Anselmo L S Teng: Conference on human resources issues (closing
remarks)
Closing remarks by Mr Anselmo L S Teng, Chairman of the Monetary Authority of Macao, at
the 12th Conference of Central Banks of Portuguese Speaking Territories on Human
Resources, Macao, 16 September 2009.
* * *
Dear Delegates,
Ladies and Gentlemen,
In the past two days, we have listened to a series of professional and indepth deliberations
on the big topic of human resources. The knowledge imparted to us will no doubt provide
food for further thought and subsequent practical implementation. I am here today not to
repeat what have been said, but to present to you my observations on human resources
issues related to the recent financial tsunami.
What caused the financial crisis which triggered a recession not seen since 1930? The
postmortem report will tell you a number of reasons, such as excess liquidity, savings glut, carry
trade etc. I would however share with you some of the causes which are related to human
resources, the main theme of this conference.
The most popular motto on the Wall Street before the financial tsunami was "greed is great".
Remunerations of originators, traders and top level executives were based on profit of
current period. Such a policy increased appetite on the part of employees to take
unwarranted risks on behalf of the institutions they were working for.
It is never too late to mend. After all, we all learn from mistakes. It is therefore imperative in
human resources management to devise a fair compensation scheme for financial
institutions. It is my personal conviction that compensation for risk taking should be based on
the following principles:
1) An executive compensation scheme should adequately reflect the performance of the
executive in the medium and long term. Therefore, executives and traders should not
be compensated based on current year revenue but the average income of a financial
institution in a defined period.
2) Executives and traders who are compensated on deals done basis should never get
their shares immediately after the completion of the transaction. There should be a
vesting period to make sure that the profits are not illusory.
3) Compensation schemes based on deals done should be symmetrical. That is to say,
when failures ensue, penalty should be imposed. This is to avoid the one way traffic
of paying out enormous rewards once the transaction has been completed while the
responsible staff would come out unscathed when the deal turns sour later.
To avoid another financial tsunami, a financial institution should adopt a check and balance
approach in management. In the heyday, deal makers in a financial institution are the golden
boys. They tended to disregard those who are supposed to control risks. Normally, when
there was an argument over whether a certain deal should be done, the senior management,
whose year-end bonus may depend on the current year revenue, or who are more
concerned with the profit and loss account of the institution, would invariably stand on the
side of the deal maker. This is usually the root of huge losses to be incurred later. To
harness risks, the risk management function should be vested with more authority. The
internal control function should go to board level. There should be a minimum level of
knowledge of internal control to be required for all audit committee members. Knowledgeable
internal controllers and anti-fraud experts may be hired by financial institutions to implement
risk-assessment and fraud prevention measures. Measures and procedures are to be
implemented to prevent management overriding internal control systems.
The greatest safety to ensure the stability however comes from self disciplined practitioners
of the financial sector. Legislations and regulators are serving merely as directions and
referees. It is the professional skills and ethics of practitioners which will give the greatest
comfort and protection to a financial institution and hence the financial system as a whole. It
is therefore the endeavour of human resources function to provide adequate training in these
respects, especially ethics, in order to have a long term solution which warrants the stability
of the financial system.
Macao returned to China in 1999. This year is the 10th Anniversary of the founding of the
Macao Special Administrative Region. Under the principle of "One country, two systems",
"Macao people ruling Macao" and "High degree of autonomy", Macao's economy has grown
by leaps and bounds. The financial sector has burgeoned in tandem with the spectacular
performance of the overall economy. We have witnessed a surge in deposits, assets and
profits in our financial sector. Capital adequacy ratio for the banking sector is well above
what is required by the Basel Committee while non-performing loans ratio lingers at a low
level. Our financial system is not immune to the financial tsunami but it has emerged
unscathed. There is however no ground for complacency. The financial sector and the
regulators are adopting a prudent and cooperative approach and have been working in
harmony in the best interest of the community. We are doing our best to attract qualified
people to join the financial work force with a view to maintaining the stability of our financial
system.
Nowadays, the official languages of the MSAR are Chinese and Portuguese. In the wake of
globalization, we have to utilize English as the medium language to communicate with other
parts of the world. It would be perfect if all our staff are conversant with 3 languages.
However, I should admit that personnel of such a qualification are very hard to find. We are
striving to provide training to our practitioners in the financial sector so that financial
practitioners are well versed in at least two of them. We believe a good communication is a
job half done.
Last but not the least, please allow me to express my heartfelt thanks on behalf of the
Monetary Authority of Macao to all participants and to my colleagues including, of course, Mr.
António Félix Pontes, for the great effort in making this Conference a success.
Finally, I do hope you will enjoy Macao and that we shall meet again in the not so distant
future. Meetings and conferences held in Macao embody Macao as a service platform for
economic and commercial cooperation between China and Portuguese speaking countries.
Thank you again, please enjoy the rest of your stay in Macau and have a pleasant trip home!