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9/27/2011

The safest Singapore bank

I would put UOB as the safest Singapore bank for one simple reason. It is managed by the real owner. You can’t imagine the real owner selling away its family jewel. It is possible only if a prodigal son appears on the scene. Not likely at the moment.

The risk of UOB going the way of Barings or UBS is much lesser. There is ownership. In the case of banks managed by professional managers, you would not know when they will strike a deal or did a Nick Leeson and the bank will be gone.

In today’s world, where integrity and trustworthiness can be bought by money, it is always the price to pay. The old virtues of righteousness, honesty, loyalty and yes, integrity and trustworthiness, are good to have ideals. Not meant to be taken seriously by those who are too smart. When they are too smart, the only interest is their own pockets.

In every commercial deal someone will be taking a cut. The bigger the deal the more attractive will be the cut. The Chairman or directors would also be in the game for the cut. When the new ethos is every man for himself, all institutions and organizations managed by clever professional managers are at risk.

When countries can be sold, what is so special about banks or sovereign funds when they are managed not by the true owners but by professional managers who owe no loyalty to the organization except to themselves? Most of the big international banks and MNCs are now in the hands of professional managers with the minority shareholders not knowing what is happening and still very trusting of the management.

What is so special about Singapore and Singapore govt owned organizations when they are managed by professional managers who owe no loyalty to the country? Who is there to guard against professional theft or adventurism when UBS too can do nothing about it?

Nothing beats the real owner sitting in management and watching his own money carefully. The day UOB goes the way of being run by professional managers, without the owners in control, I will withdraw my view that it is the safest bank.

7 comments:

Anonymous said...

Being the biggest investor in UBS, does Singapore have any board or management representation in UBS main office?

Anonymous said...

redbean, if you understand how fractional reserve banking works, you will know that there is really no such thing as a 'safe bank'. If all UOB depositers were to turn up tomorrow to request for their demand deposits, would you wager that UOB has the funds to satisfy those demands? If it was any other company, that company would be deemed to be trading whilst being insolvent.

Chua Chin Leng aka redbean said...

On that count no bank can withstand a run. My main point is that the major banks and MNCs are run by professional managers without any true owners. Thus it takes a few individuals to turn these organisations into their personal ATMs.

Anonymous said...

Private financial organizations should not be equated with national(state) institutions. And so is state funds and assets with individual private owned liquidity and possessions. The difference being self owned and common(public) owned.
Btw, the safest bank is the pillow one sleeps on, use the money as the stuffed material in it. Of course never let it catches fire.

Anonymous said...

Wee Cho Yaw, don't you be conned into hiring an angmoh to run your family biz. You won't know when they have sold out your family fortune. There are people who hire angmohs to help themselves to clean up corporations and banks to park the loot in the Bahamas.

Anonymous said...

Your vote for UOB based on the fact that the owner runs the bank is actually equivalent to the Chinese dynasty of the past. The post gets passed down from father to son and it goes on. Who is to assure that the son is up to par with his father in running the show? This is worse than your UBS situation, at the very least you can change the CEO. In the owner situation, how the hell do you do that? look around, there isn't many family owned and run enterprises still "alive" today.

Chua Chin Leng aka redbean said...

I did qualify myself on the prodigal son part. As long as the son is capable, they should refrain from hiring a stranger.

When professional managers were moving in to run private companies, it started quite well, and the owners were still keeping an eye on the operations. Also the value of goodness was still intact.

Today, such virtue is rare. And once the hired guns have tasted blood, knowing that there is no real owners on their back, indiscretion is a normal practice, like paying themselves crazy. They knew that they are the de facto owner by virtue of their position.

It is only how much and how sly they are in the taking. It's happening.

Nothing wrong with family fortunes run by able family members. If they are unable to find anyone suitable within the herd, take a hired gun, but make sure he is on a lease.