Wednesday, April 25, 2007

The MiFID debacle

I have managed to avoid writing anything about MiFID for the last few weeks, but I am forced to put pen to paper in light of recent speculation surrounding CESR's recommendations for best execution under MiFID, and an overwhelming perception that as far as regulation goes, MiFID has been a debacle from day one.

Bearing in mind that certain aspects of the regulation itself continue to suffer from a lack of regulatory clarity and detail, and the fear that some national regulators, particularly in those countries that will not transpose to MiFID on time, will lend a different interpretation to MiFID guidelines, it only serves to fuel my belief that the transition to MiFID will be anything but smooth.

With only three countries (including the UK) successfully transposing MiFID into national law by the 31 January deadline, how can regulators deem MiFID's implementation anything but a debacle of major proportions?

To add to their woes, SunGard and TradeTech have just released MiFID readiness survey findings which indicate that only 13% of financial services firms are confident that they are on track to meet new MiFID regulations. More than 60% of firms indicated that their preparations still required some work, which is hardly surprising.

Forty six percent of those surveyed by SunGard and TradeTech expressed concerns that their own national regulators would "add further complexity" to MiFID through the imposition of national laws and additional guidance.

Furthermore, whilst some clarity may have emerged surrounding best execution requirements under MiFID, rumour has is that the Committee of European Securities Regulators' (CESR) final recommendations on supervisory treatment of best execution under MiFID, are not in accordance with those of the UK's Financial Services Authority (FSA).

Apparently the UK is perceived to be way ahead of other European countries based on the government's acceptance of Paul Myners' recommendations for institutional investment decision making, and the belief is that it will take the rest of Europe a long time to catch up.

Furthermore, the mind can only boggle at the plethora of pre-trade reporting initiatives that may emerge post-MiFID and the implications for firms looking to consolidate all this data.

Marcus Hooper, who is the author of various white papers on MiFID published by Equiduct, says "few comprehensive solutions have appeared" with respect to the issue of managing increased fragmentation of pre-trade information under MiFID.

Hooper anticipates that firm’s sources of pre-trade information will "change significantly" under MiFID to encompass the existence of multiple systematic internalisers, who he says are not obligated to use identical
information distribution systems, increased multilateral trading facilities and firms with more than one secondary market listing.

The resulting connectivity diagram looks anything but streamlined and simplistic and Hooper says firms have one of two options; they can either find a way to
consolidate pre-trade information, or restrict information to a smaller number of "information delivery mechanisms", which may not be so desirable when it comes to demonstrating "superior execution".

Hooper's latest White Paper entitled: "Pre-trade information and the advantages of consolidated data" can be downloaded from Equiduct's web site.

Still confused about BICs and IBANs?

Following on from my comments last week about the mishandling and confusion surrounding correct usage of BICs and IBANs for eurozone payments, Eiger Systems, which provides a data validation solution for bank account identifiers and international bank account numbers, has added further fuel to the debate by saying that it is not enough to just have the correct IBAN (International Bank Account Number) on cross-border euro credit transfers.

From 1 January this year, the inclusion of BICs and IBANs became compulsory for cross-border credit transfers in the eurozone as well as countries such as Iceland, Liechtenstein, Norway and Switzerland. BICs and IBANs were introduced as a means of increasing the straight-through processing of cross-border payments in euro, thereby reducing the costs associated with manual repair and handling of payments.

Yet, whilst BIC and IBAN information is included on most bank account statements, and has been for some time, there still appears to be a general lack of understanding on both corporates' and banks' part as to correct format and handling of this information.

In my previous post, I remarked on LogicaCMG's survey findings which indicate that banks expect payment processing costs to increase in the first year of SEPA's introduction as they anticipate that not all cross-border transfers will contain the correct account ID information, which means payments will be delayed or require manual repair.

And whilst there are software solutions that enable companies to check the correct formatting of IBANs, Jonathan Williams, principal market strategist, Eiger Systems maintains that the accuracy of the IBAN data also needs to be checked - an extra layer of verification that not all software solutions provide, Williams claims.

There is a world of difference between correctly formatting an IBAN and ensuring that the data underlying the IBAN is correct, or even exists,” says Williams. “Banks and corporates must make this link between format validation and data validation. Only if the data is validated at the same time that the format is validated can corporates hope to avoid repair or rejection charges and the payment delays that inevitably result."

In in its efforts to streamline, standardise and make cross-border euro credit transfers more cost-effective (or the same as domestic transfers), the industry appears to have only added an additional layer of complexity for customers.

Can the industry safely say that it has gone out of its way to adequately educate customers and banks about the correct use of BICs and IBANs? More importantly, are companies likely to face increased costs and inefficiencies pertaining to cross-border euro credit transfers post-SEPA because of incorrect account formatting?

Thursday, April 19, 2007

Processing costs could rise under SEPA

Following on from the confusion amongst US companies about the use of BICs and IBANs when sending cross-border payments to the eurozone under the new SEPA framework, research commissioned by LogicaCMG, indicates that banks anticipate increased costs from incorrect addressing and routing of payments post-SEPA. And guess who is going to have to pay for that - undoubtedly the banks will pass on the costs to customers.

Based on a survey of more than 100 of the top 500 banks in the eurozone, as well as the UK and Sweden, Coleman Parks which conducted the research on behalf of LogicaCMG, found that 63% of banks anticipate increased costs from handling exceptions and 60% anticipate an increase in the number of payments returned to the originator.

The banks estimate that failed SEPA transactions and exceptions could cost them in the region of €1.3 billion (presuming an STP rate of 80%) in 2008, based on anticipated transaction volumes in the first year of SEPA's introduction.

Another 17% of banks surveyed expect difficulties in identifying the correct intermediary routing information for receiving banks, yet, according to the LogicaCMG study, only 60% of eurozone banks have plans in place to resolve the issue of IBAN and BIC transaction addressing and routing.

The whole issue of BICs and IBANs has been mishandled from day one, with banks not educating customers enough about the need to include correct account ID information in order to avoid repair costs and payments being held up. Furthermore, the concept of an International Bank Account Number is somewhat of a misnomer given that it is only recognised within Europe, and is not an internationally accepted account ID reference. In the US, for example, the IBAN contains too many characters to be accepted by local clearing systems.

LogicaCMG's findings indicate that the cost of cross-border payments is likely to increase in the months following SEPA's introduction as the number of failed transactions rises. This runs counter to what SEPA is all about in terms of reducing the cost of cross-border payments within the eurozone, and surely the industry only has itself to blame given that there is still widespread confusion amongst customers and banks about the correct use of BICs and IBANs.

Wednesday, April 18, 2007

Giving up the phone

The stats indicating uptake of online trading of FX certainly look impressive. Despite a slow start back in the late 1990s when online trading portals first came online, recent estimates indicate that more than half of all corporates execute foreign exchange trades online, particularly those companies that are "cash rich" or have revenues in excess of $1 billion.

The online trading phenomenon has given rise to various online portals for trading FX and money market instruments; traditional multibank providers like FXall and Currenex have now been complemented by specialist providers such as Hotspot FX, which targeted hedge funds with its anonymous ECN model, 360T which covers a wider range of asset classes including money markets and derivatives, and Reuters and the Chicago Mercantile Exchange's recently launched FXMarketSpace, which provides an exchange central counterparty clearing model for FX trading.

Not a day goes by without some new platform or additional functionality for trading FX-related instruments online emerging. Bearing that in mind I was surprised to find the general lack of adoption of web-based trading tools by US corporates attending EuroFinance's international cash management conference in Miami.

While all other indicators appeared to suggest that corporates favoured the price discovery and aggregated liquidity provided by trading FX on multibank web portals such as FXall and 360T, US corporates appeared to be less progressive than their European counterparts when it came to giving up the old-fashioned telephone.

Some US corporates were not convinced of the business benefits of moving their FX business online when compared to the more 'personal touch' of speaking to a trader on the telephone and leveraging the long standing credit relationships corporates enjoyed with a particular bank.

However, Christoph Perger, managing partner, of Frankfurt-headquartered 360T, was at pains to explain to US companies that online trading did not mean they had to give up the phone or entrenched banking relationships altogether.

"Automation is not drying out relationships.It is more of a hybrid approach [telephone and online trading]."

In addition to obvious benefits such as price transparency and the ability to access liquidity from multiple providers, as well as in the case of 360T's online platform, the ability to access multi-bank liquidity across multiple asset classes (FX, money markets, interest rate swaps, derivatives ) via a single web interface, Perger pointed out that online trading could also help companies with their Sarbanes-Oxley compliance by providing an electronic audit trail of FX deals and confirmations.

It appears that European corporates may be slightly ahead of their US counterparts, when it comes to realising the benefits of web-based trading tools for FX and other instruments, which I found slightly satisfying given that on the flight over to Miami I was bombarded by comments from an American tourist that had recently visited the UK about the differences in plumbing between the two countries.

I asked him what he thought of London, and instead of commenting on the virtues or otherwise of the usual tourist hot spots, he proceeded to tell me that he could not understand why there were two different taps for hot and cold water in the UK, whilst in the US one tap dispensed both at the same time which made it easier to wash your hands in warm water.

While European plumbing may be slightly archaic to some, it appears Europe has the upper hand when it comes to appreciating the finer points of web-based or electronic trading platforms.

In the dark about SEPA

As the International Payments Conference in London heard from Jean-Michel Godeffroy, director-general, payment systems, European Central Bank, that banks needed to ensure their systems were SEPA (Single Euro Payment Area) compliant in time for the launch date of 1 January, 2008, on the other side of the Atlantic, US multinationals attending EuroFinance's cash management conference in Miami were somewhat confused as to what SEPA meant for them.

It appears that the banks have not done a very good job of explaining to US headquartered multinationals what SEPA means for them in terms of payments they make within the euro zone and the real opportunities it presents to rationalise the number of accounts they hold with banks in Europe, dependent on the liquidity and tax implications.

A common refrain at the EuroFinance conference in Miami was that SEPA will create one of the "most innovative economies" in the world. But it seems no one, has really bothered to tell corporates outside of Europe what this "innovative economy" really means for them when transacting or doing business within the eurozone.

Treasury consultants at the Miami conference were eager to impart to corporates that SEPA would eventually mean they could clear all eurozone payments through a single operating account, as well as encouraging the use of centralised payment factories and collection points. Yet, survey findings indicated that SEPA was a relatively low priority for US multinationals.

While European corporates have been vociferous about the lack of communication from their banks as to the business benefits of SEPA, it appears US corporates are even more in the dark.

The general lack of education on the banks' part around SEPA only serves to fuel cynical comments that perhaps it is intentional, given that SEPA will dramatically reduce banks' revenue streams, perhaps ignorance on the part of customers is bliss, some suggest.

This is particularly pertinent in the case of US-based companies sending payments to eurozone countries in formats that are not SEPA-compliant - for example euro credit transfers may not contain the correct BIC (Bank Identifier Code) or International Bank Account Number (IBAN) for straight-through processing (STP) of that payment.

As Stephen Wojciechowicz, regional solutions manager, North America, banking industry division, SWIFT, pointed out, non-compliant SEPA payments could either be rejected, held or there could be additional charges if they are non-STP.

There also appeared to be some confusion amongst US corporates about what payment transfers would be impacted by SEPA. Wojciechowicz pointed out that whilst SEPA in theory only applied to euro payments of up to EUR 50,000, that it made more sense for US corporates to ensure all euro payments were SEPA compliant. (The European Payments Council's rule books for SEPA Credit Transfers and SEPA Direct Debits do not impose a cap and the belief is that the EUR 50,000 cap will be relaxed).

Wojciechowicz said that US companies should also apply SEPA formatting for euro payments to non-euro countries which still maintained their local currency, but had signed up to the principles of SEPA as members of the EU or European Economic Area.

Some US corporates in the audience appeared bemused as to how SEPA could proceed from 1 January 2008 without the SEPA framework for direct debits in place. SEPA Direct Debits were delayed due to the EU's failure to pass the legal framework for SEPA, otherwise known as the Payment Services Directive, in time for their implementation by 1 January, 2008.

Good old BICs and IBANs, also appear to be creating confusion outside of Europe. Wojciechowicz said how one US bank had mistakenly removed the alpha numeric character within the IBAN which meant that additional repair charges were imposed on the corporate in question.

While banks may be gearing up for SEPA implementation, preparing their back end systems to offer SEPA compliant payment instruments from 1 January next year, there is no questions that more could be done to better educate end customers on both sides of the Atlantic as to what SEPA really means for them.

Tuesday, April 17, 2007

US corporates unsure about SWIFT

At EuroFinance's International Treasury Management conference in Miami, Florida, one of the most advanced corporations, General Electric (GE), was eager to share its experience of how it had used SWIFTNet to rationalise the 'hotch potch' of electronic banking connections most corporations maintain with their banks.

Seth Marlowe, director, strategic initiatives, corporate treasury, operations services, GE, told conference goers it had already established 57 connections with banks via SWIFTNet and that it had another 75 to go. No other multinational corporation has invested as heavily in SWIFTNet as GE, however, Marlowe said it did so without conducting a strategic cost/benefit analysis.

Given the scale of its global operations, Marlowe said GE "had no choice but to go down this path [SWIFTNet]."However,it has not all been plain sailing. Marlowe says setting up multiple SWIFTNet Member Administered Closed User Groups (CUGs) is time consuming, but that the new SWIFT SCORE (Standardised Corporate Environment) Model made things easier in terms of the implementation process.

So are other North American corporates likely to follow GE's lead? Whilst IBM and Microsoft have announced their move to SWIFTNet, there were no show of hands by attendees at EuroFinance's conference in Miami when asked if GE's example had encouraged them to think about moving onto SWIFTNet. Over lunch one banker from Royal Bank of Scotland in the US said the cost of SWIFT was still too high for a number of companies.

It seems SWIFT still has its work cut out for it if it wants to penetrate the North American corporate market.

Are we there yet?

Having jetted into Miami Florida to attend EuroFinance's international treasury management conference for North American multinationals, little did I know that an anecdote a passenger shared with me on the flight from London to Miami would have some resonance on the first day of the conference.

As the conference was on cash management trends amongst large US multinationals, one of the key focuses on day one was to what extent companies were looking to obtain a single view of their cash enterprise-wide on a global basis, or what Ron Chakravarti, liquidity and investments, global transaction services, Citi, termed "strategic treasury".

Unsurprisingly "strategic treasury" is not as easily obtainable as the 'perfect body' is perhaps for some Miami South Beach regulars. Both require significant investment in terms of time and money; with corporates having to standardise fragmented technology platforms and systems, integrate business processes, streamline banking account structures and affect cultural change at the corporate level.

Yet, unlike the 'perfect body', "strategic treasury" is not just reliant on what effort and investment companies make, but also how committed their banks are at doing the same, and it soon became apparent that the banks also have a lot of work to do. Chakravarti stressed the importance of real-time information in helping companies obtain a 'single view' of their cash, but there are still huge disparities between banks and the payments clearing infrastructure in general in terms of its ability to provide up-to-the-minute high quality transaction information to companies.

Companies also need to move away from what Chakravarti described as a "hotch potch" of electronic banking systems, which large US multinationals such as General Electric (GE) has done rationalising its more than 40 proprietary EDI connections with banks using SWIFTNet Member Administered Closed User Groups (MA-CUGS) and standardising communications with its banks using SWIFT standards such as FileAct for bulk payment transfers.

Yet, despite its unprecedented investment in SWIFT, Seth Marlowe, director, strategic initiatives, corporate treasury, operations services, General Electric said SWIFTNet was not a 'panacea'. More importantly, Marlowe said, its experience of setting up the 57 SWIFTNet connections it maintains with banks, was less than consistent.

"What we found is a mixed bag. There are some banks that have the technology available, and all it takes to establish a connection with them via SWIFT is three months. But some don't have the technology in place and it can take two years to negotiate how the bank should deploy the technology on SWIFT."

According to Marlowe, whilst companies are being asked to standardise their business processes, it is anything but standardised within the banks in terms of account validation which often differs within the same bank on a country-by-country basis.

"Probably the most standardised thing is that there are exceptions to standards and a lot of that has to do with the banks. They need to get rid of the exceptions and do things the [same] way even if the branch of a bank may operate differently."

Even in the case of BICs and IBANs, which are mandatory in Europe as a means of increasing straight-through processing of payments, Marlowe said whilst banks insisted on companies including the correct IBAN in transactions, when it came to balance reporting, as a different system was used within the bank, the banks used BBANs (Basic Bank Account Numbers), which meant companies had to support two account numbers, IBANS and BBANS.

In a roundabout way this brings me back to the anecdote I mentioned at the beginning that a fellow passenger shared with me on the plane to Miami, which demonstrates how business practices within subsidiaries of the same bank are anything but standardised.

The passenger was recently visiting London and wanted to know if they could use their credit card from their US bank in a Royal Bank of Scotland ATM machine in London without being charged as RBS owned the US bank they banked with. Needless to say whilst both banks belonged to the same parent company, neither staff at the bank in the US or RBS in the UK seemed to know about the other or whether there had been any attempt at standardising processes between the two banks when it came to credit cards.

So when it comes to "strategic treasury" it appears that the banks as well as corporates need to get their own house in order.

Thursday, April 12, 2007

'Tapping' into new sources of data

With Ger Rosenkamp having steered the helm of Asset Control, transforming the privately-held company into a leading provider of centralized data management solutions for time series and reference data, what can customers expect from new CEO Phil Lynch?

Rosenkamp announced he was stepping down as CEO and president following his sale of a majority stake in his company to Fidelity Ventures and the appointment of Lynch, ex-CEO Reuters Americas and a Fidelity venture partner, as the new president and CEO of Asset Control.

Lynch says his initial focus will be on integrating the TAP Solutions acquisition with Asset Control, which will see its TAPMaster solution for data accessibility act as a downstream "data mart" to Asset Control's AC Plus data solution framework.

He says that the TAP acquisition will give Asset Control broader operating systems support beyond Unix and Linux as the Vancouver-based company's data accessibility solution leverages Microsoft.Net technology, which is likely to appeal to smaller-to-medium sized firms seeking a "simpler" solution.

Lynch also wants to build what he termed, an "ecosystem" around key product lines within Asset Control and to partner with data providers to build "out-of-the-box" standardised market data feeds from leading providers such as Thomson Data Corporation, S&P, Reuters and Bloomberg, which can be implemented more quickly.

I asked Lynch whether he would maintain Asset Control's focus on its 'hybrid' data management approach combining in-house software with outsourcing of services. His response seemed to indicate that at this stage, outsourced data management is not a top priority.

"Companies have been slow to take up outsourcing. I don't think the market as a whole is ready yet. Distribution of data is highly dispersed and not easy to 'ring-fence', which makes it difficult to outsource."

Having said that, Lynch said Asset Control would continue its partnership with Accenture's Managed Reference Data Service, which leverages AC Plus. "We also want to look at business process outsourcing opportunities as well, but that is more a long-term investment."

One question I was dying to ask, was Asset Control's participation (or lack of) in the Enterprise Data Management Council, a grouping of data management vendors including GoldenSource, Cicada and SunGard, which aims to help firms move to a more horizontal enterprise-wide data management framework.

Asset Control has always touted its centralised data management approach and Lynch appears less than enamoured by the EDM Council. "We are not planning to participate [in the Council]," he said. "We have to understand the benefits of it and how it is going to help 'move the needle'. I am not convinced of that yet. But I am open minded." Outgoing CEO Ger Rosenkamp chipped in saying that while EDM has value, he believes Asset Control's Customer Advisory Board, which influences most of its product development strategy, goes beyond the level achieved by the EDM Council.

An 'incremental' approach to compliance

The spate of regulations banks have to comply with reads like a shopping list; MiFID, Reg NMS, Know Your Customer, anti-money laundering, Basel II, fraud detection .....

And historically most banks have opted to buy separate solutions to address each regulation. Yet, given the zealousness with which the regulatory treadmill is churning out new or revised pieces of legislation, implementing separate solutions is no longer considered a viable approach. "When you deploy multiple compliance solutions, costs go up," says Stephen Epstein, vice president, head, product management, risk and compliance software provider, Mantas.

Epstein compares the scale of upfront investment required by most banks today to comply with a raft of regulations to the early days of order management system deployment. However, the difference with regulatory compliance, he says, is that the cost is not just a one-off investment; it is ongoing as new pieces of regulation come online, banks must source new data, documentation etc.

"The cost of supporting regulatory examinations is the real 'killer,' Epstein continues. "Banks need to have documentation readily available, the right policies and procedures in place and be able to say why an alert has been generated."

The only ones that appear to be benefiting from the overwhelming tide of regulation, corporate governance and compliance is the regulators, consultants and vendors implementing these myriad solutions. Yet, recognising that there is often overlap between different regulations in terms of the functionality and business processes required: transaction monitoring, scenario analysis, client classification, regulatory reporting; the latest industry buzzword to emerge is GRC (Governance, Risk and Compliance) framework.

According to Mantas, GRC is about implementing a flexible framework which does not just address regulatory, governance and compliance needs 'now', but 'future proofs' the business against future changes to regulation, governance or compliance, as well as allowing firms to re-use components from previous GRC implementations to address future needs.

"GRC is about repackaging old wine into new bottles; leverage-ability and re-usability is the value proposition," says S. Ramakrishnan, CEO, Mantas and Reveleus.

Forrester Research predicts that the GRC software platform market will grow from $590 million today to $1.3 billion by 2011.

By focusing on areas that overlap between regulations and integrating components that address these areas, Mantas and Reveleus have combined elements (transaction monitoring, behaviour detection, risk, control and self-assessment) from their once separate solutions to provide a GRC framework, a single platform which aims to reduce the duplication of effort and cost associated with implementing separate risk, governance and compliance solutions.

An example of the Reveleus/Mantas GRC platform at work is in the area of regulatory compliance with MiFID, where functionality; business execution analytics, scenario analytics, client classification, regulatory reporting; from both vendors' solutions are combined to help firms address various requirements such as best execution and KYC under MiFID.

But while GRC software platforms may be in the midst of a 'hype cycle', is it destined to fall into the 'trough of disillusionment' based on challenges around implementation and integrating data across traditional product silos within banks?

Ramakrishnan of Mantas/Reveleus says they are not trying to sell a 'monstrous' strategy to banks. The idea he says is to implement a GRC framework in incremental steps, starting with a specific regulation such as MiFID, for example, and then re-using data and analytic components of that installation to help with compliance, governance and risk management in other areas such as KYC, AML or fraud.

Thursday, April 05, 2007

The threat of non-bank payment providers

One of the good things about the current spate of private equity interest in financial technology vendors is that it allows analysts and journalists, to indulge in some healthy speculation.

And that is just what Gareth Lodge, a European banking & payments analyst at TowerGroup has been doing since the announcement of private equity firm, Kohlberg Kravis Roberts & Co's (KKR) announcement of its $28 billion bid for payments processor, First Data.

KKR is no stranger to the world of buyouts having already secured in the region of $104.5 billion such deals so far this year. The US-headquartered payments processor is a desirable catch given that its strategy to grow outside its core US business by making acquisitions in Europe, the Middle East and Asia, has helped boost the fortunes of First Data International.

Lodge estimates that First Data has made at least 15 deals or alliances in Europe alone in the last 10 years, including its recent purchase of Polcard in Poland for $330 million.

An injection of private equity capital is likely to aid First Data's bid to become a truly global payment processor, enabling it to finance further acquisitions in the Middle East, Asia and Europe. And despite First Data spinning off money transfer provider Western Union, Lodge believes KKR's investment may also see the payments processor make a bigger play for the international remittances market, which is currently dominated by money transfer agencies and a handful of banks.

It will also 'deepen the pockets' of First Data, which Lodge believes is in a much stronger position financially than European payment processors such as Voca and Equens, to play an enlarged role in Europe post-SEPA.

"Voca is still paying for its core processing renewal ... and even though they had a capital call recently, it hasn't got the kind of funds First Data has, which spent at least half a billion over the last 18 months alone in Europe," says Lodge.

But for us speculators out there, what is even more interesting is the prospect that other bidders for First Data could enter the fray. Lodge says First Data has a clause which gives the company 50 days to find a better offer, which may seem unlikely given that KKR's $29 billion offer, is, according to Lodge, one of the largest private equity buyouts ever.

Yet, Lodge and other analysts at TowerGroup have been wracking their brains thinking of other potential bidders for First Data and the list they have come up with makes the mind boggle. Banks like Citi and RBS which have been linked to the Barclays' bid for ABN Amro cannot be ruled out. However, interest from non-banks like Microsoft, Google and supermarket chains, Tesco and Wal-Mart are also plausible, says Lodge.

Acquiring a payments processor with credit card processing capabilities and a global footprint would be a major boon for these companies, says Lodge. And whilst Tesco has worked with banks like RBS to deliver financial services in the UK, rumour has it that they do not plan on working with RBS outside of the UK. "Either they [Tesco] are trying to find a partner to work with in those regions or Tesco are going to go it alone," Lodge postures. "It [Tesco] is big enough to get a banking license, which would radically change the model."