OCBC’s Tsien: “The pandemic will have lasting impact on the way we work”

• Governments’ and central banks’ extraordinary measures to combat COVID-19’s economic blow will help arrest an otherwise deeper recession
• The financial sector plays a key role in supporting government initiatives and helping customers ride through this difficult period
• The pandemic will change how people work and how businesses operate for good

The COVID-19 pandemic has brought about an unprecedented economic shock. With stresses on global supply chains and increased volatility in financial markets, extraordinary measures have been taken to address not just a health emergency, but also a deep global economic crisis. 

In Singapore, even the government’s budget worth $42 billion (SGD 59.9 billion) may not be enough to prevent a recession. Our forecast for Singapore’s economy is a 3% contraction, which could go even higher to a mid-single digit contraction. Hong Kong will report another year of recession, and slower growths are also expected in our other core markets in Malaysia, Indonesia and China.

Countries have introduced multifaceted measures to support the economies, including financial assistance for businesses and individuals. The financial sector in these countries plays a key role in supporting these initiatives and other relief measures to help customers ride through this difficult period. 

Ensuring the safety of staff and customers is paramount

In this time of crisis, our priority is to ensure that our staff and customers stay safe and healthy. From the start of the outbreak, our branches and offices implemented temperature screenings as well as health and travel declarations to ensure that customers who enter our premises are well and safe. We also stepped up cleaning of our branches and offices and made hand sanitisers available on every floor of each branch. 

At the onset of the outbreak, we implemented split operations to minimise close contact among employees and to ensure business continuity. More vulnerable colleagues, such as those who are pregnant or with pre-existing health conditions, were asked to work from home. We arranged for more staff to work remotely as the spread accelerated, and now more than 70% of our staff are working from home. We also increased offsite systems access to allow the continuity of banking services and support without compromising systems security and risk management. 

We have closed some branches in response to social distancing measures.  Many of the employees from these closed branches have been redeployed to other roles or are working from home to ensure service levels to customers are not impacted. For those who have to work in the office, we implemented other measures such as staggered work hours and safe-distancing within OCBC’s premises.

Governments of our core markets have implemented relief measures to help both individual customers and businesses. We are fully behind these measures and we had proactively reached out to them to make available targeted relief measures.  We want to do our very best to help bring affected customers back to their normal state within 6-12 months after the outbreak ends.

Financial system will remain stable amid pressures and casualties

No one bank can be ‘ready’ for a crisis of this magnitude, but if this pandemic were to happen prior to the global financial crisis, it would have been worse.  Most banks today are better capitalised and, in that sense, better prepared for crises. In our case, we have always managed our balance sheet prudently and maintained strong levels of capital, funding and liquidity. 

However, there will still be casualties. Non-performing loans and credit costs will rise, and investment activities will be muted in the short term as lockdowns continue. The impact of the US Federal Reserve’s cuts would also flow through the banking system in varying degrees to the economy. Low interest rates would benefit customers, but long periods of low interest rates will lead to misallocation of resources, which will create asset problems for the banking industry in the long run and pressure on our net interest margins in the short term.

There will be long-term structural consequences that will arise from the nations’ unprecedented use of fiscal and monetary tools, but the near-term positive effects from these measures will help arrest an otherwise even deeper recession. We believe that the fundamental stability of our financial system would not be disrupted.  

I do not expect meaningful recovery this year, although I do foresee greater stability towards the end of the year as well as improved consumer sentiments and investment appetite in 2021. It is good that China has contained the spread of the virus and it could help lead the world out of the recessionary doldrums again. If this were to happen, it will benefit us tremendously as, being a hub economy, Singapore depends on connectivity flows more than any other ASEAN countries.

A stronger push towards digital acceptance is afoot

There is also another silver lining for our banking industry. I am seeing a very good opportunity for an even stronger digital acceptance by customers. Banks themselves encourage the active use of digital channels and services. Stay-at-home directives have propelled both individuals and businesses to embrace digital capabilities much faster than before. 

We have invested significantly in our digital transformation over the past decade, enabling us to respond quickly to the crisis as it evolves. We have upgraded our mobile and digital banking platforms so that customers can transact without stepping into branches. Our employees are also increasingly taking on digital roles. Many of our employees are able to work from home to support the bank’s operations well during this period and we are able to support customers with our digital capabilities. 

Conventional banks will invest even more in technology and digitalisation after the outbreak as the public’s comfort in digital banking has caught up with technological advancements. With the delayed rollout of standalone digital banks, this time gap gives conventional banks more room to develop further digitalisation to compete with digital-only banks.

The pandemic could permanently change the way we work

There will be short-term pressures on OCBC’s financial performance, but we will come out stronger and more resilient like how we have come out of other past crises. 

The pandemic’s lasting impact will be on the way we work and operate, the way customers bank with us and even the way we engage shareholders. This crisis has forced us – whatever industry we are in – to re-evaluate systems and processes built on a business-as-usual operating scenario, to see how we can be more efficient and effective in engaging customers and doing business. It may mean driving our digital push even further, allowing our staff to stay home more often, reducing physical presence in commercial properties and eliminating a number of physical branches and ATMs permanently when more banking transactions can be completed online. 

Today, except for over-the-counter cash services, nine in 10 financial transactions are performed digitally. Our next-generation ATMs, which are available around Singapore, can function as “mini-branches” and can perform 80% of the most requested over-the-counter services. 

We should therefore not view the measures in place during this period as temporary. Instead, if they make sense and have worked, we should consider making these more permanent, even after the pandemic is over. 

Samuel Tsien is the Group CEO of OCBC Bank, the longest established bank in Singapore.