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VP Bank safely ahead of the game

Singapore

TEN years ago, Liechtenstein-based VP Bank received a licence from the Monetary Authority of Singapore (MAS) in June to establish a new bank in the city-state. Shortly after, on Sept 15, Lehman Brothers filed for the largest bankruptcy in US history, sending the global financial world crashing and subjecting the boutique bank's business model to its greatest stress test.

Fortunately, VP Bank held up well. The dramatic challenges in 2008 did not derail its ambition to penetrate new markets. The Singapore project was an investment in the future, and an opportunity for new client acquisition. The tenacity paid off.

In an interview with The Business Times (BT) recently, Thomas Rupf, deputy CEO and head investment advisory and treasury Asia at VP Bank Ltd Singapore branch, recalled how the bank dealt with the Lehman crisis.

"In 2008, the negative performance of the financial markets and national economies meant specific challenges for financial centres such as VP Bank's headquarters in Liechtenstein and Switzerland which have traditionally been active in the area of cross-border asset management," Mr Rupf said.

VP Bank quickly aligned itself to the new conditions and stepped up activities in the new markets.

"Fortunately, during the time of the Lehman crisis, VP Bank did not have direct exposure to Lehman and the collapsing sub-prime market.

"Instead, this became a period of opportunity for the Singapore office as we were able to place utmost importance on putting in place safety processes to protect our clients and navigate them through the financial crisis."

On hindsight, the experience helped bring VP Bank closer to its Asian clients. It was also an opportunity to attract new clients from global banks who were in the eye of the storm during the Lehman collapse.

"VP Bank has always emphasised priority on getting our clients safely ahead, and over the last decade in Singapore, we have been able to achieve this by providing our clients with reliable support and tailored solutions to meet the market's ever-demanding requirements," he elaborated.

As far back as 1988, VP Bank had strengthened its international activities by establishing companies in Luxembourg and Switzerland. This marked a change from a universal bank with a regional focus in Liechtenstein, to an international group.

Its entry into Asia was accomplished in 2006, with the opening of a representative office in Hong Kong, and an asset management company in 2007. With the licence in Singapore, VP Bank achieved another milestone in setting up a hub in Asia - fulfilling a strategic pillar to its growth strategy to further expand internationally.

Today, the bank has about 50 employees in Singapore. It recently upgraded its merchant bank licence to a wholesale banking one for more freedom and capacity to handle its burgeoning Asian business. The new licence allows VP Bank to conduct the same range of services as full banks, except it faces certain restrictions pertaining to the collection of Singapore dollars deposits and it can have only one main branch.

Marking its 10th anniversary in Singapore, VP Bank sees Asia playing an even bigger role for the bank as it offers more personalised wealth management options.

On the current trade dispute between the US and China, Felix Brill, VP Bank's chief investment officer, said there won't be much progress towards a solution until the mid-term elections in the US. However, the recent trade deal with South Korea showed that the US administration was willing to sign free-trade agreements.

"So, we think an all-out trade war between the US and China can still be avoided," he reckoned, adding that Beijing has ample fiscal means to cushion the impact of tariffs for the time being, such as easing credit to support infrastructure investment, implementing export tax rebates for various products, and deepening regional cooperation.

As for Brexit, the picture doesn't look good right now, with a no-Brexit deal more likely. Increasingly, nationalism will cause political uncertainty to increase occasionally too.

"But we do not expect substantial negative effects for the current broad-based economic recovery in the eurozone," Dr Brill said.

Despite these uncertainties, economic growth is robust in many Asian economies and vulnerabilities do not seem to be excessive.

"However, the outlook for most Asian economies has become more uncertain on the back of escalating trade tensions between the US and China. What is more, Asian currencies are generally facing depreciation pressure," he noted.

The economist expects sideways trading into year-end with risks to the downside amid escalating trade tensions, tighter US dollar liquidity and a potentially more hawkish stance of the FOMC (Federal Open Market Committee) not fully priced in yet.

"Though tensions are on the rise, the overall global economic backdrop is still solid. This should provide support to markets."

To be prepared for this market environment, Dr Brill said investors should pay more attention to risk management and screen their portfolios for the most prominent risk factors accordingly.

"We see further escalating trade tensions between the US and China as the dominating risk currently.

"In addition, the normalisation of monetary policy will be an ongoing source of uncertainty as forward guidance has its limits and central banks have to manoeuvre in largely uncharted territory.

"Another risk stems from further emerging markets turbulences, potentially caused from a default in Turkey or Argentina. Finally, the scenario of a no-Brexit deal has become more likely recently," he summed up.