With regulators bearing down on banks around the world, the Asia-Pacific general counsel of France's third biggest bank tells Elizabeth Broomhall how his background in compliance keeps the bank on the front foot

Seventeen years after he left Hong Kong for greener pastures Chris Davies has found himself back once again in the vibrant city. Having spent the early part of his career in Richards Butler's Asia practice he returned last year to take up a new role as regional general counsel for legal and compliance at French bank Societe Generale, responsible for the whole of the Asia-Pacific business.

"There are more opportunities here," he says. "Hong Kong and Asia have a dynamism and vibrancy you don't see in Europe. I'd also been doing compliance for 11 years and was keen to get back into law." 

But Davies' experience in compliance is setting him in good stead in his new role, which brings him into daily contact with the growing number of regulatory and compliance issues being faced by banks globally.

"The biggest challenge for us today is regulatory issues. I think every lawyer in a bank would say that – the regulatory penalties that are being handed out are material. Banks are being sanctioned for huge amounts of money and that is clearly a concern. As is the pace of change and effect of regulatory developments."

Davies previously spent more than a decade leading and building the bank's compliance department in Paris, and before that he spent two years in Tokyo managing the legal and compliance department for the bank there, as well as a stint overseeing compliance for the bank's equities business in Singapore. 

The bank has around 60 professionals working in its Asian compliance function, with half based in Hong Kong and the rest spread throughout Asia. As well as advising the bank on what the key rules, regulations and necessary procedures are, they undertake anti-money laundering and financial crime monitoring and controls, and are responsible for internal surveillance.

But even with a team of this size and with his experience, Davies maintains that it can still be challenging to advise the bank as to the exact level of potential sanctions, and he often turns to outside help in this area.

"All banks have been spending huge amounts of money [on external advice in this area]. These are investigations that demand huge amounts of data review, whether it is written or recorded data, and we just do not have the capacity internally to deal with that. Privilege is also an issue. If we did it internally it is more complicated to argue that we have privilege, whereas if you get external lawyers involved they can claim legal client-lawyer privilege in some jurisdictions. So that protects us if there were to be future litigation."

Since Davies' first stint in Hong Kong with Slaughter and May and Richards Butler, the city has seen an influx of foreign law firms. For in-house lawyers this has meant not only more choice in external advisers, but also more competitive pricing.

However, in Davies' experience, the quality of these international brands can vary widely. "I think the biggest issue that global law firms face is quality assurance," he says. "How are you assured that law firm X or Y is of the standard you want it to be? Luckily we tend to have control over the lawyers we pick – they tend not to be dictated to by our head office in Paris. The panel is sufficiently wide that we are able to find the specific lawyers who we know are good."

The broader team

Most of the bank's legal work in Asia is done in-house. It has a 55-lawyer department in Asia Pacific, with half of the team based in the bank's hub in Hong Kong and the other half spread across China, Japan, Korea, Singapore and India. 

Those based outside of Hong Kong are typically 'masters of all trades', while the Hong Kong team is split into four groups that focus on specific areas of the business. One deals with euro medium term notes (EMTNs), other notes and listed products; one focuses on over-the-counter (OTC) and ISDA master agreement negotiations; another looks at the banking and finance business; and a final group oversees litigation and regulatory projects. 

Most of the lawyers are document, transaction and execution specialists, with their core workload focused on financing, capital markets and particularly structured products sold either to financial institutions, insurance companies, sovereign wealth funds or high-net-worth individuals. A smaller part of the bank's internal workload sees lawyers advise on regulatory and commercial disputes work, and a very limited amount of corporate M&A and initial public offering work. 

"The strategy is to try and do as much in-house as possible," says Davies. "We externalise when we haven't got the internal capacity, or for certain transactions that are particularly complex and where we don't have the specialisation in-house, or for litigation and regulatory disputes."

There is a degree of overlap between the broader in-house team and the compliance function, particularly when it comes to interpreting how new regulations are likely to affect the bank. On investigations the two teams will also combine, with the legal arm dealing with litigation and working alongside external law firms, and the compliance team dealing with documentation and data collection.

"At the moment we're operating in a very volatile environment and regulators appear to have found it more effective to regulate the market by way of disciplinary or enforcement action," Davies comments. "Since the financial crisis, the regulatory environment has changed – globally and in Asia. The regulators are more intrusive and more present than they were in the past. It means they ask more questions and there are more regular inspections.   

"The regulators have a greater presence across Asia, including Hong Kong. You can understand why they are doing it: the banks failed. Every participant in the financial services market made mistakes, so there is huge pressure on regulators to do more. Therefore, for us the legal and compliance department is significantly larger than it was five years ago."

The challenges of expansion

Two of the biggest challenges for the Asian in-house function lately have come in the form of the bank's move into South Korea, which required the team to obtain a financial investment business licence in Seoul last July, and its ongoing dealings with Newedge to acquire the remaining 50% stake it does not already own from Credit Agricole for €275m (£229.8m). 

Legal work for the transaction, which is expected to complete later this year, is being handled internally. "There will be legal or regulatory issues because we have to decide which regulated entity we are going to continue to use and how the businesses are going to look going forward," Davies comments. "There is the legal entity and the brand. I am less concerned about the brand. On the legal side, do we keep both? Do we put one in the other? Then there are considerations such as regulatory, licensing, tax and capital."

For its Seoul move, however, the bank turned to Kim & Chang for assistance. "In Korea we had to deal with the regulators, and Kim & Chang have such a good relationship with them that they are the law firm of choice if you have a regulatory issue [there]," says Davies.

And with scrutiny of the banks unlikely to abate, regulators are set to keep Davies' team busy for the foreseeable future.

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Chris Davies: career profile

1984-87 – Trained at Nabarro in London

1987 – Moved to Hong Kong with Slaughter and May

1987 – Joined Richards Butler as a corporate lawyer 

1993 – Joined Hong Kong Stock Exchange listings department as a director

1997 – Joined Societe Generale in Singapore as head of legal and compliance for equities business 

1999 – Moved to Tokyo to head up legal and compliance in Asia for Societe Generale

2001 – Moved to Paris to head compliance team – stayed 11 years

2013 – Returned to Hong Kong as general counsel for Asia-Pacific

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Regular external advisers

In Asia Societe Generale regularly turns to Linklaters, Clifford Chance, Herbert Smith Freehills, Allen & Overy, King & Wood Mallesons, Reed Smith Richards Butler and Mayer Brown. 

In addition to a regional panel the bank also has country panels in each of the 11 jurisdictions it operates in, namely Japan, Korea, China, Taiwan, Hong Kong, Singapore, Malaysia, Indonesia, Australia, India and Vietnam. In Korea it will typically use the likes of Kim & Chang, and in Japan it might choose Nishimura & Asahi or Anderson Mori & Tomotsune. It uses Baker & McKenzie in markets such as Thailand and Vietnam.

On its global panel the bank regularly works with Skadden Arps Slate Meagher & Flom, Cleary Gottlieb Steen & Hamilton and Shearman & Sterling, particularly on investigations work.

• 'How to manage an increasingly complex web of regulation' is the main theme of the Corporate Counsel Forum Hong Kong 2014, which will take place on 19 June. Click here for more information.