'Princeling' Hirings Complicate Business In China For Global Banks

Feb. 28, 2017 3:30 PM ETGS, UBS, HSBC, CS, QCOM, C, BCS
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Epoch Times

By Fan Yu

One of the biggest global banks, Citigroup Inc., announced it is under investigation by the U.S. Securities and Exchange Commission (SEC) for hiring candidates based on their relationships with foreign government officials.

In a regulatory filing on Feb. 24, Citigroup announced that the SEC and other agencies are probing "the hiring of candidates referred by or related to foreign government officials." The bank did not disclose what countries or officials are involved.

The latest inquiry into Citigroup (C) follows and resembles investigations into other global banks and their hiring of so-called "princelings," or children of government officials or heads of state-owned enterprises in Asia. Companies have hired princelings in hope of winning business from local politicians or business executives, mostly in China.

Such probes into a widespread industry practice have long been expected, but they serve to further crimp the competitiveness of Western banks in an increasingly difficult market.

Starting in 2014, global banking firms and companies including Goldman Sachs (GS), UBS (UBS), HSBC (HSBC), and Credit Suisse (CS) have received letters from the SEC seeking information related to their hiring practices in Asia. The practice also goes beyond the banking sector: In March 2016, San Diego-based chipmaker Qualcomm (QCOM) reached a $7.5 million settlement with the SEC for hiring relatives of Chinese officials.

Last November, New York-based JPMorgan Chase (JPM) agreed to pay over $264 million to settle U.S. probes into its hiring of children of well-connected officials and executives in China. JPMorgan was the first global bank to settle with U.S. authorities over hiring practices in China.

'Quid Pro Quo'

"JPMorgan engaged in a systematic bribery scheme by hiring children of government officials and other favored referrals who were typically unqualified for the positions," said Andrew Ceresney, director of the SEC Enforcement Division in a statement after

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