In 2010, Standard Chartered adopted a new slogan: “Here for good.” Now, just as Google had before, with its “Don’t be evil” mantra, the bank is finding it hard to reconcile its values with its business in China.
Like its larger rival HSBC, StanChart is struggling to balance its commercial dependence on China against its London headquarters and its reliance on US dollars. The internal debate is sharpening amid rising geopolitical tensions and increased pressure from investors on environmental, social and governance issues.
Led by chief executive Bill Winters, StanChart’s top executives met late last year to discuss reputation risk. Separately, the board debated its approach to government relations. China and human rights featured prominently in both discussions, according to people familiar with the meetings.
The non-executive director responsible for brand values and conduct — Jasmine Whitbread, a former Oxfam director and ex-CEO of Save the Children — chaired the meeting. Attendees questioned whether, by continuing to do business with Chinese state firms accused of human rights violations in Xinjiang, StanChart was living up to its brand promise of “here for good”.
Some board members expressed concern that the bank’s relationships with such state entities exposed it to excessive reputational risk, the people said. They also discussed their approach to the national security law imposed on Hong Kong and US sanctions on some of the city’s top officials.
Greater China is StanChart’s most important regional market, accounting for four-fifths of its 2020 profit.
“China is obviously a really big issue at the bank and there is significant tension between that fact we need China and a good relationship with its authorities, versus the brand promise ‘here for good’,” said one person involved in the internal debates.
“If you have a business that is geared to China, how do you approach the Uighur muslims, US-China geopolitics, the belt-and-road colonialist debt trap and Hong Kong, while being a bank that espouses ESG values?” the person added. “How do you make that fit? We have been spinning the wheels trying to work it out — without success.”
StanChart’s strategy for now remained to tread lightly and avoid provoking the Chinese government, several of the senior sources said. However, the bank is increasingly being forced to pick sides.
Last June, with protests still raging on the streets of Hong Kong, the lender crafted a statement intended to appear neutral. “We believe the national security law can help maintain the long-term economic and social stability of Hong Kong”, it said, adding that the “one country, two systems” principle should be maintained.
Many staff were upset and internally it was interpreted as implicit support of China, several sources said. British lawmakers and some institutional investors publicly criticised the stance.
“Hong Kong and mainland China are fundamental to our business . . . and we remain committed to these markets,” said a spokesman. “We comply with all relevant laws and regulations, and seek to engage constructively and be a force for good wherever possible.”
Another episode when the bank was torn between commercial considerations and its values was the assassination of Saudi dissident journalist, Jamal Khashoggi, in October 2018, two of the people said.
At the time, StanChart was applying for a banking licence in Saudi Arabia, which led to a debate over whether it should continue. It did — and was granted a licence in February 2019.
Worrying over the clash between the west and China — and potential blowback for StanChart — also contributed to a recent decision to sever business with international embassies.
Late last year, a review by the London-based bank found that many embassies — including those of China, the UK and US, and some emerging-market countries — generated little income while flouting strict compliance and anti-money laundering rules, leaving it exposed to regulatory action, according to five people with knowledge of the decision.
However, executives were concerned that they risked severe repercussions for cutting off individual nations. They were particularly anxious about relations with its profit engine, China, and the UK, where it is headquartered and regulated.
Ultimately, the bank decided the least contentious decision would be to close all embassy accounts, the people said.
StanChart — which traces its roots to a royal charter from Queen Victoria 168 years ago — is one of the world’s last truly global lenders, operating a network across 60 countries with 85,000 employees.
The embassy cull is indicative of the challenges of running an international bank that straddles east and west during resurgent superpower tensions. It also reflects concerns about operating in an increasingly strict regulatory environment in which StanChart is one of the main intermediaries between China, Africa and the Middle East, and international capital markets.
“We are going to annoy a lot of our friends in countries where we banked their embassies, but the decision was taken across the board for this reason,” one of the people involved said. “We know embassies can create problems, so don’t want to get caught up in that. This was a business decision, not a political one.”
Nevertheless, central banks from African nations including Kenya, Nigeria and Botswana had contacted StanChart to express concerns about their embassies being cut off, some of the people told the Financial Times. Bankers internally were fretting over the possible loss of sovereign wealth fund business as a result, they added.
StanChart said the embassy exits were part of “transformation measures to improve efficiency and sharpen focus on activities that buttress our resilience and productivity”, adding: “The bank remains fully committed to its broader government and country relationships.”
StanChart’s move is part of a trend that began a decade ago, when many international lenders including JPMorgan closed the accounts of foreign government officials because of the opacity of embassy and diplomatic money flows and the embassies’ reticence to provide detailed information.
A saving grace in StanChart’s geopolitical dilemma has been HSBC’S higher profile and heavier footsteps. Its chief executive, Noel Quinn, has been summoned before the UK Parliament to justify its actions in Hong Kong and the lender was repeatedly singled out for freezing the accounts of pro-democracy activists by former US secretary of state, Mike Pompeo.
“We are looking across at what has happened with HSBC worried that it is coming our way,” another source said. “We spent a lot of time moving in HSBC’s shadow on this. At the moment they are taking all the flak, by the grace of God.”
Donald Trump losing power could help to ease tensions. Last month, StanChart chief executive Winters said he hoped that new President Joe Biden would re-engage with China and end “tit for tat” escalations in trade and geopolitics.
Senior figures within the bank have also bridled at what they see as hypocritical criticism from lawmakers and investors. They argue it ignores the recent history of autocratic British colonialism in Hong Kong. It also overlooks other industries’ close ties with authoritarian regimes in Asia and the Middle East, including asset management and the political establishment itself.
“We are just a microcosm of what is happening across the world,” said one of the sources. “It would be economic suicide for most companies and countries, including China, to get into a total stand-off.”
“There are correct moral questions about companies’ supply chains and human rights, but apply them universally, not selectively,” the person added. “I have to hope that politicians and opinion formers dig a bit harder to make sure they really understand what the complex reality is.”
In 2018, StanChart relaunched its slogan with a splashy campaign fronted by Jamaican Olympian Usain Bolt, expanding it to: “here for good, but good enough will never change the world”. It is now being used against StanChart by climate change activists, and over its business in China.
Last month, Swedish environmental activist Greta Thunberg targeted the lender on Twitter, accusing it of helping coal, oil and gas companies raise $24bn of financing since it spoke out in favour of the 2015 Paris Agreement’s goals and pledged to reduce emissions.
“Standard Chartered finances the pollution of our water, makes our air unbreathable, and toxifies the soil we live on,” said Mitzi Jonelle Tan, a 23-year-old Fridays for Future activist from the Philippines. “If you actually want to be ‘here for good’, stop funding our destruction.”