 Good afternoon, ladies and gentlemen, could we settle down. I know this is going to be a great one hour and it's going to be a great one hour of conversation with all of you. So I really want to start on time at 12 sharp and I have a great panel. You could tell they're all men and I'm the woman moderator, right? And we love the diversity on this panel. And the essential question that we are all going to be asking is they are going to be strategic shifts in so many areas and it's going to be part of our World Economic Forum conversation. But one big shift that we are going to see is in the area of financial landscape. And the key question that all this wonderful panelist will be talking about is what are the major trends, the new models and the emerging technologies that are transforming the financial landscape. And in no particular order, but because I am the moderator and I use my chairperson's prerogative, I wanted to start the conversation in a while with Mr. Jeffrey Irwin. He's the CEO and chairman of Asia Pact, head of Global Investment Banking at JP Morgan. And he's based in Hong Kong. And of course, next to him we will have Mr. Maui Hua, President and CEO of China Merchant Bank, People's Republic of China. And in Peter San's place, because Peter can't make it, we have a wonderful friend, Mr. Jasper Bindra. He's the group CEO and CEO of Asia for Standard Chartered Bank, also based in Hong Kong. Then next to Jasper, we have Mr. Morris Lee. He's the President of China Guangfa Bank. And the two gentlemen from China will be speaking in Mandarin. So do get your headphones ready because we do not want to miss any part of the conversation with them. And last but not least, we wanted someone from what you call the left field, the curve ball. Someone who would be disruptive and ask him to share with us his thoughts. And that's Mr. Joe Schoendorf and he's the partner of XL Partners in USA. So without further ado, can we warmly welcome this great panel that I have put together for all of you. I'm going to start with Jeff first. Jeff, you have been in banking for 35 years? 33 years. Okay, I've added two more while we are sitting here. And in this 33 years, I think Jeff, the biggest changes have been coming in the last three to four years. Can you share with us what are the big shifts that you are seeing and the recent conversation about the role of the Euro and the ECB? Give us some thoughts on that. First of all, it's a privilege to be here today on behalf of J.P. Morgan and thank the World Economic Forum for organizing this event and having such an illustrious panel. You know, in the 33 years that I've been in the business or as my wife keeps reminding me the five decades that I've been active in banking from 1979 to date, I've seen a huge amount of change. It has accelerated in the last few years. Clearly the financial crisis that we hit in 2007 had a massive impact on confidence in the banking system around the world. And part of the reaction to that was a dramatic increase in regulatory oversight and in regulatory reform. We still haven't seen all the implications of that. We're still working our way through it. But it's something that's clearly going to be a dominant feature through the remainder of my career and many of my younger colleagues. I would say that most of the bankers that I know believe that regulatory reform was essential. Everybody believes that we need a strong, well-capitalized and liquid banking system. I think what many bankers do want to see though is that regulatory reform is done in a thoughtful and even-handed way that there's a level playing field for everybody. And that where multiple regulators are involved, that they avoid contradictions in regulatory oversight. You know, it's interesting. I run global investment banking for J.P. Morgan including the U.S. And I recently moved to Hong Kong to take over the chairman and chief executive role for Asia Pacific in addition to running global banking. And one of the things that really surprised me was just how many regulators I had to deal with. J.P. Morgan is present in 14 countries from India right away across to Australia. And we deal with approximately 120 different regulators in that region. So it really is quite staggering how many different regulators, how much potential there is there for contradiction between different regulatory regimes. Looking at sort of this evolution of investment banking, you know, one of the things I looked at, I probably have a slight investment banking bias here for obvious reasons. One of the things I looked at was just how much the landscape has changed in the last five years. One of the comments just made was that change has accelerated in the last five years. I think that's pretty much correct. You know, if you looked at just looking at IB fee wallets globally and you looked at the top 15 financial institutions, the top 15 banks that are active in investment banking. It's interesting that four banks have dropped off the 15 list. Pretty obviously Lehman Brothers, Merrill Lynch, ABN Amarrow and Warkovia. Three in the US, one in Europe. And they've been replaced by one from Hong Kong, one from the US, one from Canada and one from Europe. That would be Wells Fargo, HSBC, Nomura and Royal Bank of Canada. So we're seeing a change in that landscape. Secondly, if you looked at the top five banks in the investment banking fee wallet over the last five years, you see that their share of the wallet has actually slipped from about 33% to 30%. That's actually a massive shift when you really translate it into fees and into domination of market. And what it shows is we're getting a bigger diversification of players in that top league sharing more of the wallets, less concentration at the top, more players, larger diversification. Third thing I just mentioned is the emergence of Chinese banks. The 18 Chinese banks, again, when looking at investment banking fee wallet, have seen their share of Asia Pacific IB fees grow from 4% to 17% in the last five years. So really important emergence of Chinese banks outside of China as well. Cross-border, cross-regional M&A fees. I often use, I usually use, M&A as really a very good proxy for the state of the market and what's really happening. And when you look at cross-regional M&A, it's really giving a lot of insight into corporate confidence and capital flows. And one of the things that, you know, I just point out, if you looked at M&A volume, it peaked at 2007 at about $830 billion of deal value. This is cross-regional M&A and declined pretty rapidly to $620 in 2007, 2008, sorry, and really fell off a cliff in 2009 when we had the low point in confidence in the system at about $320 billion. Again, contrast that with $830 billion at the peak. It's recovering this year, we'll probably see about $600 billion of cross-regional M&A, but significantly below that peak of 2007. And again, if you looked at where that M&A is really occurring, you'd see a pretty big spike in energy and in technology. Pretty much doubling in the last three years and quadrupling since that real low point in 2009. Corporate loan demand, you know, people keep saying to me, well, the banks aren't lending. So I chaired JP Morgan's loan committee for the last four years in the U.S., currently chaired in Europe, and the U.S., which is really the core of our market, gives a pretty good indication. We have increased our lending every year since 2009. If you looked at corporate loan volume in 2011, it was about $1.9 trillion and growing, and actually we surpassed that in August of 2012. So in eight months of 2012, we surpassed the record high volume of 2011, so pretty significant. So I think one of the trends we're going to see, one of the things I keep telling my young bankers, is that our business is not really driven by proprietary trading. It's not driven by derivatives and all the other sort of fancy things. It's driven by client demand. It's driven by servicing our corporate clients, whether that's in our treasury services business, whether it's in asset management, whether it's in debt or equity raising or emergency acquisition advice. We follow the clients. And what we are seeing is increased activity, again, by clients and across border bases, increased activity in the capital markets. The equity markets continue to be a little more challenged than the debt markets, with record low interest rates, with seeing record volumes of debt issuance. And again, I think the shape of investment banks is really changing to serve as that evolving client base. Good. Geoff, I'm going to ask you to hold on the role of the euro, because we want to hear from Mr. Ma very quickly, but I want to ask you to take a look at the crystal ball. Next five years, do you see China or Asian players in the top five in investment banking? Not in the top five, but I think you'll see more than one Chinese player in the top 15, that's for sure. Thank you. That brings me nicely to Mr. Ma. Mr. Ma, you know, with the growth in China and your 12 years in China Merchant Bank, can you share with us what is the vision of the role of the Chinese banks in the world economy and what's the role of banks in China's growth right now? Well, I'd like to thank all the members of the audience for your turnout and for your tremendous interest. And this afternoon we're going to have a business council session. We're going to talk about how to get away from the worries of the eurozone crisis. We do not have the panacea to solve that crisis. But for all the previous financial crisis, we would rely on technology and innovation to walk out of those crisis as history indicates. I think the banking sector in China is a latecomer. We have had a short history of only three decades while the traditional Western banks have had centuries of history. And we are confronted with numerous challenges as well. I think a very important opportunity in front of us is the third industrial revolution. I think it's proposed by an American economist which means that information technology will inject a new momentum into the global economy. I think the IT-driven revolution will bring new momentum to the economy but moreover it will change our way of life. Changing our way of life will bring about fresh demand for the modern banking sector or the change demand for the modern banking sector. And despite a very recent history in front of the new technology revolution, all banks in Comben ten years ago are at the same playing field. And ten years ago inspired by Bill Gates, I started the retail banking business which was a phenomenal success. Bill Gates said ten years ago that without changes, traditional banks would become dinosaurs in the 20th century. So as an emerging bank is a very incumbent, we should not be following the steps of the others. Then we would like to focus on retail banking. At the very beginning we have only 200 branch organizations at present. We have just over 900 branch organizations all across China, but leveraging the Internet, we have achieved our dreams. We have realized our dreams. We have been ranked as the best retail banking channel for many times despite a small network. However, we have a 90 percent Internet business substitution rate for the physical channels. And given our client structure, our channels are as effective as those big banks in China as well. And we are confronted with a fresh challenge. With the evolution from mainstream to PC, we're also actually into a new stage of mobile Internet with mobile finance. We saw the IPO offer in Facebook some time ago, and the banks found a lot of challenges from those new players. And in the Internet, with the help of the search engine, with the help of mobile, the cloud computing, the mobile devices, and the credit bureau kind of credit reporting, especially in the case of Facebook, which has 840 clients, many of whom have a demand for funding, and they can leverage Internet to access finance directly without any matchmaker in between. Therefore, the challenge for the banking sector is really severe. I've also noticed three emerging trends. In my view, mobile payment is going to replace the traditional approach. If you look at the global online, now share the amount increased to around 145 million, so that's 520 billion. The total payment will have amounted to 1 trillion US dollars accounting for 2 percent of the global payment. However, that is a dynamic area of development. Second, different forms of learning previously thanks to the only sources of learning. However, learning everywhere means learning through Internet. I'm afraid it is going to take more details about online learning. So this can provide us with solutions of previous issues, such as imbalance information and high risk. So this form of learning, in my view, can help us resolve all the previous problems, minimizing transaction costs and enhancing information transparency and including control over risks. In addition, we can provide customer services and greater freedom. Previously, it was the management and it was the business community that is applying for learning. But in the future, almost everybody can apply for learning. In 2005, I believe the UK had its first practice in this area, but now we noticed in China, many new organizations are coming up. Third, financing through different channels in other words, internet. Internet is a good source of financing for investment projects. So internet is largely replacing the functions of investment banks. In the age of cloud computing, this also means that the supply is of the financing can actually provide financing through internet. And then, through search engine, all the information can be collected and released in real time and precisely on the risks, price and default situations for all the demanding side can be informed to the suppliers. So I believe that if there is a good investment banking sector, imagine a big project, a profitable project, many investors will be able to join in. In the United States, there is an institution called CASTA which has been in more than 200 years attracting altogether 2 million investors providing 250 million U.S. donors for 24,000 projects, a very dynamic sector. These three emerging trends, in my view, presents challenges not only to the traditional banking sector, but also to the investment banking sector. It is true that we have technological assumptions, but those assumptions meet logic. It's almost like the explosive power of internet and the power's influence on the commercial banking sector. The thing is, too, in front of us, facing the new challenges, how can China's banking sector play out its full potential? Apart from relying on China's economic transformation and the transformation of the banking sector, there are more things we need to do. China's economy has been growing by more than 10% annually, so has China's credit size. But previously, we relied on VIP clients, but right now, perhaps we need to resort to more technology contents into our economic growth. And to do that, the banking sector needs to leverage new technologies, especially new technologies that can provide an impetus to China's retail banking and China's consumption-based banking so that consumption can be the most Thank you very much. I'd like to follow up with a question very quickly. So this is very much driven by consumption-based banking. Is the government of China ready for such a wave in banking change? To be honest, it tends to be the commercial sector or the banking sector driving forward the mindset change in the government sector. Innovation always comes from the business sector. The government is taking a proactive approach. For instance, if you look at the Banking Regulatory which is in China, the approach is based on different sub-sectors. However, a comprehensive approach has been adopted by the government and the regulatory authorities, and many measures have taken place. In terms of globalization of China's banking sector, the government has also provided more supportive measures. As I've mentioned, in the outlook of the financial crisis, the government is focused more on the most strict demand to drive the most strict demand which most people is a consumption-based learning provided by the banking sector, and that involves many policy factors, for instance, policies for SMEs. So that's an issue under consideration for the government and different regulatory authorities. Many policy-supporting measures have come up, including measures for risk-based investment, provisioning policy, risk foundation, and guarantee companies, etc. All of these will facilitate China's consumption-based banking sector. But what matters more is to respond to the needs of technological change and transform the traditional model. Thank you very much. We love what we are hearing, and I'm going to move to Jaspal. Jaspal, you've been in banking for a long time. I'm trying to count the number of years as we progress. 25. 25. He's a youngster. He's a youngster. I'm back to you, Jaspal. I think it sounds like music to your ears, what you've been hearing about the shifts, the change, and from where you sit, from a standard-charted point of view. How do you see the changes and do you think technology is the main driver? Thank you, Annie. Firstly, it's a pleasure to be here. I'll highlight four shifts that are taking place. The first is the increased demand for funding from two new sources. The first being, as Economic Activity Centre of Gravity moves to the east, there is going to be a very large demand of funding in the east, in the emerging markets of the world. The second, in the west, the demand is going to come less from the private sector, but a very large demand is going to originate from the government, who needs to spend for fiscal and because of demographic pressure. So I think we're going to see two new trends in terms of whether demand for funding is going to come. The second, Jeffrey touched upon the multiple regulations and the challenges that creates. I'll add to that one more challenge, which is as the banking industry gets more intensely regulated and is compelled to have a higher cost of capital and deleverage, therefore, we are going to see some of this increased funding demand being met by players in the unregulated or underregulated sector, which will lead to shadow banking. And I think that has its own issues around it, both good and bad. What will be some of the key players who are in this shadow banking arena? I could put them in two categories, Ani. One is in the retail side, there will, of course, be the telcos, there will be the retailers, and there will be the internet giants. And I think on the wholesale side, there will be the hedge funds, the private equity players and the commodity players. Those would be the third and probably the most immediate shift as I think both the speakers before me mentioned is going to come from technology. I think the social connectivity, the sophisticated data analytics and modeling, the wide reach and penetration that is possible through technology is going to or is promising to change the landscape of banking. Everything we have done conventionally is going to get disrupted. I think most people will do, if not all, their business through mobile. It is estimated that by 2015, there will be a billion mobile banking customers. In that same period, the value that will be transacted through mobile banking is estimated to cross a trillion US dollars. So it's clearly big moves there. And this is all happening here. It's happening in Asia. 69% of the consumers in Asia are willing to do M commerce on mobile compared to only 23% in the United States and Germany. So it's going to happen big time here. It'll be similar technology transformation in payment system. You know, Google already, Facebook already earns 500 million US dollars just on payments every year. So I think there is going to be a lot of change. In fact, there will be some disintermediation for banks because there will be certain things technology can do which banks will not or cannot do. And Google wallet is a good example where they don't have to have a banking account or an internet account where you can transact through Google wallet. The last shift I would talk about is that, and this is probably more relevant in the West than it is relevant here today, is the growing trust deficit between society at large and the banking industry. And to me, the consequence of that is that in the future generation, we are going to find it very difficult to attract good talent into the banking industry. As this trust deficit grows, you know, pre the crisis, the banks were considered responsible when it came to compensation. When the crisis happened, the banks were considered not only responsible for compensation, but also irresponsible in the way they ran their models, you know, low liquidity, low capital, etc. Almost to the point of being incompetent. But now banks have graduated from irresponsible and incompetent behavior. They've become unethical. I don't know how far it goes. I mean, you have to get criminal after this, but that's the growing trust deficit which will definitely impact future talent joining banking. I'd like to do a little poll on the audience based on that last statement. How many of you are telling your children not to join banking? Hands up for those who are telling your children not to join banking. And the rest of you? It's still a good industry. See, Jesper? There's a future for finance. Welcome to Mr. Morris Lee. And I think Morris, for you, we really want to know the ambitions for Chinese banks. Do you think they are hoping, aspiring to grow global? And I'm going to sneak this one in. What is the role of the renminbi in world finance? It's my great delight to be here at today's forum. On a personal note, I do have my own perspective. In China, there's one of the earliest listed commercial banks. In China, it is headquartered in Guangzhou and then in 2006 it introduced a reform introducing foreign investors such as city bank, state grid, city bank, etc. On behalf of the city bank, I am the president of CG Bank as the main manager of my bank. As the previous foreign friends, I'm actually representing the city bank in order to make greater progress in our bank's reform process. So on that very note, I believe I need to learn from President Ma. I was born in Taiwan and I'm actually the first Taiwanese that is able to be the president of a large commercial bank. So I do take up the micro-rows. I am a native Chinese to learn to adapt to the local Chinese culture. Back to the moderator's question. So from the west to the east, we've noticed that in the past few years, especially since 2007, in the aftermath of the financial crisis and the debt crisis, there are two emerging, two imminent challenges in front of the western banks that is very engineering efficiency. There is large-scale re-engineering project underway across the western banking sector. The other thing is repositioning the corporate culture as the moderator has rightly mentioned and as Jeff has rightly mentioned. So we've also witnessed and eroded confidence especially European and American ones are repositioning the corporate culture. And if you take a look at the east especially Chinese banks, they are still in the process of transitioning and upgrading from 2007 to 2011, the banking sector in China has been growing very rapidly with most banks having enjoyed 30% class year-on-year growth. The euro crisis and the slowdown of the US recovery for Chinese banks, it is a very good opportunity for them to reposition their extensive strategy of growth their size-centric strategy of growth over the past five years to rethink about the strategy and with the slowdown of external demand foreign trade and the external economies the momentum of the slowdown is also here for the banking sector and the banking sector in China also, like other sectors in China has to restructure itself from a very crude way of growth to a more refined way of growth and they should refine themselves that they should pursue differentiation, they should pursue more retail banking and SME banking and they should also lead by IT infrastructure technology and IT-enabled services in order to serve their new client base of retail customers and SMEs as more medium size enterprises so that's the most important topic or the theme for Chinese banks for the next five years. So there are different focuses of reform in China and elsewhere in the world but the demand for capital adequacy is the same. The western banks are talking about Bazo 3 and in China the CBRC has issued a new capital management regulation for the banks and the CBRC regulation to some extent is even more stringent than Bazo 3 in terms of capital adequacy management and for the onshore market here in China the Chinese government has been opening up the market further and the government starting from July of 2005 started to adopt managed floating system to govern its exchange rate regime and from July 2005 to this year the bent of fluctuation has been broadened in April this year the bent has been widened from 0.5% to 1% of fluctuation for the RMB exchange rate what impact has it had on the market the RMB has been more incorporated into the global financial system that's a macro trend to follow and with that change resources can be allocated in a more effective way and I think timing is always the key when there's economic slowdown when there's trade slowdown it's a good opportunity market reforms and market openness to better allocate resources more efficiently and with greater fluctuation of the exchange rate the currency is becoming more independent the monetary policy is becoming more independent and number four on the plus side China can make use of this opportunity to rebalance its trade position its extensive trade surplus in order to search for equilibrium in terms of the right level of surplus and in June China's government initiated a major reform to liberalize its interest rate allowing for a 10% range for the banks to hike that interest rate in June the interest rate the official interest rate was lowered but at the same time the interest rate has been liberalized to some extent so what has been the impact on the banking sector in China in its process of transitioning and upgrading it has yet another catalyst to push forward the reforms given the squeeze net interest margin or interest rate because of liberalization for them to pursue more SME banking retail banking and fee based businesses and all the investment bank or businesses similar to investment banking so there has been further opening in terms of the market of products and business activities those reforms have had a profound impact on the banking sector in China and second between banking and financial institutions and non-banking financial institutions the relationship has evolved substantially as well now there is cross cooperation competition between trust companies insurance companies and payment companies on the one hand and banks on the other usually most people would still place their confidence on the banking channel that is to say many products will still have to be run by bank channels but at the same time non-banking financial institutions are becoming more of a competitor against the traditional banks will be a competition and co-existence of cooperation and competition in some cases for transportation, technology and services vehicleless to pursue vehicleless business opportunities although regulations do provide in a vehicle specific way but in the future the product can penetrate into different platforms like banks insurers as a management wealth management so that's a macro trend towards consolidation towards co-petition and the final outcome will be determined by the clients and by the market which platform will be the preferred one in offering a comprehensive set of investment services so for the further development of financial services in China within the next 5 years the industry will grow bigger and larger and it's going to be an extremely good opportunity for the banking sector in China to evolve from a crude way of growth to a refined way of growth in further developing SME banking and retail banking it's a good opportunity for them American and European banks as well because those American and European banks are repositioning their bank culture while exercising more capital restraints on themselves in offering e-banking or mobile banking the Chinese banks have a good opportunity to leapfrog the stage of having to build too many physical infrastructure of having to put together brick and mortar to build good physical branches or outlets you don't have to do that in the case of a Guanyong development we are offering a SMART banking services or kind of a SMART kind of services for our banking services to give the clients a good experience and also we are leveraging mobile banking or internet banking or mobile payment tools devices to cover more clients I think this is the major leapfrog opportunity for Chinese banks I think this whole conversation is like bringing us to the world that you like are you happy with this you talk about disruptive innovation and you would like to see great changes in the landscape is this good enough for you well it's an opportunity let me just say that with another comment I'm here for two reasons one to be at your meeting of the annual meeting of new champions where also I am on the board of directors the foundation board of the World Economic Forum and this next year will be my 18th summer Davos and I have been to every Davos here I want to just tell you by walking around this morning and going into some of the sessions and sitting here on the board level the quality of the presentations that we're seeing is at a minimum to not hurt anybody's feeling as good as anything you're going to see at any other Davos meeting so I congratulate you for that you really built something wonderful here keep going I'm going to report back to the board on that this afternoon I feel like the old man on this panel I'm coming up in Lincoln Valley in Palo Alto and I've done everything from work at a big company Hewlett Packard I was VP of marketing at Apple I started my own company and for the last 25 years I've been in venture capital and what we do in venture capital is we look for great entrepreneurs who have really big ideas who want to change the world I won't take you into your history but about six years ago a young fellow came in who was 19 years old who was a sophomore in college who never really had a job had never managed anybody wanted us to give him $10 million he thought he could change the world through building a social network that a lot of people would use his name was Mark Zuckerberg we wrote the check the company is Facebook it's a great story of disruption and I probably can't say a lot more about it because I'm not sure exactly where I am on on our lock up as a lead investor but building disruptive companies is what Silicon Valley venture capital has been about and finding great entrepreneurs to do that is our central mission now let me give you a couple of major thinking points about how we're looking at the world today and why I think finance is the financial industry is so ripe first of all basic rule basic fact half of the world is under 28 years old the median age of the world is 27.6 years I don't know what the median age in this room is but how many of you have been inside of a bank to do a transaction in the last 90 days I don't see a lot of hands the if we were all under 28 I don't think we'd see any hands go up to use an old Apple expression the new generation really does think different tomorrow by the way is going to be an inflection point in the future of a lot of things but with the iPhone 5 announcement and the technologies of passbook and things that are built into that most of the people who use it will be able to do everything from buy things to borrow money without getting anywhere near a bank to give you an idea about disruption I want to just give you some names for the first 20 or 30 years of my career the disruption occurred in the technology industry and we ate our own so to speak when I started in the mid 60s we had IBM and what were called the Seven Dorfs who I don't think anybody's even heard of they were the competitors in the mainframe world and now even IBM has transformed itself and is no longer in the personal computer business and is no longer the number one computer company in the world and we went down through the whole technology list and we lost companies like Compact and Sign and it just keeps going and then 20 years ago the internet was turned over to the public it was just 20 years ago just about right now and we built, we had to invest in one of the first internet connectivity companies and that started another major set of disruptions outside of technology the first to fall was media you started to watch the decline of magazines you started to watch the decline of newspapers if I had told you 20 years ago when the first internet connectivity hooked up that most bookstores were going to go away would you have believed me look what's happened the next major disruption in media was in photography my wife also happens to be a venture capitalist and she started a company called Shutterfly it wasn't in business in the late 90's last week they bought the remaining assets of Kodak's digital camera business and their digital online business so here you had a global brand can anybody think of a city you ever went into where you didn't see the yellow and red Kodak symbol and I challenge you a year from now to find one anywhere so media disruption was next then along came Jeff Bezos and he said I'm going to change retail and I want to tell you we're just at the beginning of that right now $1 out of 10 in the US is done online retail and brick and mortar stores is flat to down retail online is growing at double digit rates let me tell you there are a number of industries particularly in the service business that are next as we go to a world where 20 years ago nobody was on the internet other than a few government students and people that worked in labs and university people and now we have $3 billion rapidly headed to $4 billion we have a world where 15 years ago there were less than a billion mobile phones to a world where by the end of this decade all but a billion people will have a mobile device and so in that world you look at industries that have the opportunity to become slowly and then completely restructured let me risk creating some controversy here for a minute one of the reasons we like the finance industry let me give you some U.S. numbers the bank the financial sector in the U.S. and I don't have global numbers has about 10 percent of the value add of our GDP in 2001 they made 46 percent of the profits now that went down to zero in the clap share of 2008 but I looked at the fourth quarter numbers the last ones that were reported for in 2011 and they were back to almost 30 percent 10 percent value add 30 percent of the profit opportunity for disruption I told you that the young people don't go to banks one of the ways you know and I'm not a predictor we think about opportunities I said to you I think there's an opportunity for disruption in service industries there's an opportunity of media of retail but one of the things that we do is we have a prepared mind and we get I don't know 100 business plans a day on the internet and I like to read through the first paragraph and just see what space people are working in mobile is still the largest things that are mobile we haven't begun to see the beginning of the ideas in this area and one of the big subcategories is all kinds of financial transactions that you can do with mobile devices I want to tell you quickly about two companies that we have started and I personally was a little dubious about this but one of the things I've learned to do is look at results and say hey guy was right he had a good idea there's a company in the UK called WANGA and you can go on the site and I this is not about promoting the company because there are competitors to WANGA that are in the same space but you can sign up we'll identify you, you put in your relevant information and with some proprietary technology we will loan you money and put it into your banking account within 30 minutes of when you've been on the site or tell you we're not gonna and our loss rate for this kind of a business is far lower than the loss rate for any of the major banks in London where the company operates and the entrepreneur has already built 100 million pound a month business in loaning money to people for short periods of time there's another company in the US that we started a couple of years ago called PROSPER I like it because it's a peer to peer loaning so you go on and a number of people again there are competitors here and you say you want to borrow money and you've been qualified and you say I want $20,000 and we've classified you who you are and we verified you you can go on the line as a lender and you can look at the people who want to borrow money and say I'll put $100 in that and $50 in that and $25 in that and you've got this peer to peer and you've got good results early stage early stage but what you have going on is as I told you half the world under 28 all but a billion people headed to a mobile device I'm just going to say not a culture of using banks I'm not going to use the word distrust that's been talked about enough but I think an industry which is ready for significant change if I had more time I'd tell you about a number of other companies that are going on some of them will make it some of them won't but my main count is to say there's an awful lot of entrepreneurs without of the box ideas who are attacking all segments of this industry thank you Joe I'm going to try and quickly get to the panel then open to the floor having heard what Joe has said you folks who are in the finance are you scared are you worried the change has to happen say no we like that the change has to happen so what are you doing about it if that is the shift that you're hearing it's not a question of being scared it's a question of having to invest pretty significantly in technology to anticipate some of these changes these changes are even more dramatic when you get into wholesale businesses exchanges and other intermediaries it's involving massive investment but at the end of the day I believe that investment banking particularly is still driven by the client and driven by the client needs and driven by people relationships Joe you want to counter that banking and financial services is a huge, huge market and I think you're exactly right but I think like anything else Jeff Bezos started the retail business by becoming a book company and he just wanted to replace the retail book segment and now he's threatened almost every retail store that there is I think investment banking is way down the list I think the things that are going on with retail banking that appear lending is much lower hanging fruit I think what really matters is to provide the best service and to have the best on targeting market segments the model can be applied into any banking unit or it can be down through the cooperation between the banking and non-banking sectors what really matters is for this model to be precise in terms of its technology its target service efficiency is for this particular banking institution to become the best in this industry thank you can we now open up to the floor yes I have a hand there lady go ahead I'm a new owner of a network I've a question right to ask who is from the Heartbleed I'm from the Heartbleed back in theご played branch into the Heartbleed I'm from the Heartbleed except by the thing I know . it let me know we also notice the age for Chinese banking sector has come to this end. You are right. The mid-half report for Chinese banking sector indicated that the growth rate for banks' profitability has slowed down. This is easy to follow due to the following reasons. First, the macro environment, the economic environment in China is different. In the past 30 years, China's economy witnessed high growth rate, having the first half of this year. The growth rate was reduced to 7.8%. This is actually quite natural, affected by the euro-dead crisis. And as a result of the delivery of the market economic regulation targets, it's impossible for the economy to be always on a faster track. The economy needs to be focused on greater efficiency and quality. Second, the banking sector is also facing the interest rate marketization issue. In the first half of this year, the borrowing amount in the bank was reduced to 11.9%. So where does the money go? The money actually goes to the non-banking sector, other sectors in the financial, in the capital market. Such as private loaning or private equity fund. This is not a bad thing, because the advanced capital market will be a good thing to the banking sector. And the narrowing margin will certainly affect the banking sector, which is also an example of the accelerated marketization of China's interest rate. Third, different demand from the market. While the government is having macroeconomic control, public and private demands are different. And we are trying to expand the market demands. However, the governmental policies and measures are not fully in place. In this context, coupled by the bank's own reform, the slowdown in the banking sector is nothing but natural. In my view, even as of now, the profitability growth in the China's banking sector is still topping the world. Although we recognize that the banks can still produce a large amount of profits, I believe that along with China's economic transformation and banking reform, banks in China still enjoy a promising future. The previous speakers were talking about technological change. I believe that the banking sector has a natural appealing for IT revolution. Every round of information technology has had its influence in the banking sector. So that presents both challenges and opportunities. I can only take one or two questions, maybe the lady and then gentlemen. All right. The lady in white? Yes. My question is also directed to Mr. Ma. Sorry, I should be the lady. Thank you. And I'm a journalist from China Business News and also a sponsor of this forum. And my first question is for Jeffrey. You have only one question. You cannot have two questions. OK. OK. Just one. We know that during 2011 and this year, the investment banking has been experiencing a kind of hardship. So do you think it's a time for Chinese investment banking to go abroad to do some MA or to increase our co-abilities? Thank you. Yeah, actually, if you looked at global investment banking, it's performing reasonably well, sustained in large part by the US, which is still quite active, even though we've had a turn down in confidence. This fiscal cliff that people have talked about that happens at the end of this year or potentially happens at the end of this year, certainly impacting CEO and board confidence in reducing M&A. But the debt capital markets in the US with record low interest rates are on fire. And that's compensating to some extent. In Asia, it's really quite different because about 70% of the investment banking fee wallet comes from the equity product. And we've had a really significant decline in foreign investor interest in equities, particularly IPOs, which has had a big impact on the total IP fee wallet. I think that's temporary. I think it'll rebound. Doesn't mean we're going back to the 2010, early 2011 levels. But I do think it'll rebound. I think the Chinese investment banks will be significant competitors, whatever happens. We're seeing that in China. There's fairly restricted access for foreign investment banks within China. And the Chinese investment banks have used that lack of competition from the foreign banks as an opportunity to really develop technologies and develop their businesses in a very impressive way. And it is only a question of time till they follow their clients, their Chinese clients, who are investing and making acquisitions outside of China. So I think that's a natural occurrence anyway. And actually, I welcome the competition. I think it's healthy. Thank you. Quick one from the young men. There was a gentleman who was up there. Yes. I'm from Huaxia newspaper. My question is addressed to Mr. Mann. Mr. Mann, I think you are very sensitive to the growing trend of the banking sector. I noticed a reader report saying that the banking sector is more engaged in the online transaction. It's naturally referring to online transaction and social networking. So my question is about the construction bank and the transportation bank. It's not linked in e-commerce. What's your comment? Alibaba is doing a small amount of work. What is your comment? And for Mr. Mann, do you have any strategy to respond to this new trend? For instance, in terms of e-commerce, is it allowable by policy? Thank you. I want to be brief. I think I've already addressed this question. As I said, the banks are part of the service sector. And for a service sector company, you should pay attention to two points. First, your client base. What are the evolving and changing needs in your client base in the era of mobile finance and mobile internet? Everyone with a mobile device does not want to visit your banks. They want to access bank service anytime, anywhere. So you've got to satisfy such demands, such requirements. So for non-bank financial institutions, both of them should focus on this new trend. And second, you should pay attention to your own technology base. How can you use your technology infrastructure to satisfy such demands? IT is very important part of the bank business. IT is like oxygen. It's like air to the banks. We have to have very good IT to satisfy your customers' demands. Thank you very much. Thank you very much. Ladies and gentlemen, I think we've got a great panel here. Can we put our hands together and sign them for the insights? Technology and finance go hand in hand together. Thank you.