Money Machine

Chapter 16Game of Chicken

I was formally nominated to the board of directors of SDB in May 2005. The thinking was that any bad feeling that had been left over from our contentious takeover of the bank had dissipated as the reforms we'd led gathered speed. It was another few months before my directorship was approved by the shareholders and then the regulators, although I had been intensely involved in the running of the bank without any title. Once Frank Newman assumed his position as CEO, there was no need for me to be so engaged. The systems I had helped set up, including the Strategy and Policy Committee, continued under Newman's leadership. Now that the bank was in his safe and experienced hands, I shifted my attention to help SDB raise fresh capital. New infusions were sorely needed.

The plan had been for SDB to raise capital through a rights issue, which could only be launched after approval by the securities regulator, the China Securities Regulatory Commission (CSRC). But conflict arose between the CSRC and the banking regulator, the China Banking Regulatory Commission (CBRC). The CBRC, the guardian of China's banking system, was keen for SDB to raise fresh capital, and had in fact been pressuring us to do so. The CSRC, however, saw supporting the stock market as one of its key (if unstated) responsibilities. In its view, one way of doing so was to restrict the supply of new stock, and so it was reluctant to approve capital‐raising plans of listed companies, or new ...