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November 18, 2016

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UBS eyes access to talent and technology

SWISS-BASED investment bank UBS Group AG unveiled a major business expansion in China earlier this month, with the opening of a new center in the Jiangsu Province city of Wuxi, which is about 140 kilometers west of Shanghai.

The new Business Solution Centre has employed about a staff of 200. The bank also said investment will be made in new technology such as blockchain.

The expansion appears to buck the global trend of banks tightening their belts amid slower profit growth and uncertain geopolitical events.

Axel P. Lehmann, group chief operating officer of UBS, sat down with Shanghai Daily in company’s new office in downtown Wuxi to discuss China expansion and technology-driven innovation.

Q: The banking industry is facing challenges worldwide. But UBS is now announcing a major expansion in China with its new Business Solution Centre. What’s the strategy behind that?

A: As you say, the banking industry is in a huge transformation. So it’s really important for a global bank like us to have presence in key markets. It’s also important for UBS business solution centers to have access to emerging talent pools globally. UBS business solution is a global concept. We have already rolled it out in Poland, India and the US. The opening in Wuxi is just another milestone for us.

Q: How does it all relate to cost factors?

A: Cost is always a topic, but it’s more about effectiveness and efficiency. Through our new site in Wuxi, UBS can for example, expand its capabilities by attracting extremely well-educated quantitative analysts and mathematicians in China. Wuxi has a population of 6.5 million, with great educational facilities and well-known universities. So we have clear hopes that we can attract the best and brightest talents to support UBS businesses. That is the biggest advantage we see.

We have now roughly 200 staff in Wuxi and will expand that to accommodate up to 500 employees over the next two to three years. The setting up of a business solution center here is in line with our strategy to double our staff and business volume in China by 2020.

Q: UBS is spending around 1 billion Swiss francs (US$1 billion) to standardize its IT platform across its wealth management business. Does that mean further slimming of UBS’s investment bank business and an increase in wealth management business? How will that affect business in China?

A: The development of the wealth management IT platform is independent from businesses related to our investment bank and asset management businesses. It is part of our efforts to improve efficiency and effectiveness and to streamline our IT platforms for wealth management.

Our China’s business presence is in line with our strategy of clearly positioning UBS as a leading investment bank globally. We have strong presences in Europe and US, and we see increasing activity in China, such as outbound transactions. Expanding our domestic wealth management and asset management businesses also form part of our China strategy.

Q: In this age of technology, what’s the UBS view on the application of blockchain?

A: UBS sees potential in blockchain technology, but it will take some years before you see meaningful and successful commercial applications. In the next five to 10 years, when it comes to the potential application of so-called “public blockchain,” what you will see is more companies and government institutions using blockchain to facilitate information sharing. But on a broader scale, it will take time for people to see the benefits of its full deployment.

Q: Do you have any examples of successful banking pilot projects using blockchain?

A: We have developed several pilot projects, including using such technology to issue “smart bonds,” a leaner and more transparent way to raise capital, and in “loyalty payments,” an application where e-commerce payments are instantly settled with loyalty points as crypto currency.

Most recently, we announced a partnership with three banks plus technology companies to further explore what we call the “utility settlement coin,” a concept that helps to translate bitcoin-like money and link it back to real-time central bank money, like US dollars, Swiss francs or renminbi.

Q: The technology of blockchain behind bitcoin was designed to do away with banks, but now top global banks are racing to make it work for them. Some may accuse banks of trying to play monopoly with the new technology. What’s your view on that?

A: I don’t think so. You could view blockchain technology as a kind of taking-over part of the value chain that banks are providing. On the other hand, it’s a great opportunity to make the banking and financial system much more effective, efficient and safer. In this regard, it’s a very important area for us to invest in to improve our overall value offering. So we are cooperating with our own in-house innovation labs as well as promoting an open architecture to share our information and data.

Q: You joined UBS as group COO earlier this year. What are your top priorities?

A: My priorities are absolutely clear. First, to continue to support and help drive transformation of the group, in particular combining innovation and digital operations. Second, to look at innovative forms to structure the bank on a going-forward basis that supports collaboration, either together with industry partners or industry utilities.


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