On April 8, it emerged the world’s 20 biggest economies will miss their ‘2-in-5’ growth targets by 2018, according to a terms of reference document released by EU finance minsters. The document also said structural reforms will continue despite the failure.
The revelations will be discussed in full at a G20 finance ministers’ summit in Washington at the end of the month.
The targets in question were set by the G20 three years ago. Member countries promised to grow their economies by two percent over the following five years through reforms and targeted investments, with a final goal of adding more than $2trn to the global economy.
Today’s global outlook is much less optimistic than it was in 2014, when the 2-in-5 targets were originally set
According to the document: “We should reflect on the appropriate communication around our 2-in-5 objective and build a shared assessment and understanding of why we have not fully delivered… It is thus vital to accelerate the implementation of structural reforms and of investment in productive infrastructure.”
Rising protectionism was a significant threat to global economic growth in the early months of 2017. In March, G20 countries backed down from their hard line against trade barriers at a meeting in Baden-Baden. While they noted trade is important to the global economy, they caused shockwaves by dropping their prior commitment to “resist all forms of protectionism”. US President Donald Trump’s anti-globalisation stance was widely blamed for the change of wording.
Other factors have changed the playing field since the G20 targets were set. According to analysts from forecasting group Focus Economics, the UK’s vote to leave the EU in 2016 combined with the rise of protectionist politicians in France and the Netherlands has caused further uncertainty.
There are also longer-term causes of the G20’s failure to hit its targets. UBS reported in mid-2016: “Monetary policy is no longer as supportive of growth as it was several years ago. For many developed economies, monetary policy has been used to the point of exhaustion where interest rates have been cut so aggressively that diminishing returns have now set in.”
The global economy made a relatively good start to 2017, propelled by momentum from the prior quarter. What’s more, G20 countries like China and India are set to continue posting strong growth figures for the next few years. Nonetheless, whether global growth will continue on this brief upward swing is somewhat doubtful given the protectionist measures that continue to emerge worldwide and general uncertainty regarding the Trump administration’s capacity to implement fiscal reforms. As such, today’s global outlook is much less optimistic than it was in 2014, when the 2-in-5 targets were set.
Donald Trump and Xi Jinping concluded their first face-to-face talks with an agreement to instigate a 100-day plan to address the trade deficit between the two countries.
Since the start of his presidential campaign, Donald Trump has continuously railed against China allegedly stealing American jobs through unfair trade policies, making the US-China trade deficit a key point of contention. The deficit stood at $43.6bn in February, with US imports of $236.4bn and exports of $192.9bn.
Efforts to reduce the US’ trade deficit appear to be focused on increasing US exports to China, rather than creating new barriers to trade
Trump’s accusatory tone and aggressive campaign promises regarding this imbalance have stoked fears of a trade battle and created a constant source of uncertainty since the presidential election. Despite this, Commerce Secretary Wilbur Ross underscored that the president approached the talks with an aim to increase trade between the two nations.
“We made very clear that our primary objectives are twofold”, Ross said during a Fox News interview on April 9. “One is to reduce the trade deficit quite noticeably between the United States and China, and two, to increase total trade between the two.”
As a result, efforts to reduce the US’ trade deficit appear to be focused on increasing US exports to China, rather than creating new barriers to trade. Towards this aim, China has offered to remove a ban of US beef exports as well as offering greater market access in finance, according to a report in the Financial Times.
Interestingly, some clear common ground emerged in the talks. According to Ross, China expressed an active interest in reducing its trade surplus with the US: “They expressed an interest in reducing their net trade balance because of the impact it’s having on money supply and inflation.”
While there is more common ground than many expected, tensions have not fully dissipated. In just a few days’ time, the US Treasury will publish its first currency report since Trump’s inauguration, in which it will make a fresh judgment on whether or not China is a currency manipulator. Indeed, Ross was quick to express that frictions remain: “Words are easy, discussions are easy, endless meetings are easy. What’s hard is tangible results, and if we don’t get some tangible results within the first 100 days, I think we’ll have to re-examine whether it’s worthwhile continuing them.”
With the global economy still reeling from two world wars and one devastating depression, the worldwide community decided on a new approach to international relations: liberalism. Forsaking the power politics of realism, proponents advocated robust international cooperation in a bid to revive the world economy and consolidate peace.
Such an approach took shape with the establishment of two supranational organisations, the first and biggest of their kind. At the historic New Hampshire-based Bretton Woods Conference of 1944, delegates from 44 nations across the globe came together to create the International Monetary Fund (IMF) and the World Bank. The former was officially founded on 27 December 1945 with 29 member countries; financial operations commenced on 1 March 1947.
From that first meeting in New Hampshire, it was established that the thrust of the IMF’s mission would be to promote greater economic cooperation within the international arena. Though today the IMF maintains its mandate has remained as such, over the years the organisation has evolved alongside a changing global landscape, becoming an extraordinarily powerful organisation as a result. And while it indeed plays the role of oft-needed international lender, there are those who argue the IMF actually causes far more harm than good.
Crisis in Indonesia
Perhaps the biggest mark against the IMF is its interventions in Indonesia during the 1997 Asian financial crisis. The crisis saw the entire region flooded by economic woes, during which the IMF recommended Indonesia float its currency. The result was disastrous: the rupiah sank immediately, tremendous inflation followed, as did food riots. Desperate for a solution, Indonesian President Suharto got in touch with noted economist and currency expert Professor Steve Hanke of Johns Hopkins University.
Many argue receiving a
loan from the IMF is when
a country’s problems
really begin
“Suharto knew that the inflation and food riots would continue, and that he would become extremely vulnerable, if not expendable – he was very clear about it”, Hanke told World Finance. “I agreed to become his chief advisor, and recommended that Indonesia should install a currency board system similar to Hong Kong’s in which the rupiah would trade at a fixed exchange rate to the US dollar, backed 100 percent by US dollar reserves… The rupiah would be fully and freely convertible.”
On the very day that Suharto announced Hanke was his new advisor, the rupiah appreciated 28 percent on both the spot market and the one-year forward market in Singapore. Having fully embraced Hanke’s suggestion, Suharto gave a ‘state of the state’ speech outlining the plan, known as the IMF Plus. This plan involved the structural reforms recommended by the organisation, alongside a currency board and a rupiah fixed to the dollar. Things, however, quickly turned sour.
Hanke explained: “All hell broke out politically and internationally.” The IMF, led by the US and the Europeans, he explained, strongly opposed the idea of a currency board. But what some considered suspect about this reaction was its misalignment with other initiatives endorsed by the IMF: mere months before, in February 1997, Hanke had guided the implementation of a currency board in Bulgaria with the IMF’s blessing. The outcome was outstanding: inflation stopped almost immediately, and the economy soon stabilised. The same strategy was also included in the Dayton Peace Accord for Bosnia and Herzegovina in August of the same year, again with the backing of the US and the IMF, the former of which Hanke acted as a representative for. Further still, it was just a matter of months afterwards that the IMF recommended the same course of action for both Brazil and Russia.
“It was very strange getting this huge push back”, said Hanke. “And in particular, [Bill] Clinton, who was the president at the time, he was pushing very hard not to do this. While I was advising Suharto, he called us three times, and Clinton said, ‘If you do Professor Hanke’s currency board, you’re not getting the $42bn [in foreign aid that had been pledged to Indonesia]’. Ultimately, Suharto stuck with the plan and was going to institute it, but then the US sent about half of the Pacific fleet to do exercises off the coast of Jakarta. The military got very nervous and backed off of the currency board idea… Suharto dropped it. This was in May of 1998.”
One can ask the question why, in the case of Indonesia, the IMF – and, in effect, the US – went against the regularly given prescription. Hanke suggested: “They weren’t worried that [the currency board] wasn’t going to work – they were panicked that it would work!”
Though the US had helped Suharto overthrow his predecessor and had forged in him a vital regional ally, the economic crisis of south-east Asia and growing corruption within the regime had made Suharto a looming liability for the West. Given the level of power Suharto wielded during his dictatorship, his ongoing leadership had become too risky for the US to allow it to continue.
Hanke told World Finance: “The main thing is that the US, as it often does, was engineering what it thought was going to be – and what it ultimately was – a regime change. They wanted to get rid of Suharto, and they wanted the Asian financial crisis to take care of him, which they thought would not be the case if they followed my advice and put in a currency board. So it was a very scandalous affair on the part of the IMF; it’s all recorded and it’s a real black mark because they were literally involved in the middle of overthrowing a government.”
Former President of Indonesia, Suharto
It’s all about US
In order to understand how and why this was even possible, it is necessary to go back to the very beginning. Though numerous countries were involved at the Bretton Woods conference, the US played an undeniably dominant role in establishing the IMF and dictating how it would operate. A crucial factor in its make up, and in the US’ ongoing influence within the organisation, was the distribution of voting power among member states. Rather than allocating votes in accordance with the size of a member’s population – which would be the most democratic approach to take – the US instead pushed for voting power to correspond with the volume of contributions made. Unsurprisingly, those contributions made by the US, the world’s biggest economy, were far greater than those of any other member state.
By contributing $2.9bn – double the amount made by the UK, the second biggest contributor at the time – the US was guaranteed twice the number of voting rights, together with veto privileges and a blocking minority. The manoeuvre enabled the superpower to secure near-absolute control of the IMF’s activities.
In order to further consolidate its dominant role, the US also claimed the right to remain fully informed about the financial comings and goings of every single member state, thenceforth and permanently.
Adding to some people’s belief that the US has used the IMF to peddle its own agenda is the fact the organisation’s headquarters – as well as those of the World Bank, for that matter – are located in Washington DC, just a short walk away from the White House, rather than near the UN headquarters in New York, as initially discussed. Hanke said: “The reality is that this should not surprise anyone. I mean, the United States is a big imperial power – why wouldn’t they have a lot of influence?”
1945
The year the IMF was officially founded
189
Member countries today
$668bn
The organisation’s annual quota
As an indication of just how important the IMF is to the US, Hanke pointed to an occasion that he witnessed while serving as one of President Ronald Reagan’s economic advisors: “Reagan himself actually personally lobbied 400 out of 435 congressmen to obtain an approval for a quota increase [for the IMF]… It is very rare… I never observed that kind of personal lobbying!”
When the idea of the IMF was first conjured up, the world was a desperate place. The international community was shell shocked from a level of human suffering that, even decades on, is beyond comprehension, while economically so much that had been achieved in the decades prior had been brought crashing down. In such a broken landscape, international cooperation was needed more than ever – even the need to feel as though something was being done and that change was going to happen had bourgeoned phenomenally.
While states may have joined the IMF with the very best intentions, the organisation that was discussed in New Hampshire is quite different to the reality that was produced. The IMF’s course has changed over the years in response to global challenges and complexities, yet it is now clear that shaping this course are the political motivations and inclinations of the global hegemon.
Hanke agreed with this theory: “It’s evolved into a very political organisation, and [Indonesia] was a perfect illustration of something that was completely politically motivated.”
Political building bloc
There are three major events that can be singled out as having altered the course of the IMF throughout the years. The first, of course, was the Bretton Woods Conference. The second was the 1973 oil embargo.
In response to the growing credit needs of developing economies, the IMF initiated the Extended Fund Facility in 1974, which enabled member states to take loans of up to 140 percent of their quota. Without checks in place, many took out loans imprudently.
As the debt burden of developing economies mushroomed, it became impossible for western banks to default on these loans without collapsing. The IMF therefore stepped in to act as an international lender; facilitating the balance of payments had become its new mission. It was during this time that the IMF first earned a reputation for imposing harsh conditions, with many arguing to this day that it does so to entrap borrowers and, in turn, yield more power.
Third, there was the Mexican peso crisis of 1994-95, which was sparked by the currency’s devaluation against the US dollar in December 1994. The devaluation rattled markets and caused dire consequences for the Mexican economy, alongside a significant spill over across the region, and even beyond to Asia.
In a bid to limit the widespread impact of the crisis, the US organised a $50m bailout for Mexico, administered through the IMF. Ultimately, it was Mexico’s adoption of the Brady Bonds Initiative – which was formulated by the US Government, Wall Street banks and the IMF – that proved successful and alleviated the region’s turmoil. Hanke maintains the success of the Mexican deal was largely the result of the work of Jacques de Larosière, who he praises as being the last great managing director of the IMF.
History suggests the US has used economic crises to broaden the scope of the political power it wields through the IMF
At the time, however, a great debate arose as to whether a moral hazard had been created that would encourage serial borrowing in the future. Adding further to the criticism that had begun proliferating about the IMF was the outcome of its intervention in Mexico: under imposed economic reforms, the country experienced a severe recession. Banks collapsed, unemployment boomed, the population living in extreme poverty rocketed to more than 50 percent, and the average national wage dropped by some 20 percent.
Crucially, the Mexican crisis marked a significant transition for the IMF, from having an overarching goal “to rebuild the international economic system”, according to its website, to one that attempted to prevent crises through “strengthened and broadened… surveillance”. Hanke underlined: “It’s really like a hydra-headed monster – you do away with one mission, and then something else pops up.”
He added: “To drum up that new business and so forth, you become more political. So that is one cost that’s associated with the hydra – more politicisation of the whole thing and less emphasis on the technical. And if you’re not relying so much on the technical, you get weaker [with fewer] competent people.” It is this point regarding the IMF’s competency – or arguably lack thereof – that has led some to proclaim the organisation’s involvement actually causes irrevocable damage to a given economy.
Indeed, many argue that receiving a loan from the IMF is when a country’s problems really begin. Hanke went so far as to say: “I would say that [the majority of] countries that have been involved with IMF loans… have been countries that serially come back to the IMF, because they go from the frying pan into the fire with these IMF programmes. They all fail! So that’s the proof of the pudding.”
It can certainly be argued that the US has used economic crises, such as Mexico and the Asian financial crisis, to broaden the scope of the political power it wields through the IMF. Yet it is precisely because of this politicisation that the IMF has lost the technical prowess that enables it to promote economic progress in a recipient state.
Though this politicisation allows the IMF to peddle the agenda of its strongest member, it does so over the needs of those it claims to help in the first place.
Chinese President Xi Jinping has arrived in Florida for his first official summit with the US president. On April 6, the Chinese leader dined with Donald Trump at the property mogul’s Mar-a-Lago resort, with Trump later telling reporters that he had “developed a friendship” with Xi.
Despite Trump’s optimistic tone, the evening was somewhat overshadowed by the rapidly escalating humanitarian crisis in Syria, with the US president having just launched his first major military action in the nation. However, as the summit enters its second day, talks between the two leaders are still expected to centre on the contentious issues of trade and North Korea’s pressing nuclear threat.
Trump threatened to impose punitive tariffs on Chinese imports, but since taking office in January, he has failed to follow through with these threats
In this historic first meeting with the Chinese leader, President Trump is under considerable pressure to fulfil his campaign promise to address trade deficits and bring manufacturing jobs back to the US from China. During his presidential campaign, Trump fiercely condemned current trade practices, stoking fears of a US-China trade war.
“We can’t continue to allow China to rape our country”, Trump told a crowd of cheering supporters in Indiana last year. “There are no jobs because China has our jobs.” The then-presidential candidate also accused China of manipulating its currency to boost exports, and threatened to impose punitive tariffs on Chinese imports as retaliation. However, since taking office in January, Trump has failed to follow through with these threats.
The US president also allegedly wants China to cut its tariffs, but it is believed that this issue will not be raised in his first summit with Xi.
While Trump has so far been unsuccessful in addressing what he sees as unfair trade practices, he has maintained his critical stance on the issue. In an effort to make gains for US manufacturing workers, Trump may use the summit to push for more Chinese investment in American infrastructure. Interestingly, Chinese investment in the US more than tripled in 2016 to a record $45bn, but Trump remains critical of the nation’s supposedly tight controls on foreign investment.
In addition to the tough topic of trade, the two leaders are also expected to address the increasingly urgent issue of North Korea’s nuclear programme. On April 5, Pyongyang fired a medium-range missile into the Sea of Japan, marking the latest in a series of test launches from the communist nation.
While China has condemned North Korea’s nuclear ambitions, it has so far been somewhat reluctant to take punitive action against Pyongyang. Xi is therefore expected to come under pressure from Trump to take a tougher stance with its neighbour, with the US president potentially calling for China to step up targeted sanctions on North Korea.
The brief, two-day summit will conclude with a working lunch on April 8, but the meeting may have a lasting impact on international politics for some time to come.
In January, the World Bank published its latest biannual Global Outlook report, which measures economic growth in almost 200 countries by calculating the year-on-year percentage change in GDP.
India and China are usually considered to be stars in this respect. While the global average growth rate is about 2.7 percent, India reported a whopping seven percent last year, with China roughly the same. Such figures are staggering – but they are not the world’s most impressive.
The Global Outlook provides growth forecasts for 2017, 2018 and 2019. India’s three-year forecast is strong – yet China fails to make the list. Meanwhile, a handful of smaller emerging markets are set to out-pace both. Here, World Finance ranks the world’s five fastest-growing economies based on the average of these percentages.
Bhutan – 11.1%
Located between China and India, Bhutan’s mountainous terrain makes it difficult to build infrastructure, such as roads and pipelines. Consequently, manufacturing industries are not the cornerstone of the economy’s growth. Instead, the roots of Bhutan’s prosperity lie in hydropower, agriculture and forestry. For example, the construction of a huge power plant in Dagan has been an important aspect of the government’s plan to increase Bhutan’s hydropower capacity to 10,000MW by 2020.
Ethiopia – 8.7%
While Ethiopia is Africa’s largest recipient of developmental aid and remains one of the world’s least developed countries, several of its sectors show great promise for the economy. A burgeoning services industry underlies the hope that Ethiopia will become a middle-income country by 2025. The construction sector was also boosted in the mid-1990s by massive public infrastructure investment, and gathered real pace between 2004 and 2014. A prime example of its accomplishments is the Grand Ethiopian Renaissance Dam, which is often considered the crowning glory of the country’s recent growth.
Ghana – 8.1%
Since the country’s democratisation in 1992, Ghana’s political and legal systems have been central to maintaining the economy’s strong expansion. With courts remaining largely independent and the political process fairly stable, there are few barriers to international trade, which therefore allows the country to draw upon its gold and cocoa reserves to boost prosperity. The discovery of oil reserves in 2010 is also a major cause of development at present. This, alongside a fiscal consolidation plan, will be central to Ghana’s future growth.
Cote d’Ivoire – 8.1%
In 2012, Cote d’Ivoire’s productivity suddenly boomed. There were two reasons for this: first, a peace agreement halted the country’s 10-year civil war, and second, the government received a $4.4bn package from the IMF. Nowadays, cocoa, coffee and palm oil are the backbone of the country’s economy. The government also channels oil revenue into education and infrastructure development, which in turn advances industry. The capital city Abidjan now plays host to Parisian-style cafes, and the country hopes to achieve ‘emerging market’ status by 2020.
India – 7.7%
Indian growth often receives global attention because the country’s economy is both stable and huge. Services are fundamental for the economy, counting for two thirds of Indian GDP, while consumerism is on the rise thanks to a growing middle class. This growth is aided by an entrepreneurial spirit in civil society and a deep sense of national pride. While China is slowing down, India marches ahead, with the IMF predicting it will crack eight percent GDP growth in 2021.
In 1956, consumer retail was revolutionised. The Southdale Centre in Edina, Minnesota was the first of its kind: a large, spacious building filled with modern shops and public art. Its climate-controlled environment offered respite during the freezing Minnesota winter, a forum for bored teenagers and bargains for savvy shoppers. It was the birth of the US shopping mall: a cultural institution that would extend across the country and define America’s suburban landscape.
But while the modern shopper has evolved, the mall has not. No longer able to attract the footfall they once boasted, many malls in the US are now struggling to fill floor space and falling into disrepair. Victims of online shopping, changing consumer tastes and, in some ways, their own success, a number of malls are now trapped in a swift decline. As shopping centres continue to close, however, new developments are being born; while the malls of the future are reimagined to better reflect the communities they represent, others become something else altogether.
King of retail
The history of the modern US mall dates back to the opening of Southdale and its designer, Victor Gruen. Gruen was an Austrian-Jewish architect who immigrated to the US in 1938. His mall aimed to capture part of the life he had left behind in Europe: the bustling town square. US communities were beginning to spread into the suburbs, and Gruen sought to replicate the feel of a medieval market or the Greek agora: a community space where people could meet, exchange ideas, and purchase goods and services. While shops were an important part of the design, they were by no means the entire point of the space. Gruen envisioned a mall that included amenities such as medical centres, schools and even residences.
As a lucrative investment opportunity, mall construction quickly ballooned and the market became saturated
Following its debut in the 1950s, the US quickly fell in love with Gruen’s creation. Malls allowed people to shop in warm and friendly environments without needing to venture into the city. They brought numerous retailers and services together in a single location, something main streets and cities could rarely offer.
As US suburbs grew – drifting further from city centres – the popularity of malls only increased. Over 1,200 shopping malls shot up in the US after the earliest examples were built in the 1950s. They became an institution, a prominent fixture in the cultural zeitgeist of suburban life.
At times it seemed like the mall would remain the undisputed king of retail forever, but following a wave of closures at the turn of the millennium, numbers continued to dwindle and further closures now appear inevitable.
Real estate research firm Green Street Advisors measures the health of the mall industry annually. By examining factors such as occupancy, sales per square foot and the demographics malls serve, Green Street assigns grades on a scale from A++ to D. In its outlook for 2017, Green Street graded more than 300 US malls at C+ or lower, underscoring a risk of closure in the near future. Combined, these malls account for only five percent of the total value of malls in the US, but once a mall begins to slide, it can be almost impossible to prop it back up.
Suburban growth
Much to the ire of their creator, malls have diverged greatly from their original concept. In a 1978 interview, Gruen made it clear he did not support the direction modern malls had taken. “I am often called the father of the shopping mall”, he said. “I would like to take this opportunity to disclaim paternity once and for all. I refuse to pay alimony to those bastard developments. They destroyed our cities.”
The biggest criticism of malls is the negative impact they have had on the previously established urban landscape. Robert J Gibbs, President of Gibbs Planning and author of Principles of Urban Retail Planning and Development, said malls have been disastrous for the main streets and urban centres once found at the heart of local communities.
“The first generation of malls built in the mid-1950s to mid-1960s devastated small towns”, Gibbs said. “They pulled out the department stores from the city centres and shifted the centre of commerce from downtown to the mall. Most of the downtowns then struggled for about 25 to 30 years. The effect was devastating.”
By their very nature, malls were built big and, as they grew, needed to move further from the town centres and communities they served. Encircled by wide highways and often lacking sufficient public transport connections, many malls became impossible to access without a car. This only worked to encourage greater urban sprawl (see Fig 1), and subsequently the construction of even more malls. As a lucrative investment opportunity, their construction quickly ballooned and the market became saturated.
“The suburban sprawl they generated was not sustainable and they became undervalued properties around the malls”, explained Gibbs. “People moved away from that area to another suburban place, further away. So it was an unsustainable model. As the neighbourhoods declined around the mall, the malls then lost their customers and declined themselves.”
The biggest victims of the mass construction of malls were the retailers in main streets and cities. “At their peak, [main streets and cities] had about 80 percent of the market share of retail”, Gibbs said. “After the malls left, it dropped down to five percent of the market share.” For the most part, the cities and urban centres never truly recovered from the loss of custom. “There’s only been about 23 or 30 American cities that regained maybe 20 percent of the market share, from the 80 percent they had”, Gibbs said.
Falling sales
It is not just disappearing consumers that have led to the gradual decline of many malls: the business model that once drove them makes increasingly little sense in the modern retail environment.
The traditional architecture of a mall was a single, long, enclosed hall that connected two major department stores at either end. These department stores, often referred to as ‘anchor stores’, were the main attractions. Along the walkways connecting these stores, smaller boutiques would open and subsequently attract a portion of the people walking past. Gradually, malls began to experiment with different shapes and sizes, but the fundamental premise of connecting department stores always remained the same.
1956
Launch of the first US mall
1,200+
Malls in the US
300+
Malls in risk of closure
Naturally, these department stores commanded a substantial amount of power over the mall’s developers and owners. As the main attraction, they were able to negotiate everything from signage locations and the size of parking lots to exceptionally low rents. The enduring popularity of a mall’s anchor stores was integral to its ongoing survival; a department store closing could trigger a spiral of declining visitors, reducing spending and ultimately closing stores.
Unfortunately for mall developers, the department stores that supported them in the past are now beginning to flounder. In 2016, Macy’s announced it would be closing 100 stores. Sears also plans to close over 150 stores, while JC Penny has announced a number of store closures over the last two years.
The challenge for many malls is, once a department store closes, it can be difficult to find something to fill the void. For a start, there are few modern retailers operating on the scale of a traditional department store. While some malls may be able to find a cinema to fill the space, many already have one. If a mall were to lose multiple department stores at the same time, the drop in footfall would be catastrophic.
The Starbucks Effect
For the malls that do end up closing, the space they occupied offers a vast range of opportunities for entrepreneurs, investors and government bodies alike (see Fig 2). “The failed malls are easily redevelopable into other land uses”, Gibbs explained. “In some cases, developers are keeping the mall structure and turning them into employment centres, community colleges and city halls.”
These redevelopments don’t necessarily mean retail is completely removed from the equation, but rather scaled down to a more suitable level. This might mean dropping retail space from one million square feet to 100,000 square feet – a level far more sustainable in the long term.
Gibbs outlined another alternative: tear the mall down and redevelop the property into a walkable and dense mixed-use community. In a relatively small space, retail, housing and employment are all connected, reducing the average person’s dependence on a car and encouraging more integrated communities.
“That’s attractive to a wide range of home buyers, from Millennials to empty nesters to seniors [and] young families”, Gibbs said. “It’s a more vibrant community because there is more to do, because you’re not dependent on the automobile, and it’s more sustainable, it takes less resources.”
The popularity of this style of development can also be very profitable for developers, with buyers showing a willingness to pay a premium to live in a more connected area.
In 2015, research firm Zillow identified what it called the Starbucks Effect, in which properties located within a quarter-mile of a Starbucks increased in value substantially faster than those further away. The huge footprint left by a failed mall presents the perfect opportunity for the development of such a community. Gibbs recalled one property he worked on was bought for $1m and sold for $30m just two years later.
Gibbs said: “[This was] because [the developer] was able to put in hundreds of residential units, new retailers in a walkable format, and he created a major employment centre. So I’m very optimistic about how these old malls can be torn down or converted into mixed use communities.”
While the malls that fail may find new life as mixed-use centres or be completely redeveloped, the malls that remain will not necessarily survive unchanged. With added pressure from online shopping, merely boasting a wide selection of shops is no longer enough to draw customers in their droves. To win back consumers, malls are increasingly beginning to resemble Gruen’s original vision.
Change in management
Matt Billerbeck, Senior Vice President at architecture, planning and design practice CallisonRTKL, believes the current wave of mall closures is at least partly due to the sheer number of sites that opened between the 1950s and 2000s.
Billerbeck said: “It was too much of a good thing, and there were just more shopping centres than the market could support, straight up. I don’t think anyone is going to argue with that. The natural evolution of competition is some of those would start to fade no matter what, even in a decent economy.”
With added pressure from online shopping, merely boasting a wide selection of shops is no longer enough to draw customers
With online shopping taking somewhere between 10 and 20 percent of mall sales, customers no longer need to travel for the basic and frequent purchases that once got people through the door. To combat this, Billerbeck said leading malls are improving their selection of stores and creating more reasons to visit.
One such example, according to Billerbeck, is the South Coast Plaza in Los Angeles: “It’s every store you could think of. So on a big shopping day, if you want to shop, they have the entire collection. When you get together with friends and you want to see it all, try on everything and make a big set of purchases, or you’re just having fun, you’ll make that bigger trip.”
But the way stores operate is also changing. While some department stores like Nordstrom are generating strong interest, the classic format of a store stocking a curated selection of brands is dropping in popularity. Billerbeck said alternative, specialised and more exclusive brands are emerging to fill this space: “There’s all sorts of other retailers out there like Bonobos, Warby Parker and Apple; these things are the new attractors to shopping centres, they’re the reason people arrive.”
Billerbeck believes, with the right management, those shopping malls freed from the demands of a department store could make substantial changes to cater for more specialist and attractive brands.
He said: “At one point you would do anything to get a department store to sign a lease in a shopping centre. As they go away, all kinds of new opportunities open up. We’re doing several nice projects around North America based on that exact dynamic: department store goes away, what do we do with the extra parking field and how do we expand the shopping centre?”
More than 300 US malls are currently at risk of closing
Malls of the future
However, it is not just store selection that is being reconsidered. Since shopping no longer commands enough draw for people to make the trip to centres, both current mall owners and developers are working to incorporate residential, office and other facilities into malls.
“The shopping centre in the US is going to be more like Asia”, Billerbeck said. “It’s the retail destination you go by every day to and from work, more like Europe, more closely connected, and more integrated into a neighbourhood.”
The trend of more connected malls has long been the norm overseas. Unlike the US, these malls are generally located in urban centres and are well connected to public transport. Overall, they tend to be more accessible and don’t draw people as far away from their homes. By virtue of this, the facilities are often composed of far more than just shops; incorporating services, amenities and even event spaces. Since there is more to do, they have a greater appeal.
Billerbeck said: “The idea that shopping centres used to be these abstract areas where you would leave your community, leave what is a normal day to day lifestyle pattern, leave your regular commute to and from work. That was one pattern of behaviour and then the shopping mall was a whole other thing… that’s changing.”
These more connected centres that include residential, office, retail and entertainment – like music venues or even stadiums – look a lot more like Gruen’s original vision. Billerbeck is quite optimistic about the kind of lifestyle these new malls encourage: “These are things that are more closely connected to communities and more driven by transit, healthier for the environment, more about a variety of choices and supporting cultural events. Less formulaic and more individualised, more personality driven. It’s a richer, deeper, broader experience, it’s kind of the way we hope our cities would look, and I think that’s the idea, that these are going to be seamlessly connected participants in the urban landscape.”
While the explosion of mall construction in the US may well be over, those that remain are on the brink of a new future for retail. Whether taking a revised role in the urban landscape or being completely reimagined, the self-destructive model adopted by previous mall developers appears to have come to an end. Instead, the malls of the future will seek to take a bigger role in both shaping and growing communities; no longer serving as merely retail destinations, but as communities in their own right.
On April 4, Krispy Kreme owner JAB Holdings signed a $7.5bn deal to acquire bakery chain Panera Bread – representing the biggest restaurant deal in US history. The news caused shares in Panera to jump 14 percent, reaching record highs of $312.98. The companies hope to close the deal in the third quarter of 2017, but are currently awaiting approval from shareholders and regulators.
Panera’s founder and CEO Ron Shaich said: “Panera has been the best performing restaurant stock of the past 20 years – up over 8,000 percent. Today’s transaction is a direct reflection of those efforts, and delivers substantial additional value for our shareholders.”
Panera owns 2,000 US restaurants and employs over 100,000 people, generating annual revenues of $5bn. Following the announcement, JAB partner and CEO Oliver Goudet said: “We have long admired Ron and the incredible success story he has created at Panera… we strongly support Panera’s vision for the future, strategic initiatives, culture of innovation and balanced company versus franchise store mix.”
If the deal to buy Panera Bread goes through, JAB will have spent over $40bn on US acquisitions in the past decade
If the deal goes through, JAB will have spent over $40bn on US acquisitions in the past decade. Panera will become the latest in an extensive portfolio including luxury shoemaker Jimmy Choo and beauty manufacturer Coty.
More recently, JAB has made significant moves in the food and drinks market, acquiring Peet’s Coffee, Caribou Coffee and Keurig Green Mountains since 2012. One of its biggest steps in this area was the $1.35bn purchase of doughnut maker Krispy Kreme in 2016.
“The move provides JAB Holdings with the significant opportunity to expand restaurants into the global markets and strengthens the positioning of retail products toward the supermarket space”, explained Darren Tristano, President of food industry research and consulting firm Technomic.
Considering the positive impact the announcement had on Panera shares, it is expected the company’s investors will give the deal the green light. JAB shareholders are likely to follow suit, given the company’s past enthusiasm for expansion. Furthermore, Panera is unlikely to see a better offer than JAB’s: “We view the acquisition price as high enough to preclude a competing financial suitor”, said Wedbush Securities Analyst Nick Setyan.
Consequently, US antitrust regulations may present the biggest obstacle to the merger. The Federal Trade Commission could order JAB to divest at least some of its restaurant assets in order to pass muster.
Currently, the market for coffee shops and breakfast chains is dominated by titans like Starbucks and Dunkin’ Donuts. The prospect of a new competitor is a promising sign, particularly as JAB seems willing to take an active role in the market. A JAB statement outlined this ambition: “[JAB hopes to] invest in and work with [Panera’s] management… to continue to lead the industry.”
On April 6, the UK’s Office for National Statistics (ONS) announced a drive to bolster its recession warning system, introducing a new procedure for devising early GDP estimates. The UK has repeatedly been found among the best performing nations when it comes to creating accurate early GDP estimates, yet statisticians at the ONS believe they could have been quicker to identify the 2008 recession.
The ONS found while the economy had contracted in the second quarter of 2008, official statistics suggested the economy was still growing
The ONS analysis re-evaluated the numbers produced around the time the economy was tipping into a recession in 2008. It found that while the economy had contracted by 0.7 percent in the second quarter, official statistics suggested the economy was still growing. This inaccuracy had very real implications, with the Bank of England unable to stimulate the economy until months later.
Several improvements have been made to the current estimation system, including the incorporation of more timely tax data. By evaluating VAT returns as they come in each month, the ONS will have an insight into wage changes as they happen, rather than relying on business survey responses. The VAT data also provides a far larger sample size than survey responses, and will supply a greater volume of new data on smaller businesses, providing a more representative measure of economic growth.
Commenting on the improvements, The ONS Head of National Accounts, Darren Morgan, said: “It is vital that ONS is able to pick up turning points as soon as they happen, enabling policymakers to respond quickly… the improvements announced today improve the quality of GDP estimates and help to reduce the size of future revisions.”
The state of Colorado – famous for being home to the stunning Rocky Mountains – has become internationally renowned for its flourishing tech scene. With its innate entrepreneurial spirit, strong history in innovation and surplus of independent thinkers, Colorado is a natural fit for start-ups and fast-growing companies. This status is furthered by the great deal of support offered to innovators and an exceptional level of cooperation within the community.
At present, Colorado ranks among the top five US states for entrepreneurship and innovation, and hosts the largest start-up week in North America. Colorado is also the birthplace of Techstars and numerous other innovative accelerators, such as a growing community of angel investors, which are helping new companies to get started without heading for the coasts.
To put Colorado’s thriving tech scene into perspective, out of the 10 metro areas with the highest tech start-up density in the US, Colorado is home to four, with Boulder being ranked as the number one area nationwide.
Colorado ranks among the
top five US states for entrepreneurship and innovation, and hosts the largest start-up week in
North America
Much of the state’s success is due to Governor John Hickenlooper’s vision of Colorado becoming a leader in innovation, which culminated in the creation of the Colorado Innovation Network (COIN) in November 2011 and the subsequent appointment of the state’s first Chief Innovation Officer. With a mission to advance connections in the global innovation ecosystem, COIN has become a catalyst for innovation in Colorado.
Over the past five years alone, COIN has produced four innovation summits and sponsored several innovation challenges to inspire new ideas and collaborations that have produced a positive social impact. Due to the work of COIN, Colorado is now the epicentre of today’s
innovation conversation.
A global tech hub
With its exceptional level of innovation, Colorado breeds new ideas, which is helped by the willingness of CEOs, mentors and entrepreneurs to support those starting out. According to Stephanie Copeland, Executive Director of the Colorado Office of Economic Development and International Trade: “Coloradans have an inclination towards constant experimentation and innovation. Tech companies in Colorado support each other’s growth and share the resources they need to scale. Moreover, organisations such as the Colorado Technology Association provide leadership for the industry and help to coordinate public-private partnerships that support Colorado’s tech community.”
Then there is the Colorado Energy Research Collaboratory, a clean energy research consortium focused on renewable energy, energy efficiency and the reduction of adverse impacts from fossil fuels. Copeland told World Finance: “It is a uniquely Colorado partnership. The Collaboratory unites the science and engineering research capabilities of four outstanding institutions: the Colorado School of Mines, Colorado State University, the National Renewable Energy Laboratory and the University of Colorado Boulder. Together, these four institutions offer a breadth of research capabilities and a spirit of cooperation, unmatched by any American clean energy research community.”
Adding to this strong support system is the fact it’s also cheaper and easier to do business in Colorado: with one of the lowest corporate income tax rates in the nation, Colorado offers companies a unique advantage to grow and compete in the global market.
Copeland explained: “Lower taxes and a predictable political climate [within the state] create stability for businesses that are making or considering making significant investments in Colorado. Colorado’s central geographic location also creates an ease of doing business in North American markets, and the Mountain Time Zone allows for same-day communication with both US coasts, Europe, South America and Asia.”
Clean technology
Colorado was one of the first states to recognise the value of a balanced energy economy that incorporates cleantech. According to Copeland: “The integration of renewable energy and Colorado’s rich energy resource base puts the state at the forefront of energy development for the nation, and the world.” Colorado was also the first state to pass a voter-approved renewable energy standard in 2004, which required utilities to supply a percentage of energy from renewable resources.
Consequently, the state is now among the top 10 in the country for solar energy production, the top five for wind energy jobs (see Fig 1), and the top five for advanced biofuels companies. This is largely due to there being almost 2,000 cleantech companies in Colorado, which provide jobs for 26,000 people and a further 86,000 indirect workers in supporting industries.
Colorado is also home to several highly innovative R&D centres, such as the Wind Blade Component Manufacturing Facility at the National Renewal Energy Laboratory’s National Wind Technology Centre. “The centre is now working on ways to augment the manufacturing process for wind turbine blade components. These advances in low-cost composite materials will help manufacturers build longer, lighter and stronger blades to create more energy”, Copeland told World Finance.
Harnessing talent
When asked what makes Colorado such a magnet for start-ups, Copeland could summarise her answer in one word: talent.
“Cleantech companies are attracted to Colorado because of our highly skilled and educated workforce”, she said. “Access to world-class higher education programmes and research institutions produce the very best scientific research talent.”
In fact, Colorado is the second most educated state in the nation, with 38 percent of the population holding a bachelor’s degree. According to TechAmerica Foundation’s 2013 Cyberstates study, it is also third in the nation for hi-tech workers per capita.
The nurturing of talent is particularly evident in the field of energy. The Colorado School of Mines in Golden is one of the few universities in the world to offer programmes from baccalaureate through to doctorate levels in all key subjects related to energy. Colorado is also home to Education Corporation of America’s Ecotech Institute, the world’s only college entirely focused on training students for careers in cleantech.
It doesn’t stop at education: the level of investment made into the state’s job training programmes is quite extraordinary, while business growth is also incentivised with grants for those relocating to or expanding in Colorado.
Copeland noted: “Our labour pool is essential to the innovation that our state’s economy benefits from. With numerous high-performance education and research institutions and a plethora of job training support organisations, Colorado’s workforce allows resident employers to create, grow and compete in a global economy.”
A solar panel field in Colorado, US
Ideal business climate
Copeland told World Finance: “Innovators, large corporations and Fortune 500 companies like Ball Aerospace, Lockheed Martin and Davita Healthcare have already discovered that Colorado does business better, and have made Colorado their home.”
As a result of its renowned tech scene, Colorado has one of the fastest growing economies in the US. Its economic status, together with its favourable and stable tax structure, is an ideal foundation for businesses to propose and plan for future growth. “Colorado also has integrated, cutting-edge infrastructure that helps businesses reach markets across the country and world, both quickly and efficiently.”
The support given to tech companies is helped further by the fact that Colorado has one of the highest per capita concentrations of federal research facilities in the nation. This includes the Solar Technology Acceleration Centre, the largest testing facility for solar technologies in the US. These laboratories are a huge economic driver for Colorado. According to Copeland: “The federal laboratories really foster innovation and stimulate technology transfers between companies and local educational facilities.
“That old adage about living to work or working to live doesn’t apply in Colorado. Here, we’re simply living our lives to the fullest, all at a lower cost than our coastal counterparts. Sure, our inviting business climate is hard to beat, but everything else we have to offer from arts and culture to recreation and wellness takes living in Colorado to a whole other level.”
With one of the lowest corporate income tax rates in the nation, Colorado offers companies a unique advantage to grow and compete in the global market
Copeland also explained that, contrary to popular belief, Colorado isn’t all snow-covered mountain peaks: “We’re a diverse playground made up of flourishing urban areas, uninterrupted open spaces, scenic alpine roads, dry desert cliffs and quaint rural towns steeping in history. As a result, we’re a magnet for adrenaline junkies, foodies, art lovers, nature seekers and fitness fanatics.”
As a result, Copeland argued much of the appeal of Colorado rests in its favourable climate: “Want to know the secret to Colorado’s reputation for being home to some of the nation’s happiest, healthiest and most productive people? The climate here is one of our best-kept secrets – and we promise it’s not too good to be true. Around 300 days of sunshine and four temperate seasons get us outside and energise us to pursue the best powder days and BBQ afternoons – sometimes all on the same day.”
At an average altitude of 6,800ft above sea level – the highest of any state in the US – Colorado’s mild winters and low-humidity summers allow for outdoor activities all year round. Furthermore, as the nation’s leader for arts funding, culture is always around the corner. Such a backdrop lends itself to Colorado’s favourable business climate, which includes performance-based, calculation-driven incentives, such as the Job Growth Incentive Tax Credit and the Colorado First Job Training Programme, as well as a stable government tax structure that allows businesses to plan for the future with certainty.
Copeland concluded: “When companies choose to do business in Colorado, they know they’ll be able to tap into our invigorated workforce, partner with innovative peers, reach global markets, and collaborate with a business-friendly government that has their bottom line in mind.” In short, there’s no support you can’t find in the exceptional state of Colorado.
On April 4, the US Federal Trade Commission (FTC) approved a $43bn merger between Swiss chemical company Syngenta AG and China National Chemical Corp (ChemCorp). While Syngenta hailed the decision as a “major step” in the process, FTC approval carried the condition that each company must divest three types of pesticide: the herbicide paraquat, the insecticide abamectin and the fungicide chlorothalonil.
The FTC said in a statement: “Syngenta owns the branded version of each of the three products at issue, giving it significant market shares in the United States. ChemChina subsidiary ADAMA focuses on generic pesticides and is either the first or second-largest generic supplier in the United States for each of these products.”
In order for the deal to go ahead, ChemChina will sell ADAMA’s stake in the production of pesticides to Californian company AMVAC. Meanwhile, Syngenta spokesman Paul Minehart said: “Syngenta will continue to provide a high quality, broad portfolio of products and solutions to US farmers.”
The merger marks the latest
in a series of deals between
the world’s six largest suppliers of chemicals
The deal is expected to close by the end of June, but is yet to gain approval from regulators in Mexico, China, India and the EU. That said, the FTC worked closely with these bodies when making its decision, limiting the scope for objections to emerge in the coming months. The EU judgement is due on April 18.
Given the Chinese government owns ChemChina and that Syngenta’s offerings will make crop management far cheaper and more effective, the merger could see the country take one step closer to reaching its food security goals.
This issue has become particularly pressing, with demand for grain in China continuing to rise as a result of a growing middle class. Farmland has also become increasingly scarce, as housing projects continue to be rolled out across China.
The merger marks the latest in a series of deals between the world’s six largest suppliers of chemicals; a $130bn transaction between Dow Chemicals and DuPont gained EU approval in March, while Monsanto and Bayer are pushing through a $66bn coupling.
The creation of these three giants will certainly raise concerns regarding competition. Greenpeace said: “[The ChemChina-Syngenta deal] is another indication that Big Agibusiness is in turmoil.”
With the deal likely to increase farmers’ dependency on the major providers, regulators will have to be increasingly vigilant to ensure consumer rights are protected and environmental damage is kept to a minimum.
US President Donald Trump has reiterated his campaign trail pledge to overhaul the sweeping Dodd-Frank banking regulations – which were introduced in response to the global financial crisis of 2008.
Speaking in a meeting with top business leaders at the White House on April 4, Trump said: “We’re going to do a very major haircut on Dodd-Frank. We want strong restrictions, we want strong regulation. But not regulation that makes it impossible for the banks to loan to people that are going to create jobs.”
Trump has attacked the
Dodd-Frank Act for inhibiting the creation of jobs and making it more difficult for banks to offer loans
Trump has been a vocal critic of the Dodd-Frank regulation since he first announced his candidacy in June 2015. Taking a staunchly Republican position on banking regulation, Trump has attacked the reforms for inhibiting the creation of jobs and making it difficult for banks to offer loans. In February, the President signed an executive order to review the act.
Introduced in 2010 by the Obama administration, the Dodd-Frank Act aimed to eliminate the financial misconduct synonymous with 2008 financial crisis. The legislation sought to reduce banks’ reliance on debt for funding, in addition to improving transparency on Wall Street and promoting financial stability.
Upon its introduction, the Dodd-Frank Act marked the most radical change in the US banking system for over 50 years. While its supporters claim the legislation protects the US economy from future crises, its critics believe it to be overly restrictive and harmful to the competitiveness of US business.
Despite Trump’s pledge to repeal the act, amending Dodd-Frank may prove difficult for the President. Any changes to the current regulation would need to pass through Congress, making the affair a lengthy and complicated process. Given Trump’s recent setbacks in repealing Obamacare, targeting Dodd-Frank could well be a costly and fruitless task.
From Merrill Lynch to Lehman Brothers, the collapse of a financial institution is inevitably followed by widespread scrutiny of its risk management strategy. Experts often retrospectively reveal that, in the majority of cases, the collapsed organisation simply did not have adequate liquidity to cover its expenses.
Prior to the 2008 financial crisis, a lack of liquidity risk regulation fuelled a culture of risk-taking on Wall Street. And yet, in the years that followed, liquidity risk has become subject to strict rules and intense scrutiny.
From being an unremarkable factor that no one talked about, the banking crisis turned liquidity risk into one of the most heavily regulated areas in the financial world. The reason for this abrupt change is clear: the 2008 crisis ultimately revealed that a lack of liquidity underlies every risk in the financial marketplace. For example, when a customer fails to pay interest on a loan, it results in a liquidity risk. Similarly, when there is fraud within an organisation, this too impacts liquidity. Even when markets themselves change and fluctuate, it affects the liquidity profile of an organisation. In this way, all financial risk is closely related to liquidity.
Given how liquidity affects all other types of risk, we can call liquidity a second order risk. In order for any organisation to manage such a risk, it needs to adequately regulate, order and control its primary risks. Therefore, if a company looks to control its credit risk, it is, in effect, also controlling its liquidity risk.
The speed of illiquidity
Liquidity impacts organisations faster than any other kind of risk, and the transformation from being liquid to illiquid is as debilitating as it is rapid. Many organisations are unable to cope with the speed with which their liquidity deserts them, and as a consequence, they eventually fail.
It rarely takes more than 90 days for an organisation to move from liquid to illiquid. In 2007, this was the time it took for Northern Rock to move from being the poster child for creativity to the first UK institution in more than 150 years to suffer the ignominy of a bank run.
In the years that have followed the 2008 financial crisis, liquidity risk has become subject to strict rules and intense scrutiny
Given the speed with which liquidity can impact an organisation, the suggestion that liquidity models should be constructed over the long term seems almost absurd. If liquidity is to be managed effectively, then companies must think of the short term.
Historically, liquidity has been regarded as a compliance risk, and has thus been considered subjective to a great extent. Highly liquid assets are sought, but what matters most of all is actually the market’s perception of what constitutes highly liquid assets and what does not.
Just because a regulator considers sovereign holdings to be liquid assets, this does not mean, for example, that Greek Government debt is more liquid than any other risky asset holding. This was made all too clear during the spectacular financial meltdowns in both Iceland and Greece, and it is unfortunate both practitioners and regulators seem to have learned little from these mishaps.
The importance of cash flows
In order to successfully manage liquidity, it is crucial to have a sound understanding of cash flows. It should be known that cash flows are subject to all of the primary risks a financial institution has undertaken. For instance, if an American company takes on bonds from the Korea Development Bank, then it is also taking on a number of additional risks. In addition to the customary counterparty risk and sovereign risk, the American organisation would also be taking on a foreign exchange risk if the bonds were in Korean won.
There would also be a potential interest rate risk, as well as a Korean equity risk, whereby the Korean markets may negatively impact the price of the development bank bonds. The American company would also have to consider the transfer risk involved, where the counterparty would be excluded from foreign exchange remittances on account of sovereign controls. Finally, there would also be a number of operational risks that would have an impact on price and yield for the American company. As markets fluctuate and the creditworthiness of Korea Development Bank changes, cash flows would also change to reflect market perception of the bank.
Each of these scenarios would have a significant impact on expected cash flows. Along with the aforementioned potential risks, cash flows are also affected by both macro factors and market factors. If a financial institution can adapt to such changes, then they will receive a revised cash flow, but if these changes are too much to handle, the organisation will likely default on its payments.
Risk interrelationship
As I have mentioned, all financial risks are closely interlinked. Let’s consider another example that illustrates this relationship: an IBM employee in the US takes a mortgage for $800,000 on a home in Washington DC for 30 years, fixed at 4.5 percent. Each year, the IBM employee will pay a portion of the initial mortgage, plus interest to the bank. If interest rates were to go up by 50 basis points, then interest payments per annum would increase by $30,000.
However, the IBM employee’s salary increase policy simply would not cover interest rate increases, meaning the expense profile of this person would increase in line with the rising interest rates (see Fig 1). This would in turn affect the creditworthiness of this customer, as they will be forced to either cover this new $30,000 tax burden by other means, or else fail to make their repayments.
This example again demonstrates how all risks are interconnected and interrelated. Taking this into consideration, an astute risk manager always applies a holistic approach to managing both cash flows and liquidity. By managing primary risks more effectively, risk managers can in turn handle liquidity risk. Indeed, any attempt to understand liquidity risk in isolation is entirely misguided, and an effort must be made to understand the close correlation between all financial risks.
Analytical approach
At Kamakura, we take an in-depth, analytical approach to risk management. In order to better understand risk in all its forms, we run a stochastic process that provides our experienced analysts with numerous different potential scenarios. Such scenarios include changes in market conditions, macro factors and counterparty creditworthiness.
After running this stochastic process and analysing the different scenarios that may arise, we can effectively assess how a customer’s cash flows change based on all the potential risk factors that could impact them. This allows our analysts to arrive at an ‘at risk’ number for the customer. This unique approach gives our customers valuable insight into the various scenarios that could impact their liquidity cash flows.
It is also more structured than standard risk management assessments, as it takes customer behaviour patterns into careful consideration, including how prepayments and early withdrawals can affect cash flows.
Our approach also takes into account an organisation’s risk appetite and risk tolerance, and models liquidity as a second order risk, correctly identifying the key risks associated with each asset class. We look to manage liquidity through the careful management of other, related risks, and strive to correctly identify the relationships between risk categories. Our strategy is rooted in a well-accepted approach already popularised through value at risk, and provides a good alternative to the standard gap analysis that is traditionally employed to understand cash flows. The approach crucially seeks to integrate with the ‘value at risk’ techniques that are currently in place within most organisations.
Approaches to understanding liquidity risk have always been varied, with some methods proving more successful than others. To achieve the best results for clients, risk managers must establish clear decision parameters, setting limits on each point of their modelling horizon and ultimately arriving at ‘best effort’ liquidity estimates.
It is clear any attempt to model liquidity on a standalone basis is flawed, as there are simply too many associated risks that need to be taken into consideration. Instead, risk managers should look to understand liquidity by means of analysing the primary risk drivers and related risks that closely affect liquidity.
On April 3, Standard & Poor’s (S&P) downgraded South Africa’s credit rating to “junk” status for the first time in 17 years. The ratings agency cited concerns over South African President Jacob Zuma’s recent executive reshuffle, which has plunged the African National Congress party into political turmoil.
Zuma’s decision to dismiss widely-respected Finance Minister Pravin Gordhan caused particular concern. Gordhan had gained a reputation for his financial prudency and was regarded as a safe pair of hands by many. But, on March 31, an overnight Cabinet reshuffle saw Gordhan replaced by Zuma-loyalist Malusi Gigaba.
“The downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the Finance Minister, have put policy continuity at risk”, S&P said in a statement.
S&P cited concerns over South African President Jacob Zuma’s recent executive reshuffle, which has plunged the African National Congress party into political turmoil
Just two days after he was officially appointed, Gigaba pledged to focus his efforts on a “radical economic transformation”. He said: “For too long, there has been a narrative or perception around [the] Treasury, that it belongs primarily and exclusively to ‘orthodox’ economists, big business, powerful interests and international investors. The ownership of wealth and assets remains concentrated in the hands of a small part of the population. This must change.”
Zuma echoed this notion and said the reshuffle was intended “to bring about radical socioeconomic transformation and to ensure that the promise of a better life for the poor and the working class becomes a reality”.
Gigaba’s unorthodox approach and proposed swing to the left has prompted concern among the business community. A coalition of top business leaders, named the CEO Initiative, said in a statement: “[We are] gravely concerned and disappointed by the ill-timed and irrational dismissal [of Gordhan].
“This decision, and the manner in which it was taken, is likely to cause severe damage to an economy that is in dire need of growth and jobs.”
The S&P reiterated this concern: “The negative outlook reflects our view that political risks will remain elevated this year, and that policy shifts are likely, which could undermine fiscal and economic growth outcomes more than we currently project.”
Ratings agency Moody is yet to change South Africa’s status, but has put the country on a watchlist for a possible ratings downgrade.
Consistent, sustained growth is a deceptively simple-sounding goal for the finance industry, and one that appears to be increasingly elusive. According to the IMF’s Global Financial Stability Report, published in October 2016, many banks require substantial reforms and a rethink of management in order to escape the current climate of low profitability. While only the tip of the iceberg when it comes to the challenges facing global markets, low interest rates and outdated thinking have eroded the profitability of many established players.
It is this challenging environment that makes strong results particularly noteworthy, as only the most successful banking institutions are able to navigate such uncertain times. To achieve positive figures requires an institution to be disciplined, dedicated and focused, not only in terms of the bottom line, but also in terms of an underlying positive ethos that drives the decision-making process.
One region experiencing rapid development within its banking industry is the Middle East, with a range of finance providers now jockeying for leading positions as the industry modernises at a rapid rate. Of particular note is Kuwait International Bank (KIB), which posted notable results for 2016, during what was certainly a challenging year.
Chairman of KIB Sheikh Mohammed Jarrah Al-Sabah told World Finance: “I am proud to say that 2016 was a particularly successful year for KIB, as we have managed to achieve impressive results across several key areas, including the enhancement of our financial position, the restructuring of our business activities and the streamlining of our internal operations.”
Originally founded as Kuwait Real Estate Bank in 1972, KIB has operated as a full-featured Sharia-compliant bank since 2007. Currently, the bank has 28 branches across Kuwait.
A year to remember
In 2016, KIB made substantial strides on the retail side of the bank’s business. Al-Jarrah said: “In an effort to make our customer experience simpler and more convenient, we have made substantial investments to upgrade our IT infrastructure and streamline our systems and processes. Also, we continue to enhance our products and services, introducing more innovative and state of the art Sharia-compliant banking solutions, which are crafted to meet the ever-changing needs of both customers and the market.”
Overall, the bank’s 2016 figures demonstrated both substantial strength and improvement over a number of key performance indicators. In total, the bank achieved a net profit of KWD 18.2m ($59.7m) for 2016, a growth of 14 percent compared with the previous year (see Fig 1).
“In specific areas, we witnessed substantial growth in financing revenues, which increased by 12 percent to reach KWD 71m [$232m], compared with KWD 63.2m [$206.6m] recorded for 2015”, Al-Jarrah explained. “Total assets reached KWD 1.85bn [$6.05bn], primarily due to a growth in the overall financing portfolio by KWD 95m [$310m] to touch KWD 1.27bn [$4.15bn], compared to KWD 1.17bn [$3.82bn] at the end of 2015. This marked an eight percent growth.”
KIB also recorded a 17 percent increase in the bank’s investment portfolio over the previous year, while customer deposits reached KWD 1.12bn ($3.66bn), a 10 percent increase on the previous year. Return on equity reached 7.2 percent, in comparison with 6.5 percent for the previous year. The bank’s non-performing loan ratio was maintained at 1.4 percent, while the total provision coverage ratio has increased to 231 percent, compared with 199 percent the previous year.
Al-Jarrah noted: “KIB continues to maintain a comfortable buffer in maintaining capital adequacy ratios in compliance with the Central Bank of Kuwait’s regulations concerning Basel III. Capital adequacy ratio was 20.5 percent at the end of 2016. The financial leverage ratio as of 31 December 2016 was 10.7 percent.”
These successful figures are beginning to add up for KIB, with 2016 culminating in a ratings upgrade. “In an important testament to our stability and financial strength, KIB’s credit ratings were raised in October 2016 by Fitch Ratings. Fitch upgraded our viability rating and affirmed our long-term issuer default rating at ‘A+’, with a ‘stable’ outlook.”
Planning for success
KIB’s successful 2016 was thanks to far more than just the strong fundamentals of its core business. Al-Jarrah explained: “Much of our continued success can be credited to the successful implementation of our forward-thinking strategy, which has been extremely successful in enhancing our position within the Islamic banking sector, setting us well on our way to achieve our vision of becoming the Islamic bank of choice in Kuwait.”
The plan dates back to 2015, when KIB formulated a strategy to develop and enhance all aspects of its operations. This included performance, market growth, asset quality, organisational structure and, perhaps most importantly, product and service offerings. Ultimately, the goal of the plan is to make KIB the Islamic bank of choice in Kuwait for both customers and employees.
According to Al-Jarrah, the strategy has so far shown positive results, while also positively impacting many different levels of the organisation: “Since its launch, we have successfully completed a number of pivotal changes within our organisation, restructuring our core departments, establishing new business units and divisions, as well as adding several talented, experienced and dynamic professionals to our executive management team. We have also focused a lot of our efforts on reinvigorating and streamlining all internal operations in order to maximise effectiveness and efficiency.”
As government expenditure shrinks and investment in projects decreases, banks witness an increase in their financing costs
Despite the successes so far, KIB has made no indication that it plans to slow down anytime soon. “The next stage of the plan, which is scheduled to roll out throughout this year, focuses on enhancing KIB’s competitive edge within the banking sector”, Al-Jarrah said. “I believe the success we have seen so far in the implementation of the first two phases has set a solid foundation for us to achieve that goal.”
Al-Jarrah also said another key factor behind KIB’s success is the wealth of experience among the bank’s management team. “Our employees have been major contributors to our recent success; KIB is proud to house a team of highly motivated banking professionals.”
As the continued development of the bank’s employees is key to its future, fostering local talent is essential. Al-Jarrah said: “Our goal is to continuously attract aspiring young Kuwaiti professionals of both genders, thereby providing a wealth of career opportunities and professional training programmes for newly graduated Kuwaiti nationals. We are also committed to investing in our employees and promoting their professional growth and development, which is why we continue to provide professional training and development opportunities across all divisions and levels.”
For example, the bank maintains a comprehensive programme of training initiatives year-round, which are designed to enhance the skillsets and abilities of all employees. It is also currently implementing a new performance management process that is designed to balance performance assessments with career aspirations and professional development.
Al-Jarrah said: “I am quite proud to say, in a testament to our outstanding employment strategies and ongoing efforts to support local human capital, we were honoured at the 15th ceremony for recognising excellence in workforce nationalisation policies in the private sector in the GCC. The ceremony took place under the auspices of the Council of Ministers of Labour and the Council of Ministers of Social Affairs of GCC States.”
Corporate social responsibility
Though now a staple in the banking sector, corporate social responsibility (CSR) programmes vary wildly in their scope and effectiveness. However, for KIB, such a programme is core to the bank’s ongoing success. “One of our biggest focus areas as an organisation has been social responsibility, and I am proud to say that KIB continues to have one of the most comprehensive CSR programmes in the region”, Al-Jarrah explained. “We believe social responsibility to be a core component defining an organisation’s success, as any successful organisation is expected to play an active role within its local community and actively contribute to social development.”
Al-Jarrah said KIB has a responsibility to not just provide the best financial solutions to customers, but also to operate the best social initiatives and programmes that truly serve all segments of KIB’s community: “CSR has been the cornerstone of our vision since inception, was solidified further after the firm’s transformation into a Sharia-compliant bank. We have always sought to be true corporate citizens and have worked diligently to fulfil our duty towards Kuwait, its people and its society, beyond our economic role.”
The importance of a CSR charter or programme comes down to a number of factors, both from a consumer and a business perspective. “One of the trends that has driven the prevalence of social responsibility within organisations is that customers have become increasingly interested in socially conscious companies; the ethical conduct of companies now influences the purchasing decisions of customers. Additionally, investors around the world are changing the way they assess companies’ performance, and are making decisions based on criteria that include ethical concerns. Even employees are looking beyond paycheques and looking into a company whose philosophies and operating practices match their own principles.”
In this sense, adopting a long-term CSR programme, as is the case at KIB, is also a long-term investment in the bank’s employees, community and future. For 2017, the bank is focusing on supporting initiatives that cover a number of key areas, including religion, humanitarianism, social causes, philanthropy, sports, environment, healthcare, nationalism, culture and education.
The specifics of KIB’s CSR strategies are varied and far-reaching. The bank promotes Islamic values, particularly through the holy month of Ramadan. Moreover, prior to this celebration, KIB distributes a collection of Koran and Du’a recitations, which feature some of the most prominent reciters in the Islamic world. The bank also supports a countless number of youth-focused events and initiatives, which are designed to encourage young people to build the future of the country, including encouraging aspiring professionals to pursue a career in banking. The bank is also an active participant in many job fairs for students.
Another focus for KIB is the health and wellbeing of various communities in Kuwait, ranging from efforts to fund cancer and diabetes support organisations, to being a regular host of a mobile blood bank at its head office. The bank has also sponsored the late Abdullah Mishari Al-Roudan’s indoor football tournament for five years running, and sponsored both the late Jassim Al-Sharhan’s Ramadan football tournament and the Flair Fitness Competition.
KIB has also made efforts to sponsor talented individuals, including honouring inventor and engineer Mubarak Taher, who received an international patent for his system, the Dynamic Network for Oil and Gas Production.
Kuwait City, Kuwait
Supporting local communities
On a national level, the bank has sought to support events that stimulate sustainable national and social development. KIB sponsored the Hala Ramadan Exhibition in 2016, an event created to support successful local youth initiatives. The bank also offered its backing to Light Expo, an event that featured leading businesswomen and young female entrepreneurs, as well as focusing on encouraging innovative small projects in Kuwait. KIB was also a sponsor of the Fifth Tmkeen Youth Empowerment Symposium. “These are examples of where KIB has been able to make a substantial difference to communities in Kuwait”, Al-Jarrah told World Finance.
According to Al-Jarrah, as a leading financial institution, KIB recognises the key economic role the bank plays in the national landscape, and is fully conscious this gives it the opportunity to be a major force for good in Kuwait. As such, KIB plays a significant role in helping to make a positive impact in society, which is a reflection of its deep-rooted commitment to serving its community with integrity in every way possible. These positive efforts reflect both the bank’s overall performance and its ability to meet the expectations of customers and shareholders.
“We believe that we have a responsibility to not only provide the best financial solutions, but to also provide the best social initiatives and community programmes that truly serve all segments of our community”, Al-Jarrah explained. “As an Islamic financial institution, we consider social responsibility to be our duty towards our community, which comes as a benefit, rather than a cost.”
Al-Jarrah also said social responsibility is particularly important in Kuwait, as CSR values are fundamentally woven into Arab culture: “Yet, even beyond that, social responsibility remains important in the Arab world, mainly because of the need for sustainable economic development. Governments, civil society organisations and academic institutions should all be involved in this effort.”
Al-Jarrah added that companies have a particularly important role to play: “They must be involved and contribute to the betterment of the societies in which they operate. They can do this through CSR initiatives that align with national development objectives in a diverse number of areas.”
It is often within local communities that companies’ CSR programmes are able to make the biggest difference to individuals. While broad directives might prompt general and gradual change in the world, working on a local level can make an immediate difference in the lives of individuals. Consequently, KIB constantly strives to actively participate in community activities, which are aimed at bettering both the local community and the national economy.
As the GCC grows from an economy that is heavily focused on oil exports to a more diversified institution, it will have to develop its finance sector to match
“Companies must work to the best of their abilities and available resources to enhance various aspects of society and support the different segments within it”, Al-Jarrah said. “Moreover, they must focus on social issues with the highest impact and steer their social responsibility efforts to create sustainable and long-term improvements.”
That said, CSR programmes are also capable of making a significant impact at a corporate level as well. Combining both the macro and micro benefits of CSR is something KIB is working hard to achieve: “We have always believed in integrating social responsibility into the very fabric of our organisation, and we therefore seek to embed corporate citizenship into our business practices and corporate values across our entire organisation – encouraging our employees to be more socially aware and active in their communities. Our all-encompassing social responsibility philosophy has enabled us to never lose sight of one of our most important core values: fulfilling our duty towards the society in which we belong. In doing so, we recognise that our credibility with stakeholders is further enhanced, as well as our corporate reputation.”
When trying to attract the best staff in addition to a loyal customer base, a sturdy CSR programme is a necessity in the modern business environment. Stakeholders have become more knowledgeable, and increasingly they tend to make decisions based on the reputational status of organisations. Accordingly, organisations must set themselves apart through more intangible means.
“CSR has a strong, positive effect on corporate image, which in turn positively affects stakeholder perception of the organisation; even employees may be attracted to work for, or be even more committed to, corporations perceived as being socially responsible.
“Our CSR programme has worked to improve our credibility within different segments of the Kuwaiti community. As credibility with our stakeholders translates into the satisfaction of our customers, we consider social responsibility to be a necessary determinant of building our reputation; which in turn affects how our clients, the community, our current employees and even potential employees view us.”
Arab banking development
The Arab banking industry has been full of swift evolutions and changes, making it one of the most exciting areas of finance at the moment. Al-Jarrah said many of these changes have been focused on the careful running of banks: “As a direct response to the 2008 financial crisis, new regulations such as Basel III have been established, introducing more stringent financial controls and restrictions over banking activity. These new regulatory frameworks have gone a long way in strengthening banks’ resilience and their ability to absorb losses in financial crises. In many ways, they have completely changed the way in which banks operate, and their approach to risk management.”
However, there have also been substantial developments in the retail banking sector. Al-Jarrah said the retail sector has been experiencing a higher growth rate than corporate banking, and is presenting a new wave of challenges and opportunities: “Also, it is important to note that our customers’ demands have evolved, as they have become more technologically savvy, more connected, better informed and less loyal to a single bank. This has forced the Arab banking sector to adapt and meet their changing needs.”
While the global banking industry is facing its fair share of challenges, Al-Jarrah explained the GCC is facing a particularly tricky climate with the prolonged instability of oil prices. “The ongoing instability in oil prices continues to pose a threat, which comes as no surprise as oil is the driving force of many of the Arab economies.
$1.85bn
Kuwait International Bank’s total assets
17%
The increase in the bank’s investment portfolio over the past year
231%
The bank’s total provision coverage ratio
“At a macroeconomic level, oil prices have taken a toll on national GDP, and therefore growth. We have witnessed its effects trickle down to the banking sector. As government expenditure shrinks, investment in projects decreases and costs for businesses rise, investment and commercial banks witness an increase in their financing costs.”
Although this presents problems, the current climate can also be seen as an opportunity for growth. “Banks must carefully monitor the dynamic business environment to effectively and constantly adapt to changes when needed”, Al-Jarrah explained. “Also, they must proactively work on keeping up with the requirements to modernise systems and maintain international compliance with legal, audit and accounting standards in order to achieve required operational efficiency amid competition, and to counteract any possible volatility in the future. Although this is a challenge, it is also a source of motivation, driving us all to provide the best services and banking solutions to individual and corporate customers alike.”
Al-Jarrah said, if the situation of unstable oil prices persists, the market is likely to witness major changes in government spending, foreign investment in the region and implementation of development plans: “Kuwait is a prime example of that, as these developments have motivated the Kuwaiti Government to forge ahead with many development projects, in a bid to diversify income and boost market performance. Not only does this reflect the government’s commitment to move ahead with its development plans, it also signals that capital spending will not be affected by the drop in oil revenues, at least in the medium run. Additionally, I believe the shifts taking place in the global economic landscape have created an opportunity for the Islamic banking industry in the GCC, opening the door for banks in the region to augment their position as key international players.”
A new beginning
As the sector develops, the Arab banking is increasingly finding a united voice to meet these challenges, with both KIB and Al-Jarrah at the forefront of these efforts. Speaking in Beirut at the Annual Arab Banking Conference in November, Al-Jarrah’s opening remarks as Chairman of the Union of Arab Banks called for the establishment of an Arab lobby: “Through this conference today, the Union of Arab Banks is looking to explore the possibility of establishing an international Arab banking lobby, stemming from the union’s commitment to promoting financial stability and economic cohesiveness, despite the political and security challenges the world is currently facing.”
He also warned of the impact of unstable oil prices, and the potential consequences should the migration of domestic capital continue at its current rates. “To put things into perspective, the combined assets of Arab banking institutions exceed the total value of the Arab economy”, Al-Jarrah told World Finance. “Through the establishment of a consortium, we aim to enhance the competitive edge of the Arab banking sector by redirecting investments made abroad to the local banking sector. The consortium intends to decrease international dependency from foreign debt. This will positively affect investments in the region by boosting new projects, creating job opportunities and driving economic development across the entire Arab region.”
The agreement could make for an important moment in the Arab banking world, creating a united voice that would be far more capable of addressing the challenges the region presents.
Al-Jarrah added: “Driven by the belief that cooperation will help mobilise human capital, conserve and maximise resources, and build capacities, the consortium will allow for a collaborative effort to strengthen the Arab economy. This cooperation is a prerequisite to building a solid foundation that is rooted in peace and stability, in addition to being a key component towards achieving balanced, sustainable and comprehensive development.”
However, such unity is not necessarily easy to create. Despite facing the same challenges, uniting so many organisations in a coordinated effort is difficult in any field, let alone banking. Al-Jarrah said building greater trust and confidence in what are relatively young institutions is the first challenge.
“So far, there has been great development in enhancing their reputation around the world and among ourselves, and in doing so there is now a better understanding of the strength and integrity of these institutions. There have also been great efforts made in encouraging the Arab banking sector to help drive social and economic development within the Arab region, as opposed to elsewhere.”
Al-Jarrah said there are other fields in which the organisation is working to improve. “Further efforts are to be made by the Arab banking sector by taking an active role in helping boost the economy by capitalising on its financial and human resources, as well as committing to promoting financial stability and cohesiveness, despite the political and economic turmoil plaguing the region.”
In holding chairman positions at both KIB and the Union of Arab Banks, one may think that Al-Jarrah may have an impossible amount of work in front of him. However, the goals of both organisations are one and the same: “Many of my key responsibilities involve a wide scope, such as building the reputation, enhancing the framework and creating awareness for Islamic banking, both in the region and globally. Furthermore, an important item on my agenda is strengthening Arab banks across the region by building reputation and harnessing capabilities to achieve the higher goal of developing the Arab financial sector.”
Future-centric
As the GCC grows from an economy that has been heavily focused on the export of oil and other goods and services for the past two decades (see Fig 2) to a more diversified and resilient institution, it will have to develop its finance sector to match.
Al-Jarrah believes a well developed financial sector is intrinsically linked to economic development: “With the improvement of the financial sector comes the reduction of inefficiency, the proper identification of profitable business opportunities, the mobilisation of savings, and the enhancement of goods exchange and productivity. As we work to develop these financial mechanisms, we will witness a more efficient allocation of resources, a more rapid accumulation of physical and human capital, and faster technological progress, all of which feed economic growth.”
He also said that, conversely, these advancements go hand-in-hand at a macroeconomic level. “Developments in the financial sector must work simultaneously with policy changes by government decision makers, which encourage robust regulations for financial activities and consequently, facilitate financial development.”
Overall, the future for banking in Kuwait looks promising, despite the challenges that exist in the region. Islamic finance has developed rapidly, and as the GCC continues to find new industries to foster, banking and finance has found a bigger sector to fill.
“Amid the ongoing instability in the energy sector and the changing global economic landscape, the banking sector in Kuwait and the GCC continues to perform strongly”, Al-Jarrah said. “As I’ve already mentioned, the challenging economic climate seems to have encouraged governments across the GCC to undertake fiscal reforms and actively pursue income diversification. Consequently, many governments in the GCC are forging ahead with widescale national development schemes.” One such example is the recently announced plan to transform Kuwait into a business and cultural hub for the region by 2035, which will also inevitably create countless opportunities for the sector.
“I would also say that the shifting global economic paradigms are opening the door for Arab banks, particularly Islamic banks, to assume a greater role on a global level, particularly as the world continues to recognise the importance of socially responsible investments.”
In an industry as vibrant as Islamic finance, even more innovations and achievements are expected to emerge in the coming years. While the region faces its challenges, a promising future awaits both KIB and the people driving the incredible creativity behind this bank. Indeed, the next decade may see financial institutions have as big an impact as oil.
Just a couple of years ago, the act of transferring money via a mobile banking app was fraught with obstacles. Now, however, customers are expecting far more than just basic services. Biometric identification through fingerprint or face detection is being embraced, while artificial intelligence is finding its way into the most pioneering digital banks.
As banks become increasingly digital, the race to capture the most innovative tech and put it to good use has revved up. We take a look at five of the banks and financial firms that are doing it best.
DBS DBS has been crowned the world’s best digital bank by the Euromoney Awards for Excellence, thanks to its simultaneous embrace of biometrics, artificial intelligence and intuitive tech. The company has time-saving at the centre of its thinking, so is keen to abolish wasted time for its customers. DBS has also leveraged artificial intelligence to integrate digital banking into people’s everyday lives. Instead of opening up the bank’s app or going into a traditional brick-and-mortar store, all customers need to do is message their bank on WhatsApp or WeChat. Messages such as “how much do I have?” or “pay my mobile bill please” are then received by innovative artificial intelligence tech, which can carry out commands automatically. DBS’ chatbot can also give customers banking tips or provide information like the location of their nearest ATM.
Garanti Bank Garanti Bank has become a huge leader in Turkey’s banking sector, as a result of its high quality technological services. Its digital enhancement has been driven by developments in the Internet of Things, cloud technology, big data and artificial intelligence. It has worked hard to enhance the capacities of all its branches, offering digital screens for customer use, as well as a seamless, omni channel experience across its banking services.
Nutmeg Nutmeg is one of the most established of a new series of mobile-based wealth management platforms. It offers a user-friendly platform for investment portfolio management, allowing customers to start from as little as £500. The platform is available online or on a smartphone, allowing people to avoid the usual complexities of wealth management. Customers set their own goals and risk level, and are then provided with an ‘intelligent’ portfolio that can be accessed and tweaked through a simple digital interface.
Mondo Mondo is another app-based bank that recently became accredited, officially gaining its license in August. The bank makes it possible to open an account without a human conversation, focusing purely on the digital experience. What most sets Mondo apart, however, is its approach to simplifying everything to do with a customer’s finances into a user-friendly app. The app provides a real-time breakdown of spending habits, and enables quick mobile money transfers, as well as being seamlessly integrated with other day-to-day tech, including Uber.
Barclays With many start-ups leaping forward in the digital space, traditional banks have often lagged behind. However, Barclays has managed to speed ahead of the rest, and its app is consistently among the top-rated banking apps for both Apple and Android. Some neat extras are helping it hold its popularity, like the ‘direct call’ feature that allows customers to get through to an operator that already knows their name and account details.
By their very nature, malls were built big and, as they grew, needed to move further from the town centres and communities they served. Encircled by wide highways and often lacking sufficient public transport connections, many malls became impossible to access without a car. This only worked to encourage greater urban sprawl (see Fig 1), and subsequently the construction of even more malls. As a lucrative investment opportunity, their construction quickly ballooned and the market became saturated.
Gibbs outlined another alternative: tear the mall down and redevelop the property into a walkable and dense mixed-use community. In a relatively small space, retail, housing and employment are all connected, reducing the average person’s dependence on a car and encouraging more integrated communities.
