tag:blogger.com,1999:blog-327134072024-03-14T07:37:40.603+00:00FinancialTech InsiderRantings, ravings and commentary on financial technologyFinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.comBlogger251125tag:blogger.com,1999:blog-32713407.post-68443191592052301252010-08-26T12:47:00.001+01:002010-08-26T12:47:52.268+01:00FinancialTech Insider has movedFor those of you that have followed financial-i's blog FinancialTech Insider and want to continue to follow it, we have integrated the blog within financial-i's redesigned web site. Go to <a href="http://www.financial-i.com/">www.financial-i.com </a>for news and comment on issues pertaining to cash management, payments, trade finance, asset servicing and business solutions in the transaction banking space.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-17497561502061452402010-04-22T12:36:00.001+01:002010-04-22T12:36:39.496+01:00What EU airport regulators can and should learn from SEPA"The European single sky". In the wake of the volcanic ash disaster that brought European skies to a standstill, experts are calling for a more united approach across Europe's aviation regulators.<br />
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The handling of airport closures across Europe highlighted the fragmented approach that exists among European governments, airport regulators and air traffic control. Commentators now suggest that a more harmonised approach to air traffic control and airport safety across the EU is needed.<br />
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What has this got to do with transaction banking, you may ask? Well efforts to unite Europe's skies reminded me about efforts to unite European payments under the Single Euro Payments Area (SEPA) initiative. And if SEPA is anything to go by airport regulators could have their job cut out for them.<br />
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Of course, SEPA not only tried to harmonise existing European payment schemes, but instead proposed replacing them with new pan-European schemes for cross-border credit transfers and direct debits, which end users have been slow to adopt. No one is proposing a new EU-wide airport traffic control system per se, but linking airport traffic control systems across Europe does present its challenges, and one can already hear the national politicking and objections that are likely to emerge as different national regulators and interests jockey for position.<br />
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Europe may have a single currency, but it appears that the EU is far from united when it comes to most other things and EU-wide payment mechanisms or airport traffic control systems, are no exception. While these concepts may sound good on paper, in reality they are difficult to implement and are often hijacked or impeded by parochial interests.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-25999605808058625672010-04-14T15:21:00.000+01:002010-04-14T15:21:33.288+01:00Paying the price of electronic paymentsCash is no longer king, despite the fact that for the last decade or so we have heard transaction banks bang on about the supremacy of cash, at least to corporate treasurers that are cash-rich or looking to unlock cash trapped in inefficient parts of their business.<br />
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However, a report published by the UK Payments Council, concludes that cash's reign as king is over with cash usage rising just 7% over 10 years and comprising just 59% of all transactions (down from 73% a decade ago), with more consumers using electronic forms of payment such as debit cards, online payments or contactless cards.<br />
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Unlike the US, which while declining year on year, still has some challenges in terms of weaning companies and their customers off paper cheques, by 2018 the Payments Council predicts that fewer than 1% of UK payments will be made by cheque.<br />
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Yet, with the increasing use of electronic payments whether it is debit or credit cards, ACH or online, comes the increased risk or threat of fraud, particularly as transaction volumes rise. Jim Woodworth, head of business services at payments software provider, ACI Worldwide says financial institutions need to ensure that their systems are able to support the growth in the number of electronic payments, while reducing the risk of fraud.<br />
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Nick Ogden, founder and CEO of Voice Commerce, which provides voice authentication solutions for payments, also highlighted the heightened fraud implications associated with increased use of electronic payments whether it is cards or mobile. "The threat of fraud and identity theft becomes more prevalent as hackers get better at cracking these new payment technologies," he says.<br />
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This highlights the need for the industry to devise more secure means of authentication, that are cost effective and non-intrusive for the user. So as more payments are made online, banks not only face the challenge of ensuring their legacy payments infrastructure, some of which dates back 30 years or more, is up to scratch, but also that they are able to monitor and detect potentially fraudulent transactions in real time and to ascertain someone is who they say they are when making a payment without the user having to jump through too many onerous hoops.<br />
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And as electronic solutions revolutionize the way we pay, are consumers and companies likely to place more onus not only the speed and efficiency with which they can make a payment, but also how secure it is? In other words when we shop around for payment services will security be more front of mind than it has been historically?FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-2628095898760349812010-03-30T23:34:00.002+01:002010-04-01T12:50:36.873+01:00Transaction processing in microseconds?I attended an Intel Faster City event this evening, the 17th such event, in which Intel talks about its latest faster, more efficient processors and its technology partners and customers talk about how increased processing and compute power is`helping them in their everyday business applications.<br />
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The aspect I associate most with Intel's Faster City events is firms like Nomura talking about how faster processors are helping them win the so-called arms race, by reducing latency in algorithmic trading and high-velocity Direct Market Access trading applications.<br />
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Ken Robson, chief algo trading architect, Nomura, reeled off a list of benefits his firm had gained from using faster Intel processors; putting multiple strategies on a single box, compressing ticker plants; but the thing that struck me the most was his comment that why they do not break the bank, his department pretty much has free rein when it comes to technology spend. <br />
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That contrasts sharply with the middle and back office, which as we know historically has not matched the level of technology investment that the front office has enjoyed. Yet, as the crisis reminded us, while the front office talked in microseconds, back-office risk and reference data management systems struggled to keep up with their batch processing systems.<br />
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You don't hear reference data managers talking in microseconds, nor do you hear transaction banks or payment processors boasting that it only took them a microsecond to transmit a payment to a customer.<br />
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However, it appears that may be changing. With data management and risk management being the 'fall guys' of the financial crisis, the expectation now is that they will be among the largest areas of IT investment in the coming months as the fallout from the financial crisis forces banks to step up investment in these areas.<br />
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Nigel Matthews of Thomson Reuters told attendees at Intel Faster City that next-generation data management was not about batch processes but would be more near real time and event driven and that front-office technologies were slowly starting to penetrate the middle and back offices.<br />
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This can only be good news, particularly when it comes to reference data management and ensuring that the back and middle-office is keeping pace with what is happening in the front office. But I cannot help thinking when is the payments business likely to benefit from these technologies? <br />
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While there have been developments in reducing payment processing times, particularly with the advent of UK Faster Payments, which has reduced clearing times for low value payments from three days to "near real time", payments are still largely batch processed.<br />
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Although not all payments are time sensitive, there are certainly customers that would benefit from speedier payments and there are certainly banks that would benefit from being able to process more transactions per second using dual or multi-core processors. So why is it that most firms are still using single-core processors?<br />
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But has the financial crisis really changed anything in terms of the clout back-office reference data managers have when it comes to getting a larger share of the IT begging bowl so they too can try and win the "arms race". We'd like to hear from reference data managers that are able to say with the same confidence as Nomura's chief algo architect, that they have carte blanche when it comes to technology spend.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com1tag:blogger.com,1999:blog-32713407.post-27259490501923389612010-03-15T17:19:00.001+00:002010-03-16T10:57:39.849+00:00Data analytics not for "rocket scientists"<i><b>We’ve all read the reports that in the wake of the financial crisis, risk management and analytics needs to move to the top of the corporate agenda and that risk managers should be viewed not as the bogeyman trying to rein in the profit-hungry trading desk’s excessive risk taking, but more as a strategic asset within the bank that has the ear of the CEO, CFO and CIO.</b></i><br />
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While risk managers within some banks did spot the early warning signs of a pending crisis, the risk models and analysis used have also come under harsh criticism in the wake of the crisis, particularly for their inability to speak to senior executives in a language that they clearly understood. In other words, if you take this level of exposure in your CDS portfolio, this, this and this will happen and oh by the way, i have sliced and diced the data for you and presented it in a rather colourful line graph or pie chart, that can be quickly read and interpreted, not some complex mathematical formula.<br />
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What the financial crisis boils down to, notes Venkat Mullur, senior director, industry solutions, TIBCO Spotfire, is that “People who were making the decisions didn’t understand what Value at Risk (VAR) meant,” – VaR being a common risk modelling technique used by banks. “There was a cognitive gap between the model and analysis and consumers of that data,” not all of whom were mathematical geniuses.<br />
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Post-crisis I think we can safely assume there were too few so-called "geniuses" within banks, as there was a lot of exposure to things banks did not really understand. If only someone had bothered to portray the risk analysis for them in a more easily digestible manner than perhaps they would not have been all so keen to pile into CDS. The question is what to do about it?<br />
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Going forward if all parts of the businesses within a bank are to understand the outcomes of data analysis across all lines of the business, Mullur argues that data or business intelligence needs to be presented in a more easily digestible, flexible and dynamic format. <br />
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Business users also need to be able to perform on-the-fly data analysis on a whole host of different data without having to revert back to IT. TIBCO’s answer to this dilemma is to leverage the business intelligence and predictive analytics capabilities within its in-memory Spotfire 3.1 platform. Spotfire uses a range of data visualization techniqes such as “conditional coloring and lasso and axis marking that allow for better data analysis of patterns, clusters and correlations among sets of variables. Multiple scale bar charts and combination bar and line plots can also be used to analyse unstructured, ‘free-dimensional’ data to identify key trends (<i>see diagram)</i>.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/_B6uR99nvcDw/S55pXjvrZNI/AAAAAAAAAS0/m-6UTyZOX1k/s1600-h/SegmentationThickClient+%282%29.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/_B6uR99nvcDw/S55pXjvrZNI/AAAAAAAAAS0/m-6UTyZOX1k/s320/SegmentationThickClient+%282%29.png" /></a></div><br />
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“Spotfire allows users to analyse data in a more intuitive way and to make better sense of the data needed to predict future events,” says Mullur. Analyst firm <a href="http://eclipse.sys-con.com/node/1276341">Forrester </a>has given Spotfire the thumbs up saying that it “puts the power of predictive analytics into the hands of any business user, with data visualizations they can understand, and a level of interactivity unmatched by traditional business intelligence (BI). That means, says Forrester, that statisticians and business analysts can “prototype, test, and deploy analytics much faster than with alternative statistical modelling environments,” such as spreadsheets, which do not easily allow for ad hoc analysis by business users. <br />
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It’s easy to see why TIBCO and Forrester are bullish about Spotfire, particularly when advanced data analytics of the past has been the preserve of “rocket scientists”. So there will be no excuses now for banking CEOs to say they did not understand the risks the business was undertaking in a particular investment portfolio or line of business when their risk or business manager presents them with colourful line graphs and pie charts of various statistical analyses they have performed.<br />
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And it is not just commercial banks that are likely to benefit. Mullur says it is also working with global regulators to help them get a better handle on risk analysis.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-62165750984376768902010-02-05T11:24:00.002+00:002010-02-05T12:01:41.313+00:00Sybase-Aleri deal plays to the advantage of remaining pure-play CEP vendorsI remember writing about the burgeoning Complex Event Processing (CEP) market two or three years ago when their were a handful of vendors; StreamBase, Coral8, Aleri, Progress Apama,; all vying for market share and using CEP to service different parts of the market. Some like Progress Apama were focused on CEP and its application in the algo trading space, while Aleri was more focused on the liquidity management side.<br />
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With this week's announcement that Sybase had finalised an asset purchase agreement with Aleri, the CEP pure-play market has virtually shrunk overnight. Sybase was already using Coral8's CEP in its real-time analytics or RAP platform and had a reseller agreement with Coral8.<br />
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However, Coral8 was bought by Aleri back in 2008 giving Aleri essentially three CEP products, its own, Coral8's and OHIO, the project name for its attempt to integrate Coral8 with Aleri's CEP engine. Meanwhile since 2008, Sybase had a reseller agreement to offer the Coral8 engine and portal as a general purpose CEP platform "in conjunction with any Sybase solution globally". <br />
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There is a lot of speculation on the web about why Aleri sold up to Sybase, including an article on <a href="http://www.wallstreetandtech.com/data-latency/showArticle.jhtml?articleID=222601058">Wall Street & Technology </a>speculating that maybe Aleri was having financial difficulties. However, the truth may lie somewhere in the complicated morass of reseller agreements and the fact that having acquired Coral8, Aleri was also planning to sell its technology, which Sybase was also reselling. <br />
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The official line from Sybase this week is that the Aleri acquisition will position it as a "clear market leader in CEP" and help strengthen its RAP platform with the addition of Aleri's Liquidity Risk Management and Liquidity Management Suite.<br />
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However, some commentators I spoke to say that Sybase is unlikely to be a serious contender in the CEP space and that under Sybase's stewardship the Aleri platform could wane, which may be a problem for existing customers.<br />
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Furthermore the so-called OHIO project for merging Coral8 CEP with Aleri CEP also seems unlikely to continue. Hence why StreamBase is rubbing its hands together coming out with the statement that customers of Aleri-Coral8 or Sybase-RAP can trade-in their products and move over to its platform.<br />
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Richard Tibbetts, CTO at StreamBase, said, “It’s unlikely that Sybase will maintain four separate products.Aleri had three separate CEP product initiatives; Coral8, Aleri, plus OHIO. Sybase’s CEP product RAP is yet a fourth code base. As a result, we’ve been approached by customers of all these products and asked to provide migration strategies to StreamBase."<br />
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It seems that the true winners out of this deal in the CEP pure-play space are likely to be StreamBase and Progress Apama. It appears that Sybase sees CEP not as the be-all and end-all on its own, but as part of an integrated offering that supports analytics and data repositories. To that extent it is unlikely to go head-to-head with StreamBase and Progress Apama on the CEP piece.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com3tag:blogger.com,1999:blog-32713407.post-31414767805899147442010-02-03T18:32:00.018+00:002010-02-05T10:23:12.187+00:00Clearstream no longer thinks of itself as just a depository but as a commercial bank<div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/_B6uR99nvcDw/S2nBaF6f02I/AAAAAAAAASs/QAZG4__ZjqE/s1600-h/Clearstream_JeffreyTessler.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://3.bp.blogspot.com/_B6uR99nvcDw/S2nBaF6f02I/AAAAAAAAASs/QAZG4__ZjqE/s320/Clearstream_JeffreyTessler.jpg" /></a></div>At the London Capital Club, Jeffrey Tessler, CEO of Clearstream International, the Luxembourg-based ICSD, painted its competitor, Euroclear, the other half of the ICSD (International Central Securities Depository) duopoly, as being in a much weaker position - directly exposed to the failure of broker/dealer clients during the crisis, a number of changes at top management level including the impending arrival of a new CEO, and still stuck in the mindset of a utility, not a commercial bank that is moving up the value chain.<br />
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One could be forgiven for thinking that old rivalries between the ICSD duopoly, which go back decades, have never really dissipated. However, Tessler was also complementary towards his Brussels-based counterparts saying that it too recognised the importance of interoperability amongst CSDs (although the jury is still out on whether Euroclear is likely to join Clearstream's <a href="http://www.linkupmarkets.com/">Link Up Markets</a>).<br />
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He complemented Euroclear for the work it had done in integrating the CSDs within the Euronext markets into one with its Euroclear Settlement of Euronext-zone Securities (ESES). Yet he added that it would be difficult for Euroclear to extend its single platform concept beyond the Euronext markets, so it would have to embrace interoperability and hopefully join Link Up Markets.<br />
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When I spoke to outgoing Euroclear CEO Pierre Francotte at Sibos in Hong Kong last September, he said Euroclear was looking at Link Up Markets, but he remained non-commital. It will be interesting to see how Euroclear's new CEO, Tim Howell, approaches the issue of interoperability and Link Up Markets when he finally takes the helm at the Brussels-based ICSD.<br />
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If Euroclear decides not to join Link Up Markets, which has built a converter for fostering interoperability between different domestic CSDs, Tessler said you could still have bilateral links in all major markets. However, from Link Up Markets' perspective its ambition is to provide a single point of access into multiple markets."We believe interoperability as a strategy going forward is the right one," says Tessler. "Regulation is moving in that direction. Instead of destroying local market infrastructure, we want to leverage the infrastructure that exists." <i>For more on Link Up Markets as a single pipe, </i><code><a href="http://sites.google.com/site/financialipodcasts/jeffrey-tessler-clearstream/JeffreyTessler%2CLinkUpMarkets.mp3?attredirects=0&d=1"></a></code><a href="http://sites.google.com/site/financialipodcasts/jeffrey-tessler-clearstream/JeffreyTessler%2CLinkUpMarkets.mp3?attredirects=0&d=1">listen to Jeffrey Tessler<code></code></a>.<br />
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<blockquote></blockquote>Clearstream Banking Frankfurt, which is the German domestic CSD within the Deutsche Bourse <i></i>Group, sees its membership of Link Up Markets as a way of not only fostering interoperability among CSDs, but also moving up the value chain to prepare for a much-changed world post-TARGET2-Securities (T2S), which is the new settlement platform for euro-denominated securities due to go live now in 2014.<br />
<blockquote><span style="color: #660000;">"T2S is like taking a chalkboard and erasing everything off of it," said Tessler. "Through Link Up Markets we will be able to access multiple markets through a single window. We are transforming Clearstream Banking Frankfurt from a domestic CSD into a hub for accessing multiple CSDs throughout Europe and the world."</span> </blockquote> But Clearstream International, the ICSD part of the business, has far loftier ambitions. Tessler says it plans to become not just a depository but a commercial global custodian like J.P. Morgan or Bank of New York Mellon that provides value added services such as Global Securities Financing, which is an increasingly successful part of its business, going from has a 22% market share in 2002 to a 51% market share.<br />
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Interestingly, custodian banks are also customers of Clearstream, and when questioned on whether Clearstream would compete directly with its customers, Tessler said regional subcustodians that acted as an intermediary between the broker and the CSD, would find their business increasingly threatened. Increasingly, he says, brokers will ask themselves, 'Why do I need a subcustodian?'<br />
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Tessler says Clearstream is winning more securities financing business than its competitor Euroclear because of its vertical integration model which combines the trading functionalty of Deutsche Bourse, with the settlement and collateral management capabilities that also exist within the group, particularly Clearstream Frankfurt's direct links with the Deutsche Bundesbank. For more on why Clearstream has been successful in the securities financing space, <code><a href="http://sites.google.com/site/financialipodcasts/jeffrey-tessler-clearstream/JeffreyTessler%2CGlobalSecuritiesFinancing.mp3?attredirects=0&d=1"></a></code><a href="http://sites.google.com/site/financialipodcasts/jeffrey-tessler-clearstream/JeffreyTessler%2CGlobalSecuritiesFinancing.mp3?attredirects=0&d=1">listen to Jeffrey Tessler<code></code></a>.<br />
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</i>FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-17270017725065935102010-02-01T11:22:00.005+00:002010-02-02T18:11:44.095+00:00The worst of regulatory oversight for banks is yet to comeThose of you in the banking industry that thought Barack Obama's recent announcement about limiting the size and scope of banks and their trading activities was enough to make you want to leave a job in the City and become a yoga instructor, well it seems we haven't seen the worst of the regulatory backlash against banks yet.<br />
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That is the view of Oliver Wyman's Financial Services practice and is one of the key findings in its <i>State of the Financial Services Industry 2010</i> report, which was released at Davos last week. The report, which is published annually, is based on feedback from 70 financial services firms globally.<br />
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While Obama's announcement signified that the period of "temporary leniency" by regulators to enable banks to shore up their capital reserves and balance sheets, may be over, Oliver Wyman says Obama's announcement was not that tough on the banks. "The big question now is how the industry will interface with regulators," says David Moloney, from Oliver Wyman's Sydney-based financial services practice. <i>For more on regulation from David Moloney, listen to this<code> </code></i><a href="http://sites.google.com/site/financialipodcasts/david-molone-oliver-wyman/MONO-DavidMolonefirstedit.mp3?attredirects=0&d=1"><i>voice grab.</i><code></code></a><br />
<blockquote></blockquote>Jamie White of Oliver Wyman in London, said that if Obama's definition of what constitutes proprietary trading is too wide, the regulation itself could be difficult to enforce as it could be argued by some that market making is proprietary trading, although outlawing that would have a detrimental impact on the market.<br />
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Yet, Obama is perhaps missing the point by focusing so much on proprietary trading, which Oliver Wyman maintains was not the root cause of the recent financial crisis. It also questions the "excessive faith" regulators are placing on regulatory capital as a source of systemic stability. Some of the high profile casualties of the financial crisis such as Bear Stearns were deemed to have more than their fair share of regulatory capital, yet that did not prevent it from collapsing.<br />
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Oliver Wyman believes the worst in terms of regulatory aggressiveness has yet to come in the form of initial proposals under consideration for Basle III. Obama's "mini-Glass-Steagall", which is largely US focused, will seem like a walk in the park compared to some of the proposals under consideration as part of the revision of Basle's supervisory requirements.<br />
<blockquote style="color: #660000;">White says the next incarnation of Basle could end up making some lines of a bank's business impossible. For example, he says initial proposals talk about getting rid of netting, which could in effect quadruple banks' exposures.</blockquote>Although we would like to think that the worst of the crisis is over and that banks are in the "convalescence" stage, Oliver Wyman's report shows that while 57% of market value losses have been recovered by financial firms since the crisis began in 2007, these green shoots may be "astroturf" as there are still high levels of consumer debt and if government support of financial services firms is withdrawn too quickly, they could relapse. Moloney said Japanese and Scandinavian examples suggest that governments maintaining equity ownership of financial institutions can go on for longer than anticipated. <br />
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Te possibility of another "relapse" in the not too distant future can not be ruled out, with 32% of CEOs surveyed in is report saying there is a 32% chance of a double dip or "W-shaped recession". Relapse risk is highest in Continental Europe, says Mark Weill of Oliver Wyman, where there are still a large number of losses on banks' books, that have not been accounted fors.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-89718905126481528202010-01-22T17:49:00.000+00:002010-01-22T17:49:38.013+00:00Good bank, bad bankWhile financial stocks are reeling in the wake of U.S. president Barack Obama's announcement that he wants to limit the scope and size of banks and their trading activities, their must be mixed feelings amongst banks about this announcement and what it means for certain parts of the bank.<br />
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Trading, hedge funds, private equiy and investment banking look as if they could be the hardest hit particularly as much of the U.S. government's rhetoric is around those banks that have become more than just deposit takers and are indulging in risky trading activity on their own books (and still expecting to be bailed out by the government). According to a WSJ.com article, one White House spokesman said that banks that received a "backstop" from the taxpayer shouldn't be able to make a profit off their own investing."<br />
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It goes back to the co-mingling of clients' funds with the banks' money, but as early newspaper reports suggest trying to disentangle one from the other could be tricky unless you clearly separate good old fashioned banking (lending and deposit taking) from proprietary trading. That smacks of Glass-Steagall.<br />
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Most banks will be reluctant to separate investment banking or proprietary trading from the rest of the bank and will argue that one feeds into the other in terms of cross-selling opportunities. After all investment banking or proprietary trading, although high risk, made a substantial contribution to banks' balance sheets prior to the recent crisis and in its wake. <br />
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But what does this mean for the less riskier parts of a bank's business, for example, transaction banking? Does Obama's clampdown on banks mean that transaction banking - which is less volatile and a relatively stable business in good times or bad - will become the most prized of all the banks' businesses?<br />
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We are certainly seeing that with the likes of Citi, which has divided itself into "good bank", "bad bank", putting its more core, stable and profitable businesses such as GTB into a separate unit called Citicorp and riskier non-core assets into Citi Holdings. Are other banks going to have to follow this example in order to comply with Obama's requirements? And if they don't is transaction banking in danger of being polluted or fouled by the mistakes or errors of judgement of its riskier investment banking counterparts?FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-60462730707323071852010-01-22T16:20:00.000+00:002010-01-22T16:20:45.913+00:00Transaction banks vye for a slice of the remittances marketOne aspect of the cross-border payments business that global transaction banks have failed to monopolise is remittances. Estimates from the World Bank suggest that the global remittance market increased 63% in the five years leading up to 2009 with more than $550 billion worth of funds remitted by immigrants living abroad in 2008.<br />
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Any bank can see the huge revenue potential if they are able to capture a substantial share of the global remittances market. However, the global remittances business is still dominated by non-bank money transfer providers such as Western Union and MoneyGram. One of the reasons for that is that remittances tend to touch the "unbanked" in emerging markets - people that don't have a bank account or ready access to one.<br />
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Banks, also being risk averse, have hesitated to enter this space particularly given the onerous regulatory requirements it entails for them in terms of compliance with Know Your Customer (KYC) and Anti-Money Laundering legislation. That perhaps explains why figures suggest that, in the US market at least, there are only about 100 banks that offer consumer remittance services with any meaninful volumes.<br />
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Yet, some banks like Citi and Bank of America have made forays into the remittances space, either alone or in conjunction with partner banks to offer consumer remittances at a lower cost than the traditional money transfer agencies.<br />
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Deutsche Bank is the latest entrant to this space. While it has no interest in selling remittance services to consumers directly, as part of its growth strategy for its Global Transaction Banking business, this week the German bank announced a strengthening of ties with payments network Eurogiro, which connects postal organisations globally.<br />
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Deutsche has taken an 8% equity stake in Eurogiro and plans to expand its offering to Eurogiro's network of postal organisations, post banks and othe financial institutions beyond US settlement services to encompass multicurency services. In return Deutsche gains access to Eurogiro's enviable global footprint across emerging markets without having to build a bricks and mortar presence itself.<br />
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Paul Camp, head, cash management, financial institutions at Deutsche Bank says the strategic investment in Eurogiro is part of Deutsche's Global Remittance initiative which combines Eurogiro's reach with the bank's existing capabilities as well as its plans to leverage mobile and SMS.<br />
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Camp was coy about Deutsche and banks' overall share of the global remittances space, but said its overall share was quite small (Deutsche's share of total cross-border payments globally is 5% based on SWIFT traffic volumes) but that it was looking to grow its presence. "However it is not a risk free market," he says, "given the AML and KYC issues." <br />
<br />
Deutsche will be relying on the partner banks and postal organisations within Eurogiro to have the right risk controls in place while it will provide them with multicurrency settlement capabilities. It is also working with mobile technology provider Luup to expand its mobile payments capabilities particularly in the B2B space. Mobile is deemed to be a useful technology in the remittances space because it allows people without bank accounts to receive money.<br />
<br />
On the whole whoever, both banks and the money transfer agencies have been slow to leverage mobile technologies in the remittances space. They have been pipped to the post by telecom companies like Vodafone which partnered with Safari.com in Kenya to launch M-PESA, a mobile money transfer system which has more than 7 million subscribers. <br />
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The banks have yet to clearly demonstrate what additional value they can bring to the remittances space, however, the gloves are off, and Western Union and MoneyGram can expect increased competition from banks, telcos and pre-paid card providers.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com1tag:blogger.com,1999:blog-32713407.post-2425131338947529532009-10-27T18:42:00.000+00:002009-10-27T18:42:46.895+00:00More corporates are joining SWIFT, but some warn it could become an inflexible "monolith"As corporates, particularly those that are multibanked, spend considerable time and money trying to integrate their systems with the multitude of proprietary banking platforms that are out there, Eurofinance's organisers felt it pertinent to ask whether banks should have developed a common non-proprietary solution.<br />
<br />
Unsurprisingly 75% of corporates surveyed at the Eurofinance conference in Copenhagen last week favoured a common banking platform, while just over 50% of banks favoured a collective solution. The truth is that banks continue to see their proprietary treasury management platforms as a key differentiator and continue to invest millions in these platforms.<br />
<br />
Two good examples of this is Citi with its recent announcement at Sibos in Hong Kong of its next gen treasury management platform, CitiDirect Banking Evolution, and Bank of America Merrill Lynch's CashPro Online. Bothleverage Web 2.0 technologies and aim to set the standard for other banks to follow when it comes to the next generation of treasury management applications.<br />
<br />
Both banks invested substantial sums in these solutions, so corporates telling them that they would prefer a common solution across all banks is not what the banks really want to hear, although they maintain that these platforms are where they can truly differentiate their service offerings in terms of delivering value-added services and that they can collaborate in other areas such as standards, electronic bank account management and SWIFT connectivity for corporates.<br />
<br />
Marilyn Spearing, managing director, global head of trade finance and cash management, corporates, Deutsche Bank, believes banks need to do a lot more on SWIFT if they want to ease the complexities for their corporate customers.<br />
<br />
<a href="http://2.bp.blogspot.com/_B6uR99nvcDw/Suc9Y07RgyI/AAAAAAAAASk/vQH7j_SA4Rc/s1600-h/P1020721.JPG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://2.bp.blogspot.com/_B6uR99nvcDw/Suc9Y07RgyI/AAAAAAAAASk/vQH7j_SA4Rc/s200/P1020721.JPG" /></a>However, Catherine Bessant, president, Global Corporate Banking, Bank of America Merrill Lynch USA, does not believe SWIFT is the be all and end all and warned of the problems that can stem from creating "monoliths" that are inflexible, not that innovative and have too much power. "I am a fan of what SWIFT has done," but she says we should not presume that SWIFT is the best collective solution.<br />
<br />
Spearing, who is on the board of SWIFT, leapt to the banking network's defence, saying that it it is not a monolith as it would only be used for messaging and connectivity amongst corporates.<br />
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<br />
Historically, however, connecting to SWIFT has been the preserve of large Fortune 500 companies that have the patience, financial wherewithal and inhouse IT infrastructure to support such a mammoth undertaking. Yet, more recently SWIFT has targeted smaller companies that do not have the transaction or messaging volumes of the larger players but still want the STP benefits of connecting to SWIFT with its "SWIFT-on-a-USB-stick" solution.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-46458024769341372022009-10-27T17:55:00.000+00:002009-10-27T17:55:32.996+00:00Cash may be king, but it won't all be plain sailing for transaction banks"Payment systems did not slip up at any time during the [recent financial] crisis. Payment systems were resilient and strong." This is a common refrain you will hear from global transaction banks who appear to have absolved themselves of any responsibility for the financial crisis.<br />
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While it is true to say that the recent credit crunch and liquidity crisis did not stem from the transaction banking side of the business but from the more nefarious side of the business where mortgages were bundled into complex securitiized products that were resold, global transaction banks cannot completely absolve themselves of any wrongdoing throughout the crisis.<br />
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The crisis may not have stemmed from the activities that underpin global transaction banking; namely faciliating cross-border payments, cash management and trade finance and the safekeeping of securities, to some extent; however the behaviour of transaction banks, which provide credit or financing to corporates and other banks based around the provision of other transactional services and processing capabilities, has been called into question throughout the crisis.<br />
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Corporate treasurers in particular appeared to have lost faith in their transaction banks, who have reduced credit lines or increased margins making it more expensive to obtain credit. At Eurofinance in Copenhagen last week, approximately 60% of corporates at one of the sessions said banks were not delivering acceptable lending terms. Unsurprisingly, 84% of bankers maintained that they had not used the crisis to unfairly set higher prices. <br />
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There appears to be a collective denial among most transaction banks, even those that have had to scale down their global ambitions in light of opting for a substantial chunk of taxpayers' money, when it comes to acknowledging that corporates have lost of faith in them as a result of their behaviour post-crisis.<br />
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Most transaction banks at Eurofinance were keen to point out that the infrastructure did not at any point fail throughout the crisis; payments continued to be made and processed. While corporates acknowledge this what they are alluding to is perhaps a breakdown in the relationship a lot of them have spent years building with some of their major transaction providers in Europe or the US.<br />
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And while corporates were eager to make banks more accountable with 58% of those companies surveyed at Eurofinance saying the G20 should be concerned about bankers’ bonuses, bankers did not see bonuses or even deposit protection as the real issue, despite the fact that during the height of the crisis there must have been quite a few treasurers worryingly scratching their heads worrying about substantial sums of money they may have deposited with a bank that was teetering on the brink of failure.<br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_B6uR99nvcDw/Sucz9LEXyPI/AAAAAAAAASc/YiUltJuezdA/s1600-h/Spearing.jpb.JPG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/Sucz9LEXyPI/AAAAAAAAASc/YiUltJuezdA/s200/Spearing.jpb.JPG" /></a><br />
</div>Marilyn Spearing, managing director, global head of trade finance and cash management, corporates, Deutsche Bank, said she worried about more regulation creating excess costs, which inevitably will be passed on to corporates. Yet, while the transaction banking business in general may escape the mightly flourish of the regulatory pen, corporates are going to demand greater levels of transparency and accountability from their transaction banks, particularly in terms of assessing counterparty risk based on CDS spreads and banks' Tier 1 capital ratios.<br />
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If cash is truly king as everyone keeps saying, corporates are also going to demand morereal-time information pertaining to payment flows into and out of accounts from their banks and the ability to track payments from initiation through to delivery into the receipient's bank account in real time. Those transaction banks that do not have the wherewithal to deliver these kinds of services are likely to find themselves at the bottom of the pile.<br />
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While transaction bankers may be smiling given that most of their businesses continued to deliver double digit percentage growth throughout the crisis, they cannot and should not rest on their laurels. There is still considerable work to be done to ease the concerns of corporate treasurers, who are going to find it easier to switch banking relationships in future given that more and more are communicating with multiple banks via SWIFT or SWIFT service bureaux and standards for automating Electronic Bank Account Management, which will reduce the time taken to open new bank accounts, become more widely implemented.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-8552351829942471472009-09-17T16:40:00.014+01:002009-09-18T15:56:25.374+01:00<div class="MsoNormal"><b><i><span lang="EN-US">The worst of the financial crisis and the typhoon that threatened Sibos in Hong Kong may have passed, but guest blogger, </span>Andy Schmidt of TowerGroup, says considerable uncertainty surrounding certain aspects of the financial services industry remains.</i></b><br />
</div><div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/_B6uR99nvcDw/SrOffZ9RYzI/AAAAAAAAASU/Qvm_aUnlWnM/s1600-h/Andy+Schmidt.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/_B6uR99nvcDw/SrOffZ9RYzI/AAAAAAAAASU/Qvm_aUnlWnM/s320/Andy+Schmidt.jpg" /></a><br />
</div><div class="MsoNormal"><b><i> </i></b><span lang="EN-US"> </span><br />
</div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span lang="EN-US">And so we find ourselves at the end of another successful Sibos. One year (and one typhoon!) after the fall of Lehman, despite being humbled, the financial services industry is peering out at the world with an air of cautious optimism. <o:p></o:p></span><br />
</div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span lang="EN-US">Of course, there’s a lot of work still to do to recover. Significant challenges with respect to transparency and liquidity can still wreak havoc in the marketplace. Financial market harmonisation remains more a dream than reality, and regulations like SEPA are still without a final implementation date. Therefore, uncertainty of all kinds will continue to challenge the financial services community for the foreseeable future. <o:p></o:p></span><br />
</div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span lang="EN-US">Therein lays the point. The financial services industry is a community whose members rely on one another for survival and success, now more than ever. We’ve survived — especially in the payments sector — because of our ability to work together. And as a community, we’re looking at ways to work together that we would never have considered before the crisis, considering approaches like collaboration, competition, and joint ventures that were “unnatural acts” a short 12 months ago. <o:p></o:p></span><br />
</div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span lang="EN-US">Broader standards adoption will certainly ease the transition toward shared infrastructures, and innovation will uncover new ways to achieve greater efficiencies in serving our clients and partners. </span><br />
</div><div class="MsoNormal"><br />
</div><div class="separator" style="clear: both; text-align: center;"><br />
</div><div class="MsoNormal"><span lang="EN-US">However, it’s the ability, opportunity, and (dare I say) responsibility of the financial services community to speak to the regulators in simple language that will provide us the greatest opportunity to shape our collective future. Remember, the regulators need our input to better understand where the risks truly are, and engagement with the regulators provides us a voice in the direction our industry heads.<o:p></o:p></span><br />
</div><div class="MsoNormal"><br />
</div><div class="MsoNormal"><span lang="EN-US">So when we reconvene, I expect we’ll have stories (and perhaps even case studies) to share on how the market has evolved and improved in 12 months’ time, showing how, together, we can create a stronger, better industry. See you in Amsterdam!<o:p></o:p></span><br />
</div><div class="MsoNormal"><br />
</div>FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com1tag:blogger.com,1999:blog-32713407.post-44597834299982804272009-09-17T09:59:00.000+01:002009-09-17T09:59:12.392+01:00<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/_B6uR99nvcDw/SrH6PTPvhjI/AAAAAAAAASM/iVrfOGBG8mo/s1600-h/Closing+2.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/_B6uR99nvcDw/SrH6PTPvhjI/AAAAAAAAASM/iVrfOGBG8mo/s200/Closing+2.jpg" /></a></div><br />
<br />
Another Sibos is over and the big debate is not the fallout from the GFC (global financial crisis) or whether SWIFT can truly trim EUR 30 million off its bottom line (although if the sliver of a sandwich the journalists were fed in the press room is anything to go by, the McKinsey consultants have certainly been cutting a swathe through SWIFT's balance sheet).<br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/_B6uR99nvcDw/SrH56S3uY6I/AAAAAAAAASE/xeHFPAOcDMY/s1600-h/Empty+exhibition.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://3.bp.blogspot.com/_B6uR99nvcDw/SrH56S3uY6I/AAAAAAAAASE/xeHFPAOcDMY/s200/Empty+exhibition.jpg" /></a></div>The bigger story, other than the typhoon that wasn't really a typhoon, was whether there really was 5,000 delegates in attendance. At the opening plenary, SWIFT claimed that more than 5,000 people were attending Sibos in Hong kong, yet the exhibition floor looked thin on the ground most days (particularly the one on the third floor which saw less foot traffic than those lucky exhibitiors with first floor stands. <br />
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However, today, suddenly from out of nowhere hundreds (not thousands) of bankers converged on the closing plenary. Where had they been all week? Well with a convention centre so spread out you needed to run a marathon to get from one room to the next, looks may be deceiving. Maybe there really were 5,000 registered delegates (there also seemed to be an awful lot of people employed to wipe drops of water off air conditioning systems with long mops - presumably they were not counted as delegates).<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/_B6uR99nvcDw/SrH5hYY-j8I/AAAAAAAAAR8/GH6VzMOr4EU/s1600-h/Closing+4.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://3.bp.blogspot.com/_B6uR99nvcDw/SrH5hYY-j8I/AAAAAAAAAR8/GH6VzMOr4EU/s200/Closing+4.jpg" /></a><a href="http://4.bp.blogspot.com/_B6uR99nvcDw/SrH5ehJOItI/AAAAAAAAAR0/4FNdb4-DYLA/s1600-h/Closing.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://4.bp.blogspot.com/_B6uR99nvcDw/SrH5ehJOItI/AAAAAAAAAR0/4FNdb4-DYLA/s200/Closing.jpg" /></a></div><br />
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Anyway, jokes aside, keeping with the innovation theme SWIFT introduced at Sibos last year in Vienna, the closing guest speaker was <a href="http://www.guykawasaki.com/">Guy Kawasaki</a>, ex-Apple and now running his own technology venture company. He boasted about how the "egomaniacs" at Apple flew first class (on flights longer than two hours), drank fresh orange juice and had a Bodendorf piano. Those were the days and perhaps there were a few bankers in the audience also lamenting the loss of first class travel and fresh orange juice.<br />
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Kawasaki trawled through his 10 ways for companies to be innovative - none of the corporate names he mentioned however were banks. Funny that. Despite all the Innotribe sessions in the world, I doubt there will be many bannks at Sibos next year with all their apps hosted in the cloud or providing financial services linked into social networking sites.<br />
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The sheer weight of the legacy infrastructure banks (particularly those large global networked banks) have to live with, makes innovation of the Apple and Guy Kawasaki kind difficult for banks, even if they did have fresh orange juice or Bodendorf pianos in their office.<br />
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People spoke about social networking and collaborative technologies but I saw very few real-world examples of banks using these technologies in the B2B space. I cannot see it getting past most boards, although Citi's Banking Evolution platform, announced at Sibos, was an example of one bold move in that direction. But then Citi is a technology start-up more than it is a bank.<br />
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Yes it handles transactions and enables customers to send and receive money from around the world, but it differentiates itself in terms of technology, and if it has its way, all the smaller and medium-sized banks will be white labelling its technology.<br />
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The Citi view of banking is that you don't need to manufacture the parts in order to be a transaction bank. You can insource them and assemble them and still call yourself a transaction bank, although I do expect that transaction banking in the future will be less about owning the payment or moving money, and more about what you do with the information associated with those payments and the customer making them.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-30451035697940951562009-09-17T08:19:00.000+01:002009-09-17T08:19:09.889+01:00The open account challenge<div class="separator" style="clear: both; text-align: center;"><a href="http://4.bp.blogspot.com/_B6uR99nvcDw/SrHieolSWKI/AAAAAAAAARs/jV6Bq1zkUNE/s1600-h/Kah+Chye+Tan+SC2.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/_B6uR99nvcDw/SrHieolSWKI/AAAAAAAAARs/jV6Bq1zkUNE/s200/Kah+Chye+Tan+SC2.jpg" /></a></div><br />
<br />
When the president of the United States and the UK chancellor, Alistair Darling, start mentioning trade finance you know that a subject most transaction banks took for granted has suddenly been elevated to a new level of importance.<br />
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"Everybody is talking about trade finance," says Kah Chye Tan, global head of trade finance, Standard Chartered Bank. Thanks to the financial crisis, trade finance, which has oiled the wheels of global trade for hundreds of years, is sexy again.<br />
<br />
But despite what some banks are saying about traditional trade finance instruments such as Letters of Credit being on the uptick again, Tan says that is not the true picture. <br />
<br />
Although the risk mitigation benefits of LCs were appreciated more during the crisis, in 2008 overall LC volumes declined by 13%, said Tan. "If you look at 2008 the dollar value of LCs shot through the roof as commodity prices increased. Because the dollar value went up people thought LCs were back in favour."<br />
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While LCs will always be a part of the trade finance business, open account trading is here to stay (Tan says it makes up approximately 95% of the $14 trillion a year in world trade). After all why would a company want to pay $1 million to mitigate risk against non-payment using an LC when an open account trade may only cost $30?<br />
<br />
<blockquote><span style="color: #660000;">The challenge now for the banking industry, says Chan, is to bring the same risk mitigant benefits the LC provides to open account trading. So far, however, he says banks have done a pretty poor job of that. "It will be another five to 10 years before banks come up with a solution that the market needs," says Tan.</span></blockquote>The problem is that open account does not just mean one product. For example, it can encompass receivables discounting, supply chain financing and accounts payable financing. "Open account means different things to different banks," says Tan.<br />
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In the run up to the global financial crisis (now referred to as GFC, which is the three letter acronymn doing the rounds at Sibos this year), most of the transaction banks were eager to talk about supply chain financing. And two Siboses ago it was a fairly universal theme on exhibition stands.<br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_B6uR99nvcDw/SrHhfRygiTI/AAAAAAAAARk/c95AlmHOWTw/s1600-h/Kah+Chye+Tan+SC1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/SrHhfRygiTI/AAAAAAAAARk/c95AlmHOWTw/s320/Kah+Chye+Tan+SC1.jpg" /></a></div><div class="separator" style="clear: both; text-align: center;"></div>Although supply chain is still topical at Sibos this year, Tan says some banks were talking the talk but not walking the walk because the provision of supply chain financing on a cross-border basis is problematic for them as they do not own the local relationship with SMEs or suppliers and feel more comfortable financing domestic transactions. "Banks may say they are a global network bank, but in reality there are a lot of silos in banks," said Tan. "A lot of banks are shying away from cross-border [supply chain financing] transactions."FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com1tag:blogger.com,1999:blog-32713407.post-85608886050102272992009-09-17T07:21:00.003+01:002009-09-17T07:38:42.370+01:00SWIFT in the retail network space?SWIFT would like banks and other financial intermediaries to use its IP network more, particularly when the banking co-operative has not had such a good year in terms of traffic. While SWIFT chairman Yawar Shah said in the opening plenary that SWIFT should focus on those areas where it is more likely to succeed, the banking-owned network is eyeing up opportunities in the retail network space.<br />
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It is kind of ironic that SWIFT feels it can be successful in the retail space, when on the face of it managing a closed network with just 8000 banks on it, hardly equates to a successful network business, particularly when your pricing is not necessarily as cost competitive with other IP-based networks that have substantially higher volumes and carry more transactions.<br />
<br />
<a href="http://4.bp.blogspot.com/_B6uR99nvcDw/SrHVOybxAQI/AAAAAAAAARc/FrjhqduehyM/s1600-h/Francesco.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/_B6uR99nvcDw/SrHVOybxAQI/AAAAAAAAARc/FrjhqduehyM/s200/Francesco.jpg" /></a>Francesco Lanza, marketing manager, network services for SIA-SSB was a little bemused to hear about SWIFT's plans to move into the retail space. SIA-SSB, which is owned by leading Italian banks such as UniCredit, has 550 banks on SIAnet, which handles wholesale, capital markets and retail traffic (payment cards) on its network, providing connectivity to STEP2 in Europe, to SWIFTNet for Italian banks and to multilateral trading facilities in Europe.<br />
<br />
Lanza says that SWIFT could have its work cut out for it in the retail networking space. "Retail traffic is huge compared to wholesale and it requires a different service model." And unlike SWIFT, which saw network traffic decline in the wake of the crisis, SIA-SSB saw double percentage increases in network traffic across most months last year, largely because it carries not just wholesale traffic, but also retail.<br />
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According to Lanza, SWIFT's "central hub" network approach is unsuited to the retail environment where a peer-to-peer topology works better. SIAnet works on the basis of network nodes, which are able to reach out to other nodes not requiring a central hub, which means government agencies are unable to pry into information carried on its network, says Lanza.<br />
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SWIFT found itself in hot water with data privacy organisations a couple of years back after it allowed US intelligence agencies to look into messages carried on its network. In response to that SWIFT is looking at developing a mirrored data environment located in Europe for European traffic. However, Lanza says that means additional cost. <br />
<br />
It raises the question yet again as to whether SWIFT should be in the network business. While it may have started out as a replacement for the telex, with the advent of the internet and global IP networks, is running a network (despite all the stuff about non-repudiation) really SWIFT's core business. Arguably in the retail space the same level of non-repudiation is not needed and SWIFT's network is likely to be perceived as being too closed.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-28668045372482688032009-09-17T04:54:00.000+01:002009-09-17T04:54:06.909+01:00How much more regulation can the industry take?<span lang="EN-US" style="font-size: 10pt;"><i>As regulators are about to unleash even more regulation on the financial services industry in the wake of the financial crisis, guest blogger, Gareth Lodge of TowerGroup, says they should stop and think carefully about whether more regulation is going to have the desired effect? </i><br />
</span><br />
<div class="separator" style="clear: both; text-align: center;"><a href="http://3.bp.blogspot.com/_B6uR99nvcDw/SrGyzzyErXI/AAAAAAAAARU/d1UwxxkAo_c/s1600-h/Gareth+Lodge.jpb.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://3.bp.blogspot.com/_B6uR99nvcDw/SrGyzzyErXI/AAAAAAAAARU/d1UwxxkAo_c/s320/Gareth+Lodge.jpb.jpg" /></a></div><br />
<span lang="EN-US" style="font-size: 10pt;">I’ve just been enjoying the <i>Big Issues</i> debate on transaction banking, chaired by TowerGroup CEO Karen Cone. I may be somewhat biased when I say how interesting it was!<o:p></o:p></span> <br />
<div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US" style="font-size: 10pt;">What continues to strike me is how transaction banking has emerged successfully from the financial crisis. There are some good reasons for that success. Bankers and other observers sometimes forget that global transaction banking isn’t one “thing” but actually comprises multiple businesses. As a whole, however, transaction banking emerged as one of the few areas of the bank to have grown in the last year. Transaction banking is all about helping the banks’ customers manage risk. The help may be as straightforward as a letter of credit designed to take the risk out of international trade or as highly sophisticated as the systems and processes that flawlessly move billions of transactions and trillions in currency value. The recent market uncertainty has therefore been good for the transaction banking business in many ways. <o:p></o:p></span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US" style="font-size: 10pt;">At least in some parts of the bank such as global transaction banking, banks have managed risk extremely well, I think. The policies and processes put in place meant that no payment system failed, which is why many are surprised about the threat of increased regulation. This concern stems from the open question as to whether existing regulations — and regulators — are effective. Many banks, particularly in Europe, have come to see regulation as unavoidable and in effect simply an increasingly large cost of doing business. What has always been a concern, and is becoming of even greater one, is the perceived lack of benefit and value in the regulations. The proportional cost of IT spend related in some way to regulation is already large and is rising. </span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US" style="font-size: 10pt;">The cost is starting to have a material impact on some banks, with results contrary to what the regulator wished. In essence, much of the regulation addressing competition and risk levels the playing field. One consequence seems to be that some banks suffering from the burden of spending on regulatory compliance are outsourcing to larger banks, with the converse and unintended consequence of reducing competition and concentrating risk. </span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US" style="font-size: 10pt;">Of course, not all will agree with this view, each “group” having a different opinion as to the view’s truth and merits. Although there is no easy solution, it would seem beneficial to all to provide greater clarity and governance of regulation before embarking on yet more. Defining and agreeing what is required and how success should be measured surely should be the basis on which any project should be undertaken.</span></div>FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-91092549979274475832009-09-16T09:53:00.001+01:002009-09-16T09:54:23.382+01:00Can banks move beyond the limitations of legacy?Coming to Sibos for the last 10 years it tends to feel like Groundhog Day (weren't banks debating the same issues three or four Siboses ago?), but one good aspect of that is that you are able to pick up on how far the industry and therefore the debate has really moved on.<br />
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<a href="http://1.bp.blogspot.com/_B6uR99nvcDw/SrClZXp9m2I/AAAAAAAAARM/TgLjgNW9LBM/s1600-h/David+Blair.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/SrClZXp9m2I/AAAAAAAAARM/TgLjgNW9LBM/s200/David+Blair.jpg" /></a>A good example of that was at this afternoon's corporates forum, where an old Sibos attendee, David Blair, former corporate treasurer at Nokia and now vice president, treasury, Huawei, appeared to adopt a less aggressive stance with the banks than he had at previous Siboses. <br />
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The forum's moderator kindly reminded Blair of what he had asked for from banks at Sibos in Singapore six years ago: an 18 character Universal Remittance Identifier (URI) that enabled corporates in the high-tech industry to reconcile an invoice with a payment. Sounds like a simple request, but having become somewhat of a Sibos mainstay myself, I know only too well how slowly banks move when corporates ask them for something.<br />
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Blair and other high-tech corporates went on to develop <a href="http://www.rosettanet.org/">RosettaNet</a>, the 18-character URI themselves, and perhaps if they had waited for the banks to come up with it they would still be debating the nuances of it at Sibos in Hong Kong.<br />
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Blair reminded the banks that sometimes their defensive stance means they can misinterpret what corporates are actually asking for and he said contrary to what banks thought, RosettaNet was not trying to replace SWIFT or compete with banks.<br />
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Another interesting attendee on the corporate panel was no other than Vipul Shah, senior director and head of financial services at PayPal/eBay; that company that banks spent many a Sibos accusing of stealing their business. Now PayPal is attending Sibos and talking about using SWIFT.<br />
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PayPal at Sibos? Well given that SWIFT chairman Yawar Shah said at the opening plenary that companies need to use SWIFT more, the Brussels-based banking co-operative eager to reverse the trend of declining wholesale volumes on its network is contemplating entering the retail space (more on that later).<br />
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As a global online payment provider, PayPal has its challenges when it comes to working with multiple clearing systems and banks. "Clearing systems are not able to accommodate a unique remittance identifier," said Shah.<br />
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It is not only the clearing systems that have their challenges. I left the corporate forum with the overarching impression that although corporates may demand a lot from their banks, the pace of change is significantly hampered by bank legacy infrastructure and inertia.<br />
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Not only are banks still trying to leverage next generation apps on legacy infrastructures that are at least 30 years old, but banks are also failing to uniformly apply standards that exist, which means the experience for the corporate customer is inconsistent from one banking provider to the next.<br />
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While we heard that there are opportunities for banks, for example in the cash flow forecasting space, to organise themselves and deliver a range of capabilities in an integrated way, the banks conceded it was not easy; not easy because of their legacy infrastructure which is "disaggregated."<br />
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Picking up on the theme that banks' payments and transaction banking infrastructure is outmoded and siloed, a number of software providers at Sibos are touting payment hub solutions or the next generation of payment platforms that integrate both wholesale and retail payments and aim to help banks overcome the limitations of their legacy siloed infrastructure by providing a "unified platform" whereby banks can deploy payments functionality (whether it is credit cards, ACH, cheques, mobile payments, real-time payments) as a service on a single platform using service-oriented architecture.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-44774741655602418372009-09-16T05:21:00.001+01:002009-09-16T07:37:45.553+01:00Trade finance - A "rude awakening" for banks as they seek to innovate<a href="http://4.bp.blogspot.com/_B6uR99nvcDw/SrCHjd48e9I/AAAAAAAAARE/AUapihnEzVQ/s1600-h/Kah+Chye+Tan+SC.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://4.bp.blogspot.com/_B6uR99nvcDw/SrCHjd48e9I/AAAAAAAAARE/AUapihnEzVQ/s200/Kah+Chye+Tan+SC.jpg" /></a>A show of hands for those corporates that have lost trust in their banks post-financial crisis. At this morning's conference session at Sibos in Hong Kong on the shortage of trade credit, the vote was fairly overwhelming with a show of red cards from those corporates in the audience.<br />
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The leading trade finance bankers on the panel had no choice but to acknowledge that they have some work to do to restore corporates' trust. "Corporates believe trust has been damaged," said Kah Chye Tan, global head of trade finance, Standard Chartered Bank. However, he added that banks also had a responsibility to be prudent. <br />
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"Trust has dissipated," said Lawrence Webb, global head of trade and supply chain, HSBC. "However, I don't think clients distrust banks at the transaction level. But we have some way to go to rebuilding trust at an industry level." <br />
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John Ahearn, managing director, supply chain managment, structured trade and asset optimisation, Citi, was more inclined to apportion the blame equally between banks and corporates, saying that corporates are largely sophisticated buyers that should have understood what they were buying. "We [still] have clients coming to us asking to borrow enormous amounts of money [based on] thin prices." When it comes to apportioning blame, Ahearn says "we (banks and corporates) all got drunk together, but now the party is over.<br />
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<a href="http://1.bp.blogspot.com/_B6uR99nvcDw/SrCHAkQAiII/AAAAAAAAAQ8/aG-i6w04qig/s1600-h/webb+HSBC.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/SrCHAkQAiII/AAAAAAAAAQ8/aG-i6w04qig/s200/webb+HSBC.jpg" /></a>While it may not be the best time for new clients to approach banks asking for credit, Webb said that HSBC's trade weighted index indicated that Hong Kong companies were expecting increased access to trade finance in the months ahead. But what about those banks that now have substantial government stakeholdings? Will they be extending credit in the wake of the financial crisis? Tan of Standard Chartered seems to think that they will be forced to withdraw to their home market and therefore reduce lending.<br />
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Ahearn, representing Citi, which the US government has a more than 3o% stake in (apparently the US government has announced it wants to sell its stake) asked whether the UK government would be happy with RBS lending money in Singapore? The same could be asked of Citi, although the US government's stakeholding in Citi is much less than the UK's 70% shareholding in RBS. Tan ventured that the money governments pumped into banks to prop them up during the crisis equated to a form of protectionism or a form of subsidy.<br />
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In an effort to plug the gap in the secondary trade finance markets, The International Finance Corporation with the support of the G20 group of countries set up the Global Liquidity Program, yet it is unclear whether the millions pledged to that program have filtered through to those banks or companies that actually need it. There also appears to be an enlarged role for Export Credit Agencies to play, however, they appear to be playing catch up.<br />
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"We need to make sure these [IFC] initiatives are in place on a long-term basis," said Webb of HSBC, "as opposed to being reactive." The challenge for the banks in the trade finance space is not only restoring credit but also being able to move with companies as their supply chains evolve. <br />
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Tan said banks needed to move with companies as they expanded their global supply chains and not just provide domestic solutions. However, Ahearn cautioned that banks should not underestimate the risks in terms of tax and financing issues in cross-border supply chain or trade finance. "They may be in for a rude awakening if the regulators look at this," he said.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-41641292970200039922009-09-15T18:41:00.000+01:002009-09-15T18:41:30.856+01:00The Prime Brokerage Business: One Year Out, Where Are We?<div class="MsoNormal" style="margin-bottom: 10pt;"><a href="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq_RtIcTUCI/AAAAAAAAAQ0/vZGEyu62BIc/s1600-h/Dushyant+Shahrawat.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq_RtIcTUCI/AAAAAAAAAQ0/vZGEyu62BIc/s200/Dushyant+Shahrawat.jpg" /></a><i>Dushyant Shahrawat, senior research director, securities and investments, TowerGroup, examines the fall out for the prime brokerage business one year after the collapse of Lehman Brothers. </i></div><div class="MsoNormal" style="margin-bottom: 10pt;"></div><div class="MsoNormal" style="margin-bottom: 10pt;">It has been one year since the collapse of Lehman Brothers, the fall of Bear Stearns and the hectic sale of Merrill Lynch to Bank of America. One can argue that the biggest impact of this string of events within the financial industry has been on the prime brokerage business. What has changed? The prime brokerage business has been impacted and has changed in the following ways: <span style="font-family: "Times New Roman","serif"; font-size: 12pt;"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 10pt;">1) The demise of two major prime brokers (in Lehman Brothers and Bear Stearns) has shaken hedge funds’ confidence in their prime brokerage providers<o:p></o:p></div><div class="MsoNormal" style="margin-bottom: 10pt;">2) The events of just a few months have dramatically changed the relationship between hedge funds and their prime brokers for a long time to come. Cosy relationships have been questioned, and both hedge firms and prime brokers are re-evaluating their mutual association. <o:p></o:p></div><div class="MsoNormal" style="margin-bottom: 10pt;">3) The competitive dynamic of this business has changed, with Goldman Sachs and Morgan Stanley dropping in market share from an estimated 52% of the global prime brokerage business in 2007 to under 35% in 2009. New players such as Fidelity Investments are entering, and several other firms are waiting on the sidelines. <span style="font-family: "Times New Roman","serif";"><o:p></o:p></span></div><div class="MsoNormal" style="margin-bottom: 10pt;">4) Large Wall Street brokers have been deprived of a major and steady stream of revenue from the prime brokerage business. The estimated $12.5 billion that US brokerage firms make from the prime brokerage business may well see a 20% cut in the next few years. <o:p></o:p></div><div class="MsoNormal" style="margin-bottom: 10pt;">5) Client perceptions and attitudes about their prime brokers have changed drastically during the crisis. Hedge funds have become more sensitive to the stability of their prime brokers and are demanding their prime brokers segregate client assets so that they are not overly exposed to the prime broker. <o:p></o:p></div>6) Finally, a major trend that has emerged is the shift to a "multiprime broker" model. That is, hedge funds that used to rely overwhelmingly on one or two prime brokers are now hiring multiple prime brokers to spread the risk of doing too much with particular firms. Is the trend towards multiprime brokers a flash in the pan, or is it here to stay? We think this is a longer-term trend and will not reverse itself anytime in the future.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-86838695082627209482009-09-15T09:38:00.000+01:002009-09-15T09:38:09.227+01:00SWIFT TSU passes the all-important 100 markSWIFT's Trade Services Utility (TSU), which is a central matching utility designed to standardise the process between banks for matching purchase order and invoice information, was first announced at Sibos in Atlanta.<br />
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It was initially designed to help banks become more relevant in the open account trading space, which makes up more than 80% of cross-border trade. While the TSU attracted some early adopters, until recently it looked set to become a non-starter as few banks signed up to the utility. But oh what a difference a financial crisis and changes in the trade finance market make. <br />
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Today SWIFT announced that the TSU passed the all-important 100 mark in terms of bank membership with recent signings including Barclays Commercial Bank, Yapi Kredi Bankasi, Banco de Crédito del Peru, Bank of China Hong Kong, Shin Kong Bank and Taishin Bank.<br />
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Those banks that recently signed up to the TSU are hoping it will be one of the key lynchpins for developing the next generation of trade finance solutions. However, the TSU still has its sceptics, with corporates saying it offers little in terms of direct value to them. <br />
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And although trade finance is sexy again given that most banks have witnessed increased trade finance activity as buyers and suppliers look to mitigate counterparty risk, working out how they can successfully re-integrate themselves into corporates' supply chains is still challenging for most banks.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-47123674109304882842009-09-15T09:12:00.000+01:002009-09-15T09:12:05.127+01:00Euroclear and Link Up Markets continue dialogue<div class="separator" style="clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/_B6uR99nvcDw/Sq9MPud2uSI/AAAAAAAAAQs/9-F43hGo9pw/s1600-h/Tomas+Kindler.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://2.bp.blogspot.com/_B6uR99nvcDw/Sq9MPud2uSI/AAAAAAAAAQs/9-F43hGo9pw/s320/Tomas+Kindler.jpg" /></a></div><br />
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Twelve months ago at Sibos in Vienna when Tomas Kindler, managing director of <a href="http://www.linkupmarkets.com/">Link Up Markets</a>, the joint venture between eight European CSDs, said that it would go live in early 2009 with its central mapping engine to foster interoperability between different CSDs, most people probably thought he was mad.<br />
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Kindler himself even admits that there were some doubters, however, in March this year, Link Up Markets officially went live. The main benefit it will deliver for participating CSDs is that it fosters interoperabilty by converting domestic messaging formats used by national CSDs into a common ISO-compliant standard.<br />
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Although the joint CSD initiative started out with a largely European focus, it is has since expanded beyond Europe with South African CSD, Strate, becoming the ninth CSD to join Link Up Markets. "Strate want to extend their business model and position themselves as a hub in the region," said Kindler, and he says we could see some of the Asian CSDs doing the same.<br />
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Kindler says the Asian Development Bank (ADB) and a group of experts comprising regional CSDs and custodians are looking at a Giovannini-type exercise for the ASEAN markets. China, Korea and Japan are believed to be looking at a regional settlement solution or an Asian ICSD.<br />
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However, unlike Europe which benefits from having a single currency, Asia's securities settlement infrastructure is even more highly fragmented and is characterised by varying levels of sophistication. "The ADB is not the European Central Bank in terms of influence and policy making, so I think its ambitions are more of a long-term initiative," said Kindler.<br />
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The pressure [for CSD] to change is also more prounounced in Europe, given the requirements of the Code of Conduct for Clearing & Settlement which calls for interoperability and the launch of the European Central Bank's TARGET2-Securities (T2S) initiative which will consolidate settlement of eurozone securities in central bank money on a single platform.<br />
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Closer to home Link Up Markets is also in discussions with Brussels ICSD Euroclear. If Euroclear were to join it would be a major coup for Link Up Markets given that Euroclear incorporates seven markets and has substantial volumes. Pierre Francotte, CEO of Euroclear, says Link Up Markets would be considered on its merits and that the real value for SWIFT in joining would be to link into markets not covered by its seven CSDs.<br />
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For CSDs in Europe faced with the prospect of having to outsource securities settlement to T2S when it goes live in 2013, there are essentially only two games in town: join Link Up Markets or become part of the Euroclear Group Monte Titoli in Italyis the exception in that it developed a joint partnership with a global custodian, but Kindler says he hasn't seen a lot of developmen around that. "The options for [European] CSDs are limited," he says, "however, there is no right or wrong approach."<br />
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The next phase for Link Up Markets is to leverage its joint-CSD infrastructure to develop additional services such as pooling collateral across participating CSDs. Kindler also hopes that it will become an attractive proposition for CSDs looking to connect to T2S, which will require an element of conversion.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-66815957077560949272009-09-15T07:50:00.005+01:002009-09-18T15:44:11.128+01:00Citi looks to social networking and YouTube in new banking platform launchIn the aftermath of the current financial crisis it would be easy to write off any innovation coming from transaction banks as most of them for the last few months have been hoarding capital to appease regulators and hunkering down as banking "goes back to basics".<br />
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A number of consultant studies also suggest that innovation, at least in the payments space, is more likely to come from companies like Google, Microsoft and WalMart. However, some of the transaction banks exhibiting at Sibos this year are eager to stress that the banks should not be written off yet when it comes to innovation.<br />
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One of those banks is Citi, which launched its "next generation collaborative online banking platform", CitiDirect BE (Banking Evolution) at Sibos in Hong Kong today. With Francesco Vanni d'Archirafi, CEO of Citi Global Transaction Services (GTS) describing the bank as a $9 billion technology start-up, Citi has a strong track record of producing award-winning technologies such as its online banking plaftorm CitiDirect, which back in 1999 when it was launched set the benchmark for the many online banking platforms from other providers that followed.<br />
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<a href="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq86sGZ_VDI/AAAAAAAAAQk/5rj8yDK0kEg/s1600-h/Gary+Greenwald+Citi.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq86sGZ_VDI/AAAAAAAAAQk/5rj8yDK0kEg/s200/Gary+Greenwald+Citi.jpg" /></a>In 2005 Citi also launched its TreasuryVision portal, which combined information with analytics to enable corporate treasurers to gain greater visibility over their cash, risk and global liquidity positions. Despite the well publicised financial difficulties Citi has had in the last 18 months, Gary Greenwald, chief innovation officer, Citi GTS, said that the bank spends more than $1 billion on technology annually and that this year's IT budget was marginally higher than last year's.<br />
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<blockquote style="color: #660000;">Recognising that some aspects of its CitiDirect platform had become commoditised as other transaction banks developed online banking platforms that benefited from subsequent developments in technology, CitiDirect BE is the next incarnation of where Citi believes treasury and payments functionality is headed.<br />
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Interestingly, while Citi has historically targeted its solutions at top-tier corporates and other banks, CitiDirect BE will be initially rolled out to the SME market in Poland.It will also be sold as a white-labelled solution to other banks. <br />
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CitiDirect BE builds on lessons learned from developing TreasuryVision and embraces the latest in social networking, collaborative and Web 2.0 technologies to provide treasurers of both large companies and SMEs with a more intuitive, customisable interface for doing a whole bunch of things, above and beyond initiating payments, trade finance and FX transactions. CitiDirect BE is built on Microsoft .Net and Microsoft Office SharePoint Server 2007 Enterprise Edition. "SharePoint is a portal which allows us to deliver a new web services architecture," Greenwald explains. "Within the portal, we have a modular platform that allows different back-end technologies to come together at the front end." <br />
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Recognising that banks have been sitting on a lot of transaction-related information that they were unable to harness before in a meaninful way and push out to customers, Greenwald said CitiDirect BE builds on the analytics and information contained within its TreasuryVision platform to provide treasurers with data that can help them achieve greater insight into their accounts receivable and collections, as well as data that supports activities such as supply chain financing.<br />
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Pushing more data out to treasurers, says Greenwald, is not so much about having a "pretty dashboard" but about normalising and cleansing data from multiple back-ends to provide treasurers with quality and timely data. "We have taken the analytical processing and slice and dice capabilities within TreasuryVision and combined it with different sets of data around payment transactions and account openings," Greenwald explains. "So, for example, if you are running a large shared service centre you can look at the efficiency of your payment processes over time."<br />
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CitiDirect BE also incorporates the work Citi has done with major multinationals around Electronic Bank Account Management, combining digital signature technology with the ability to automate the currently manually-intensive process many corporate treasurers with multiple banking relationships face when it comes to changing account signatories and bank mandate management.<br />
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But perhaps one of the more unusual features of CitiDirect BE is the degree to which it embraces social networking and collaborative online technologies including a media channel, which Greenwald compares to YouTube, as it allows Citi execs in any country to develop a video library harnessing their expertise. Treasurers can search the video library and pre-register topics of interest. "If you look at social networking sites such as Twitter it took us some time work out how that makes sense in a B2B world," said Greenwald. To take a look at how CitiDirect BE's media channel and other functionlaith within the next generation banking platform works, <a href="http://a4.g.akamai.net/7/4/22231/v001/citimediaftp.download.akamai.com/22231/citimediashare/CitiDirectBE/GARY_GREENWALD_VIDEO_RELEASE1.wmv">click here</a>. <br />
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Commenting on the launch of CitiDirect BE Jerry Norton, director of strategy, global financial services, Logica, said it was an exciting development, however it masks the complexities that still exist on the back-end in terms of the different interbank market infrastructures for processing cheques, card payments, high value and low value payments.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-71311683337155087392009-09-14T11:03:00.006+01:002009-09-14T13:59:16.966+01:00The need to innovate<div class="MsoNormal"><a href="http://3.bp.blogspot.com/_B6uR99nvcDw/Sq4U8687oYI/AAAAAAAAAQM/lR369-kHePc/s1600-h/Gareth+Lodge.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://3.bp.blogspot.com/_B6uR99nvcDw/Sq4U8687oYI/AAAAAAAAAQM/lR369-kHePc/s320/Gareth+Lodge.jpg" /></a><b><span lang="EN-US"><i>Guest blogger, Gareth Lodge of TowerGroup, says the financial industry appears to be turning a corner and that innovation or the art of doing things differently will be key to recovery.</i></span></b></div><div class="MsoNormal"><span lang="EN-US"><i> </i><br />
</span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US">It's true, SIBOS is here — two parties already and a looming happy hour are testament to that! But as I sit waiting for the opening plenary session to begin, I reflect on the year that has passed. I suspect many in the industry wondered at least once in the last year whether they or even the industry would survive. It has certainly changed the focus of the banks since that point.</span><br />
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<span lang="EN-US"><o:p></o:p></span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US">When I first saw the agenda for Sibos, I was slightly surprised to see the <a href="http://www.swift.com/sibos2009/conference/Forumsandstreams.page">Innotribe</a> track. I should say, that having previously worked at an innovations consultancy, that I believe in both innovation and its benefits. But innovation has certainly suffered in the last year, as budgets are frozen or cut across the bank, making its inclusion on the agenda a bold move. </span><br />
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<span lang="EN-US"><o:p></o:p></span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US">There is a general feeling over the past few months and certainly heard in the conversations I've had today, that we're turning a corner. Banks are planning for 2010, for at least a form of business as usual. That's why innovation is important. Innovation is synonymous with cutting-edge technology. </span><br />
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<span lang="EN-US"><o:p></o:p></span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US">In reality, innovation can be considered to be the art of doing something differently. Technology may play a part but isn't the answer. Technology without an application is just technology. Why do I raise this point? Because the world has changed. Don't banks therefore need to change as a result? If clients' demands have changed, banks need to respond. Now more than ever is the time that banks need to innovate. What is needed is a much a cultural change as any other kind of change. </span><br />
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<span lang="EN-US"><o:p></o:p></span></div><div class="MsoNormal"></div><div class="MsoNormal"><span lang="EN-US">Innovation begins in the thinking and approach of an individual, not in a piece of technology. The key objective has to become how to deliver value to the customer. Innovation for innovations sake is a luxury. Retaining customers is essential for survival of the firm or institution.<span style="color: #1f497d;"> </span>I encourage you all to attend the Innotribe stream today. To respond to the world tomorrow, you need to start today. <o:p></o:p></span></div><div class="MsoNormal"></div><div class="MsoNormal"></div><div class="MsoNormal"></div>FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0tag:blogger.com,1999:blog-32713407.post-67598440844441450222009-09-14T10:47:00.003+01:002009-09-14T13:57:07.527+01:00The new lean and mean SWIFT<div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq4RnGRYirI/AAAAAAAAAP8/ul9iXZQbewE/s1600-h/Opening+plenary.+jpg.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq4RnGRYirI/AAAAAAAAAP8/ul9iXZQbewE/s320/Opening+plenary.+jpg.JPG" /></a></div><br />
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A more sombre tone characterised the opening plenary at Sibos in Hong Kong. Last year in Vienna, the opening plenary coincided with the collapse of Lehman Brothers. This year the only bad news delegates had to face was the threat of a typhoon level eight warning, which meant we may be bunkered down at the Hong Kong Convention Centre for longer than expected.<br />
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Also this year there was not the usual announcement by SWIFT of a rebate to its members. With year-to-date volumes on SWIFTNet down by 2.5% and SWIFT 11% off its budget target in view of the banking network's first ever volume decrease, the rhetoric of previous years where one gained the impression that SWIFT was trying to be everything to everybody, was usurped by a more pragmatic realisation that SWIFT needs to focus on those things it is good at.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq4Q-zANqiI/AAAAAAAAAPs/nRLLQo1dQCw/s1600-h/Yawar+Shah.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" src="http://1.bp.blogspot.com/_B6uR99nvcDw/Sq4Q-zANqiI/AAAAAAAAAPs/nRLLQo1dQCw/s200/Yawar+Shah.jpg" /></a></div>"What is new [this year]?" asked SWIFT chairman, Yawar Shah. "Not much. It is about making sure SWIFT works. We don't expect SWIFT to sizzle in banks' boadrooms. We are just getting on with things, which should give us peace of mind." <br />
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Like its banking members, it appears SWIFT is going back to basics, and like some financial services companies and even media outlets, in these troubled times where everyone is trying to get more bang for their buck, SWIFT has called in McKinsey to see where it can make further cost savings and efficiencies. SWIFT's CEO <a href="http://www.swift.com/about_swift/press_room/members_of_the_leadership_council_biographies_and_photographs/index.page?lang=en#lc">Lázaro</a> Campos expanded on "Lean@SWIFT", which he said is a two-year project overseen by SWIFT's CFO, Francis Vanbever in conjunction with McKinsey.<br />
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SWIFT hopes to make targeted efficiency gains of 30% without downgrading its service. Campos said SWIFT remained committed to price reductions for members and innovation, yet, given that SWIFT's pricing model is geared more favorably towards increased traffic, when volumes are down, the banking co-operative is unable to deliver on its cost-savings promise. However, using other means such as offshoring and vendor re-negotiation, Campos said SWIFT had already saved EUR 30 million.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="http://2.bp.blogspot.com/_B6uR99nvcDw/Sq4RH5HupxI/AAAAAAAAAP0/h-p3hjAqeSo/s1600-h/Lazaro+Campos.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://2.bp.blogspot.com/_B6uR99nvcDw/Sq4RH5HupxI/AAAAAAAAAP0/h-p3hjAqeSo/s320/Lazaro+Campos.jpg" /></a></div><br />
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In future, Shah said there would be no "hobbies" for SWIFT (one only has to think of SWIFT's failed epaymentsPLUS initiative during the dot.com boom). I got the impression that there had been some refocusing at SWIFT with Shah saying that 500 corporates on SWIFTNet, while encouraging, was still a dip in the ocean.<br />
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Shah also alluded to the potential for SWIFT in the securities space; namely its recent activity in the area of corporate actions. Yet at Sibos last year, and in previous years, the attendance by securities market participants has always been dismally low, which seems to suggest that gaining traction in that space is still challenging for the Brussels-based co-operative - it is probably hoping that the renewed focus on standards, STP and automation will change that.<br />
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Shah also alluded to the role for SWIFT in reinsurance and managed identity services stressing the need for SWIFT to "go beyond messaging services". "SWIFT should be the shared service infrastructure as it is bank owned and governed," he said.<br />
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Does SWIFT really need to look that far to realise why banks and other financial market participants are not using it more? SWIFT has always been deemed as expensive when compared with other IP networks and it has to get its own house, in terms of internal cost savings and efficiencies in order, before it can expect banks, corporates and other financial intermediaries to start using it more.FinancialTech Insiderhttp://www.blogger.com/profile/10688549571379138620noreply@blogger.com0