in domestic and cross-border business.