Question 1: Businesses have a key role in shaping a sustainable world. While there is growing consensus on this, there are also some strong dissenting views. Where do you stand on the matter?

At the heart of this question is the ongoing debate between the virtues of “shareholder capitalism” versus what is increasingly being referred to as “stakeholder or conscious capitalism”.

The shareholder school posits that the correct role for a corporation is to maximise shareholder value; the other societal goals should be left to agencies like investors or the government, who are better suited to this. Making corporations the agents of social change gives managements an easy “out” from driving financial performance. Warren Buffett is one exponent of this school.

I believe that there are deeper underlying questions that this view begs. Some of these are the following: a) Are corporations independent entities with obligations of their own, independent of their shareholders? b) Are governments adequately equipped to address some of the knotty, transnational problems faced by the world? c) Is there really a conflict between the interests of shareholders and those of other stakeholders?

The fact that corporations are “living beings” to all intents and purposes (which is why shareholders have limited liability) suggests that they have an obligation to the common good, just as all other living beings. This obligation requires them to look after the interests of employees and customers, as a start. However, I would argue that this also places an obligation to be good taxpayers, as well as address other community imperatives as part of their charter. To that extent, I believe that Boards are not merely agents of shareholders, but have an independent obligation to ensure that the business does what is right.

Two of the biggest challenges our world is facing today are a) climate change, biodiversity and the future of our planet and b) social tensions caused by issues of inequality.

In 2019, floods in Jakarta, raging fires in Australia and serious drought in many parts of the world sounded an alarm on the pace of climate change. There was also massive social unrest – higher than any year since 1968, with at least 25 civil protests around the world. The synchronised anger was fuelled by growing income inequality, and compounded by the rise of social media and the Internet, which made the divide more pronounced. In the coming years, I believe social tensions will be exacerbated by the pensions and jobs problem. As people live longer, the savings and pensions which have traditionally funded one’s retirement will no longer be sufficient. As older people hang on to their jobs longer, and as younger ones vie for the same opportunities, generational tensions will result. Okay boomer, on steroids!

The nature of these problems is such that they transcend the nation state. Therefore, we cannot leave it to NGOs and governments to find resolution on their own. The truth is that private sector corporations are some of the biggest actors on the world stage, and have an ability to carry influence across borders. They represent a potent source of resources and talent, and not bringing this to bear on what are literally life and death issues would seem ill-advised.

Finally, I actually believe that there is no real conflict between shareholder and stakeholder interests. The issue is one of timeframes. While there may be some tradeoffs between maximising shareholder returns and providing societal benefits in the short term, addressing broader issues in society is completely consistent with shareholder interests in the long term. The long-term interests of the shareholder require that the company have a long-term existence. This can only be achieved if it has a “ licence” from civil society in addition to any other licences it needs.

I also believe that the growing focus on sustainability will result in massive incremental business opportunities as the world reorganises to a more planet-friendly business model. The shift to renewable forms of energy is one example. Think not just solar plants, but transmission, distribution, storage and Tesla!

At DBS, advancing the sustainability agenda through our three pillars of responsible banking, responsible business practices and creating social impact, has become a strategic priority. Some of the bank’s focus areas include stepping up on sustainable financing, pursuing financial inclusion and democratising wealth creation by making financial planning and investment convenient and easy to understand for all customers. Through the DBS Foundation, now in its sixth year, we also seek to multiply our social impact by supporting social enterprises which are working to solve many of the world’s sustainability issues.

Question 2: How will digital banking entrants in the coming year affect the competitive dynamics of the Singapore banking industry? How are you responding to them?

New entrants into any market increase competitive intensity, and the five new virtual banks who will be awarded licences this year are no exception to the rule. In addition, it is likely that the new competitors will be free from the burden of legacy, and have access to large resources. Therefore, they will quite possibly be able to disrupt the market in interesting ways, and are not to be underestimated.

However, I do not believe that it will be easy for new entrants to be successful in the short or medium term. There are a few factors to consider:

1. The Singapore banking market is not a large market, and banking penetration is high, at over 98%. There are really no obvious underserved segments; to the extent they exist, the revenue pools are likely to be small.

2. The incumbents – including DBS – have made credible strides in their own digital offerings over the past few years. The new players will not find it easy to create very differentiated offerings.

3. Once the players reach a certain minimum size, the capital requirements are sizeable, and the onus for regulatory compliance will create challenges. On the back of the Uber and WeWork IPOs, it is unlikely that investors will have appetite for continued unlimited cash burn without a line of sight to EBITDA and returns.

4. While competitors are likely to drive price competition, it is a healthy sign that the regulators are unwilling to support predatory pricing. In industries like e-commerce and ride hailing, deep discounting with a “winner take all” mentality has led to industry instability. Such instability in financial services may be unwise.

We have been preparing for this new form of competition for the past six years by seeking to disrupt ourselves before someone else can! I believe that we have built sufficient organisational capability and muscle in our technology, our products and our people to be able to compete effectively.

Our digital platforms enable 3.3 million customers to carry out everyday banking transactions from payments to investments. PayLah!, our digital wallet, is now routinely used for shopping, dining and transport in addition to peer-to-peer transfers. We have the lion’s share of overseas remittances with 7.4 million transactions to almost 50 countries amounting to SGD 13.4 billion annually. Our new comprehensive digital financial planning tool has already reached 1.8 million customers with more than 300,000 actively using the tool monthly; 33,000 customers have turned from being cashflow negative to being net savers. We have created digital marketplaces for customers to buy and sell properties and cars, make travel arrangements and switch utility providers.

In short, while any new competition must be taken seriously, I am confident that the incumbent players will hold our own. With the Singapore banking market already well served by more than 200 players, the additional competition from five new digital banks is likely to be manageable.

Question 3: Tell us more about your plans and strategy for Hong Kong and the Greater Bay Area.

The Greater Bay Area (GBA) is poised to be one of the great mega-regions of the world. It has modern infrastructure, a wide array of manufacturing expertise and extensive connections to other parts of the mainland and to the region. There are more than one million companies, many of which are clustered around technology, white goods and car manufacturing. Its teeming population is made up of migrants from other parts of the mainland seeking a better future. These characteristics make the region a fertile ground for local and global players to test concepts and innovate.

At least since 2000, Hong Kong has been one of the biggest beneficiaries of the China growth story. This has not been from largesse; rather, it is the soft and hard infrastructure of the country, and the resourcefulness and tenacity of its people, that have made Hong Kong the capital markets hub for the mainland. Notwithstanding the short-term social tensions, it is our belief that in the long term, Hong Kong will continue to benefit from the China, and more specifically the GBA, phenomenon.

Our Hong Kong franchise is well placed to drive our GBA strategy. As the anchor of our Greater China business, it has been financing Chinese companies’ international expansion, capturing the expanding trade and investment flows between Hong Kong and southern China, as well as meeting the growing demand for wealth management services from affluent Chinese individuals. These activities were responsible for the tripling of our Hong Kong and Greater China business over the past decade.

We therefore have the expertise, experience and resources to capture opportunities across the GBA customer spectrum. For large corporates, we will target industry leaders by customising cross-border solutions with our treasury and capital markets capabilities. We have already been doing this to serve Chinese and Hong Kong large corporates over the past several years, so the approach will be an extension of the existing strategy. For medium-sized companies, we will grow by targeting large corporate customers’ supply chains, using digital payment platforms and data analytics, and drawing on our SME capabilities in Hong Kong. Our ability to offer SMEs dual account openings in China and Hong Kong will be another advantage, particularly in garnering deposits.

The results since the inception of our GBA strategy in 2018 have been ahead of our business plan. The GBA accounted for around 5% of our total income from Greater China (including Hong Kong) in 2019.