Asia Banking Research

The former Portuguese colony of Macau, China's answer to Las Vegas, has long struggled to diversify its economy away from gaming. Efforts to promote MICE and family tourism have had limited success. After all, Macau is small and faces stiff competition in the region.

Yet, amidst relentless political turmoil in Hong Kong - China's only global financial center - Beijing has found a new opportunity for Macau: offshore finance. While Macau cannot replace Hong Kong, it might be transformed into a secondary offshore financial center for China. Macau benefits from the same one country, two systems model that governs Hong Kong, although the former's legal system is Portuguese rather than British, and doesn't enjoy the same prestige.

Singapore's ride-hailing unicorn Grab is Southeast Asia's answer to Uber. But as Uber's cash-hemorrhaging business model has come under closer scrutiny, Grab has been racing to rebrand itself: first as a digital bank, then as a "super app" that will offer users in Southeast Asia the same bevy of services as WeChat does in China.

Grab has teamed up with a number of financial-services incumbents in its bid to become a digital bank, but there's a problem with that approach: Incumbents want to co-opt Grab, not let in move in on their core revenue drivers. That's why it makes sense for Grab to apply jointly for a Singapore digital-banking license with telecoms giant Singtel. The two firms have plenty of synergies and no conflicting interests. They applied for the license as a consortium just before the December 31 deadline, with Grab holding a 60% stake and Singtel 40%.

Australia is not considered a country at high risk for money laundering. When the Financial Action Task Force (FATF) grades Australia on different AML criteria, it tends to award a "compliant" or "largely compliant" grade. Only 14 of 40 criteria were graded as "non-compliant" or "partially compliant" during FATF's most recent review of Australia. The most long-running of Australia's AML weaknesses are in the property market, where some analysts say unsavory characters from overseas launder illicit cash.

That's why the the recent money-laundering scandals involving one of Australia's biggest four banks come as an unpleasant surprise. The Royal Financial Services Commission's review of misconduct in the banking sector had already cast the biggest Australian lenders in in an unflattering light. Now Australia's financial intelligence agency Austrac is proceeding with legal action against Westpac, one of the four largest Australian banks, alleging that breached AML and counter-terrorism laws more than 23 million times in $11 billion in transactions. Some of the transactions reportedly involved the exploitation of children.

The political unrest in Hong Kong has plunged the city's economy into recession for the first time since the global financial crisis of 2008-09. The retail and hospitality sectors have borne the brunt of the blow so far, but that's set to change barring a miraculous easing of tensions.

One of the most obvious impacts of the unrest on the financial sector is the delay of Hong Kong's planned launch of eight virtual banks. The neobanks, which are heavily represented by financial interests from the mainland, were set to swoop onto the scene and shake up a staid banking sector dominated by a handful of incumbents accustomed to high profits and meager competition. That would have been a boon for consumers and forced incumbents to up their game. In fact, ahead of the anticipated arrival of the neobanks, traditional banks had already started to slash some unpopular fees.