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HONG KONG LAWYER June 2013

The English historian Lord Actonfamously said the issue which hasswept down the centuries and which

will have to be fought sooner or later is

the people versus the banks.

This cannot ring truer than now, with

many banks, particularly the biggest

ones, in the public spotlight facing

a wide range of investigations and

litigations, following the 2007-2008

global financial crisis. And as Mr.

Longo puts it, that is all just part of

doing business at the moment if you

are a financial institution such as

Deutsche Bank.

Since the GFC (global financial

crisis), the industry has gone through

tremendous change on a variety of

fronts, he tells Hong Kong Lawyer

one grayish morning last month in

Thomson Reuters office in Central.

So we have to deal with investigations

and litigations on the one hand, and

on the other hand adapt our model

to see how we can reorganise and

restructure the institution to comply

with the variety of regulatory changes

as well as develop existing and new

business opportunities to replace

income streams that are no longer

viable.

And to make it even more challenging,

Mr. Longo adds, these are set against

a grayish macro-economic backdrop

where the economy remains weak in

Europe while recovering slowly in the

US.

There are also challenges driven by the

plethora of reforms coming out of the

G20 commitments and demographics

and urbanisation, a whole range of

things It is an interesting time to be in

banking, he says with a laugh. The 53

year old should know, given that he was

once a key member of the Australian

Securities and Investments Commission,

responsible for enforcement.

The way that Mr. Longo sees it, how

the universal banking model changes

following the crisis will dictate the

future of banking. For instance, a key

discussion has been whether retailbanking activity should be separated

from trading and investment banking

activity.

Its a Glass-Steagall-type discussion,

he continues, referring to the US

Banking Act of 1933, which separated

commercial and investment banking

components. It was passed during the

Great Depression in the 1930s. Sections

of it were repealed in 1999 partly to

allow for the merger of retail banks

and investment banks that engage in

underwriting and dealing in securities

as banking operations.

Some people argue that if we want to

protect the public purse, we need to getso called risky investment banking

activity away from deposit-taking

activity that is seen as a public good.

That doesnt seem to be happening in

the US, while that is happening in the

UK, with continued questioning in the

rest of Europe, generally, about whether

to do that.

Before and after the GFC

The main difference before and after the

crisis, says Mr. Longo, is growth.

Everybody was growing, hiring, legal

departments were growing, he recalls.

Since the crisis, there have been

enormous changes in how we think

about (things like) headcount,

resources, cost efficiency , adapting to

a new environment Managing in that

environment is different from managing

in an environment where there is lots of

growth, hiring, and all of that.

For instance, while he used to spend

more time on banking transactions in

the early days after joining Deutsche

Bank in 2002, Mr. Longo now often

finds himself dealing with managing a

range of regulatory issues and strategy .

Lawyers thinking of going in-house in a

bank now can also expect to deal with

a huge increase in regulatory work to

develop responses to, and implement,

the immense amount of new global

bank and financial institution reforms,

he says. These include responding to

Dodd-Frank (Act) and Volcker (Rules)

from the US, the European Market

Infrastructure Regulation (EMIR), Living

Wills and Resolution plans, and the OTC

(over-the-counter) derivative reforms

and central clearing initiatives.