Major business or national infrastructure projects require significant investment. Since the autumn of 2012, the Japanese banking sector has emerged as a key project finance partner, replacing European banks that are still struggling to recover from the credit crisis which severely damaged the world economy in 2008.
The Financial Times reported recently how engineering firm Hitachi, also from Japan, had won the bid to modernise the UK’s intercity rail network. Hitachi is the lead partner in a consortium that needed a loan of £2.2 billion for “upfront investments”, the financial news service reported. Of the nine banks lending to the Hitachi-led Agility Trains consortium, six were Japanese, including the Bank of Tokyo-Mitsubishi.
“That funding is part of a conspicuous trend of Japanese lenders returning to the offensive across the world, taking advantage of the weakness of US and European rivals constrained by the financial crisis and tightening regulation,” reported the Financial Times in October 2012.
Bank of Tokyo-Mitsubishi (BTMU) has been growing in the last two years and has increased its head count outside of Japan as it seeks to expand its global markets business.
BTMU is the largest bank in Japan by assets and expects half of its growth to come from the Asia Pacific region.
In Europe, BTMU has been growing, too. In November 2013, it became the first Japanese bank to open an operation in Turkey. London is the EMEA region headquarters and, as part of the growth, CIO Ian Alderton joined the bank 12 months ago. He told CIO UK about the cultural differences at BTMU and his business technology plans.
“The history of the bank goes back to the 17th century and today we’re an organisation of 37,000 global employees,” Alderton explains. “We’ve been in the UK since 1952 as the primary Japanese bank here and in Europe.”
Referring to the 2013 Turkish bank opening, Alderton says: “It’s our most significant investment and a big role for our technology team. BTMU is the first wholly owned Japanese bank in Turkey – it’s part of our growth strategy to be at a central point between Asia and Europe.
“The regulators in Turkey are more proactive than in other markets, especially around technology and we have to host all our systems for the Turkish bank in Turkey. So it was a bank that was built all the way from the ground up,” he explains.
Alderton is an experienced banking-technology leader, having had senior positions within RBS and Wachovia Bank, where he worked with former Barclays CIO Anthony Watson, and his career has included leadership positions with Prudential Financial, NM Rothschild and Sons and Deutsche Bank. Moving to BTMU, the CIO has been struck by, and clearly enjoys, the cultural differences to doing business and operating a business at the Japanese financial services provider.
“For me, what’s refreshing is the trust that really shines through, down to how we operate with our customers, both internally and externally. It’s been an exciting journey over the last year since joining the bank, especially learning about how we conduct business.
“In most western organisations, the most important person in a major meeting sits at the top of the table. In Japanese culture the protocol is different. During meetings, guest have their backs against the wall and the most junior person sits near the meeting-room door. This goes back all the way to the days of the Samurai, who believed the most junior person is the most expendable and it ensures the guests have enough time to draw their swords!”
So far, Alderton’s first year at BTMU has been about ‘providing a clear vision’.
“I’m looking at the future potential of the technology organisation based on its trust and respect. We’re looking at how the technology is used and can be delivered more efficiently to enable the business to become truly global,” he says.
The CIO has a seven-strong management team who reports to him made up of Japanese and European staff.
“The team is trained with a deep understanding of the organisation, so we can focus on how we deliver,” Alderton explains. “It will be about how we develop the story and improve the collaboration and communications internally.”
As you’d expect, Tokyo is the major hub for the bank’s operations, including IT, with London – as well as being a hub for EMEA operations.
“I have a solid reporting line to the global technology organisation in Tokyo and have weekly scheduled meetings with the EMEA CEO,” Alderton says.
Technology strategy renewal
Financial services CIOs face a user base that demands the latest technologies as a result of their consumer experience and from what they see being used in other less highly regulated sectors. But the regulations are important and place a degree of restriction on the adoption of new technology in the sector.
“We’re looking at virtualisation, infrastructure-as-a-service, software-as-a-service and desktop virtualisation as well as the private cloud. The opportunity is there, it’s about understanding the risks, so we may well reach a hybrid solution.
“I really want faster provisioning as well as increased resilience and believe that virtualisation will increase the uptime of our services,” Alderton explains.
“We’re also going through application rationalisation and reducing the size of our data centre footprint. Staff at BTMU understand the importance of data, so bringing their own devices is currently not supported or demanded.”
Alderton is an advocate of the important role that data and information needs to play in modern banking.
Viewing banks as being ‘in the money business’ is old-fashioned thinking.
“Financial organisations are understandably thought of as being in ‘the money business’ – but in reality, they’re actually in ‘the data business’.
“Banks are only now coming to the realisation that data is their biggest asset in the new digital economy.”
In our interview at BTMU’s UK headquarters, Alderton explains that his bank knows their customers very well, but across the banking sector, customer knowledge is an untapped opportunity.
“For BTMU, it’s all about – can we offer the customer ideas before they realise they need what we’re proposing? Business intelligence and information management are the engines to communicate and collaborate with the customer more effectively,” he says.
As the Financial Times analysis shows, Japanese banks “appear robust” – as they avoided the mistake of investing in securities which has caused so much damage to western banks – and have succeeded in building strong balance sheets. BTMU and others are lending to real tangible assets such as Hitachi’s UK rail infrastructure development deal.
Reuters report that outstanding bank loan levels in Japan have fallen by 13.9 percent – a figure that most banks in Europe or the US probably envy.
With his focus on the opportunities offered by information and a very clear enthusiasm for the thriving culture of BTMU, Alderton is ideally placed to be on a fascinating journey as BTMU and Japanese banks begin to emerge as key players in global project finance.