HONG KONG LAWYER June 2013

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 get so 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

he English historian Lord Acton famously said the issue which has swept 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 retail banking 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

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.

16www.hk-lawyer.org