Your Baby Didn’t Die

I’m going to do something that I don’t usually do – I’m going to try and make the most of the fact that I’ve spent the last half decade working for a firm that specializes in a unique field of accountancy called “insolvency.” The field that I’ve worked in is in a curious place between accountancy (liquidator’s and trustees in bankruptcy are mostly trained accountants), law (most of our work involves crossing a legal minefield) and management (the process of liquidation involves management skills of having to collect debts, pacify angry creditors, deal with frustrated landlords, firing of employees – many of who may not have been paid for some time, disposing of assets and so on.). In a funny way, my day job in the insolvency trade has given me many of the skills that my side hustle of promoting a start-up accelerator requires.

One of the main reasons why I don’t blog directly about what I do during the day is because much of what happens in the business involves legal. However, wherever possible, I do try to share my experiences of dealing with people in certain situations, particularly the sad and depressing ones and I guess one of the key topics that someone who has a toe-hole in this business should address is the emotional topic of corporate insolvency and bankruptcy.

Many of us were brought up with the notion that business is entirely about making money. The concept of business is simple enough – you buy low, sell high and pocket the difference. However, as the act of buying and selling involves human interaction, the concept of business is complicated by human emotion. If you hang around business people long enough, you’ll realise that business is not just about money – it’s about something more important – the human being.

In my five-years of being in the insolvency, I’ve seen how a business becomes part of a person. I remember liquidating a company set up by an Englishman who had found himself on the wrong end of a law suit. Throughout the process he kept repeating that we were taking away 27-years of his life and it took several reminders from us and his friend, who was an Australian lawyer that he had no company left.

The man had a point. The business he had started and built up from the ground was his life’s work. A few of the people who were collecting their goods from the Company actually remarked that the man was a pioneer in his field and was effectively an industry unto himself.

However, the fact remained, the court order against him had been issued and he was unable to come to an agreeable settlement with his petitioning creditor. While there was a semblance of a functioning business, we had the power to stop him from functioning and that was that.

While it was easy to sympathise with the man, the fact of the matter was he had not made payment on a judgement debt and the creditor had every right to wind him up. A good part of my job was to handle him and to keep reminding him that he and his business were contrary to what he was feeling separate entities.  The business had died but he was alive and well enough.

Too many business people forget that part of the reason they set up a “company” in the first place is because a company is a separate legal entity from the person. While a company may contain a person and more often than not in Asia (I’ve been involved in liquidating companies as old if not older than me) a family’s life’s work, the company is not in any biological sense a living being.

If a human being dies, that’s it. If a company dies, there is a possibility that the business it was running can be revived at some stage or another.

While this may seem self-serving (considering its my main stay to get liquidation and restructuring projects for my employer), business people need to remember that there is no shame in calling in professionals to help them restructure or in many cases to shut the company down. Companies, no matter how much time you might have spent building them up, are not living beings. One should not hold onto a company for emotional and personal reasons. When the company cannot survive, it is better to let go. There are laws relating to “insolvent trading” or situations where the directors are clearly aware that the company is in obvious financial difficulties and cannot be saved. I cannot stress enough that the company is not a living being where you have a moral obligation to look after.

The same point leads to the matter of personal bankruptcy. Like corporate insolvency, bankruptcy is an issue that many try to avoid. This is particularly true in Asia, where the concept of “Face” is all important (rough translation is reputation but the meanings of “face” are often deeper). Nobody, particularly someone who is known to be successful wants to confront.

However, the reality is that many of today’s lenders insist on personal guarantees (PGs) before they make loans of a certain quantum. There are situations where bosses have pledged personal properties to the banks and in some cases, even the landlords (one of the most powerful group in Singapore’s economy) insist on personal guarantees before leasing out a place.

When this happens and the company goes down, one can expect banks and landlords to call on their PGs. In this case, one has to be clear headed. If you owe in the millions and have no prospect of ever earning that type of money, bankruptcy is the sensible option.  I had to explain to someone recently that it was better to pay thousands on personal debts of millions. While bankruptcy does impose restrictions on things like overseas travel, it also allows one breathing space to reoganise one’s financial situation. A bankrupt is perfectly capable of earning a living. Bankrupts are also entitled to certain government assistance programs like legal aid.

Having said that, bankruptcy should not and does not protect one from criminal laws. While it’s pointless to sue a bankrupt (what can you collect), anyone thinking that bankruptcy protects them from fraud charges is wrong. You can do jail time for things like fraud.

Thanks to Covid-19, the world economy is in a bad shape. The prospect of business failure and a collapse in one’s personal financial situation is an increasing reality for many. Insolvency and bankruptcy are likely prospects. While neither are pleasant things to go through, they are not medical issues that involve your personal well being. If you have to go through them, use them as situations where you can figure out how to rebuild when things improve. Work with your liquidators or bankruptcy trustees. You can still make a living and you can always rebuild even when dealing with business failure or personal bankruptcy. 

The Love of Your Own Kind!

Since I collected payment from my first decent sized job for the year, I decided that it was time to start saving again. Two dry years and the absence of a retainer client made savings all the more important. So, I decided to take a tenth of what I made and split the savings between my Central Provident Fund (CPF – a compulsory saving scheme for all Singaporeans) and my Standard Chartered Account.

Discovering Standard Chartered again was a wonderful joy that put one of the biggest “hot-button” issues into perspective – that it the issue of foreigners.

Despite having no presence in the UK, Standard Chartered is a British Bank, which is listed on the London Stock Exchange. The bank, along with the Hong Kong Shanghai Banking Corporation (HSBC) was a bastion of British Commercial Dominance in the colonies. Standard Chartered, along with HSBC remains the only commercial banks in the Western World that issues currency (Hong Kong Dollar, the other to issue Hong Kong Dollars is the Bank of China) and its presence in emerging markets has helped Standard Chartered remain fairly strong despite the financial crisis (American Express Banks was bought by Standard Chartered).

I became a Standard Chartered customer in 2005, when I started writing for Arab News. The Arabs paid me with a cheque that was to be drawn on a Standard Chartered Bank account. At the time, the account they had on offer paid me a grand total of 1.88 percent (which may not sound like much but in Singapore its considered a lottery to get this type of interest on a savings account) and I could run the account with something as little as a single dollar.

In 2006, when I was doing relatively well, thanks to the Saudi Embassy in Singapore, I used this account as a place to park my savings. Unfortunately, I lost focus and allowed myself to whittle down my cash savings to a non-existent level and sometime in 2010; they sent me a note asking me to put something into the account to keep it going. I put five dollars into the account in November, 2010 and left it there.

So, when I visited them last week, I decided to find out how the account was doing. I was told that in the year my five bucks had lain in the account, untouched, I had earned a grand total of a cent in interest payments. OK, this doesn’t sound like a lot of money.

However, the comparison with how I would be treated at my regular bank, the Development Bank of Singapore or DBS was quite astounding.

Let’s start with the amount. Standard Chartered allowed me to keep my account open with a mere five dollars. Had I put this amount in an account with DBS, I would have received a few more nasty notes through the course of the year to remind me to put more money into the account because they would have shut me down. DBS has a policy of charging the customer a fee of two dollars a month for having less than $500 in your savings account. If you have the misfortune of having a current account with them, they’ll charge you a mere $15 for having a balance of less than $10,000 a month.

The argument here is that DBS loses money to maintain accounts with not very much money in them and so they need to pass the losses onto the consumer.

For some reason, the government thinks this is acceptable. Like all banks, DBS borrows money from depositors at a low level of interest and proceeds to lend it out at a higher rate. To anyone outside Singapore, it looks like DBS has a fool proof way of printing money. I get paid some 0.05 percent per annum on my savings account and I get NO interest on my corporate account. The bank then lends out the money I deposit into the accounts at anything ranging from six to 20 percent per annum.

The non-existent interest rates I’m paid for lending money to the bank would not be so bad on its own. However, insult is added to injury when the bank charges are thrown into the equation. I effectively pay the bank for the privilege of lending them money I earn.

My treatment at Standard Chartered and my comparative treatment at DBS is not a question of who would have paid me more. I made one cent out of Standard Chartered and had I kept an account with DBS with five dollars, I would end up owing them money.

The question here is, why do I have to pay DBS for the privilege of lending them money when Standard Chartered does not charge me for the privilege? It cannot be that Standard Chartered has found a way of not losing money on my account while DBS bleeds money every time I have less than $500 in my savings account?

Not everything about Standard Chartered is better than DBS. It’s cheaper to transfer money via DBS. When I first started out with Huong, I helped her to transfer money to Vietnam. Charges at DBS were only S$30 per transaction. By contrast, Standard Chartered charged $100 per transaction. The process at both banks takes about the same amount of paper work, yet one bank charged a premium of $70 extra per transaction.

That’s OK. In a world with free-competition, customers should be allowed to pick and choose which provider they want for various services. I would save with Standard Chartered and transfer money through DBS.

Unfortunately, the world of banking isn’t exactly “free-market” competition. Foreign banks like HSBC, Citi and Standard Chartered are allowed to operate in the local market provided they understand whose market it is. As such, foreign banks that deal with consumers tend to cater to only the very high-end ones and ignore the masses. They are limited in the number of branches they are allowed to operate. Back when I was an intern and Citibank was Citibank NA, rather than Citibank Pte Ltd, we had a grand total of three branches. By contrast, DBS, which is co-incidentally owned by Temasek Holdings, which is in turn owned by the Ministry of Finance, has a mere 100 plus branches across the island.

Yes, Citi, Standard Chartered, HSBC and gang have a larger international network than the local boys. However, within the domestic market, it’s the local boys who have the advantage. Every Singaporean with a savings account started out with a POSB (Post Office Savings Banks – a subsidiary of DBS) account. The local boys have had a head start on taking the local market and in a way; local people have their savings trapped in the local banks. Contrary to what the powers-that-be may tell you, Singapore’s prosperity isn’t built by foreigners pouring their money into the place, it’s built by trapping the savings of the locals and investing it elsewhere.

To be fair, the local banks have realized the importance of overseas growth markets and adapting to deal with them. United Overseas Bank (UOB) is a big player in Thailand. DBS is a big player in Hong Kong. The bank is actively modeling itself on one of the most successful international banks – Citibank. My ex-boss, Eddie Khoo, moved from Citi to DBS before heading to UOB where he runs consumer banking. More recently, DBS hired Piyush Gupta, a former Citibanker to be CEO.

Once they hit overseas markets, our local boys will have to learn to treat customers properly. However, will their love for their customers in say Hong Kong or Thailand translate into love or at least respect for the Singaporean customer?

As much as I would like it to be yes, I don’t think there’s a strong case for optimism. The big Singapore businesses that burnt overseas resort to milking more from their home base – the average Singapore consumer. Word has it that DBS was allowed to take over POSB when It started feeling the heat in the initial days of investing in China. When Temasek Holdings bought shares in the loss making Merrill Lynch, it quietly sold assets in Singapore.

A while back, I actually got into a heated debate with my favourite litigator and his partners. The crux of the argument was, one of their members had proposed that the government take a more active role in giving work to local law firms. I countered that patriotism has never been much of an effective marketing tool. Local consumers will chose price and quality over patriotism.

A year after this incident, I stick my position. As a local Singaporean business, I don’t expect the government to give me preferential treatment. What I do expect, is for the big local enterprises that I rely on like the banks to treat me like a valued customer rather than an automaton they can squeeze whenever they need to cover up for mistakes made elsewhere.

Let’s face it, after comparing the way I’ve been treated by Standard Chartered and the way I’ve been treated by DBS, I’m not thinking about Standard Chartered’s London Listing or Colonial heritage, I’m thinking of ways to move more of what little money I have their way because they give me so much more.

Extend that idea to other things. Why do we choose foreign things over local things? Could it be because the foreigners actually treat the locals with a bit more love and respect than the way we treat each other?