Year: 2019

How BTI Bank is leading the way in Morocco’s participatory banking sector

Posted on by Helen

In January 2017, Morocco’s central bank approved the launch of Islamic banking, marking the beginning of a new era for the nation’s financial sector. Offering access to Sharia-compliant products and services, Islamic banking has had a transformative effect on the Moroccan banking industry, boosting financial inclusion among previously unbanked citizens and growing to encompass more than 100 branches nationwide.

Unlike other Muslim-majority nations that have also authorised Islamic banking, Morocco has eschewed this term in its official legislation, opting instead to use the phrase ‘participatory’ banking. This word choice is deliberate and is far from the only thing that Morocco is doing differently when it comes to Sharia-compliant finance. The North African nation has created its own model for its participatory finance industry, based on a thorough analysis of the local market and close consultation of successful international templates.

At BTI Bank, we believe society needs a fair and equitable financial system – one that rewards effort and contributes to the development of the wider community

Now, just two years on from the launch of Morocco’s participatory finance industry, this unique approach appears to be paying off, with the sector fast emerging as one of the brightest spots on Morocco’s economic landscape. Last year saw the nation issue its very first Islamic sovereign bonds for MAD 1.1bn ($110m), with plans to introduce Islamic insurance – known as ‘takaful’ – later this year. While the nascent industry still faces a number of challenges, its initial success suggests that participatory banking has a very bright future in Morocco. World Finance spoke with Mohamed Maarouf, General Manager of BTI Bank, about the development of this promising new sector.

Can you explain how Morocco’s participatory finance model works?
Morocco’s participatory finance industry is still in its very early stages, with designated participatory banks debuting just two years ago. The Moroccan model is unique in many regards, and has been designed with both local and international markets in mind. Essentially, two government institutions regulate banking activity and ensure that it functions properly – the first being the High Council of Ulema, and the second being the nation’s central bank, Bank Al-Maghrib. The High Council of Ulema ensures that all products and services are Sharia-compliant, while the central bank supervises the financial activity of the industry.

The financial landscape of this young sector is still evolving, with new products and services in development. At present, Sharia-compliant products include murabaha financing for real estate and automobile and equipment purchases, investment accounts, and istisna financing. We fully expect to see takaful insurance debut later in the year. The launch of takaful products will mark a key milestone in the development of Morocco’s participatory finance sector, as it will increase liquidity in the sector and strengthen this growing industry.

How has the participatory finance sector evolved in recent years?
After two years of existence, the industry has shown that it is more than capable of competing with the traditional banking sector, attracting scores of customers and boosting financial inclusion by offering clients crucial products that comply with their personal beliefs. In a short space of time, the industry has made great progress, with deposits already reaching MAD 1.6bn ($165m), financing reaching MAD 6.05bn ($630m) and more than 100 participatory banking branches opening across the country. As we look to the future, we believe that the participatory finance industry will emerge as a real pillar of the Moroccan economy.

What challenges has the sector overcome?
The industry has faced many challenges, both prior to and since its launch. It goes without saying that such an undertaking is incredibly complex and demanding and requires a strong, fully functional core IT system in order to operate effectively. As such, regulators had to ensure that all activities at every level of the banking industry were operational and effective from the very first day. This included human resource training, as all banking employees had to become familiar with the intricate details of what participatory finance entails.

While most participatory banks recruited employees with strong banking backgrounds, intensive training programmes still proved necessary in order to ensure a complete understanding of the participatory finance landscape. What’s more, prior to the debut of participatory finance, the Moroccan public harboured many misconceptions about the industry, so all participants in the sector have had to work tremendously hard to re-educate customers on what the sector can offer them. Another challenge going forward is the issue of liquidity: compliant investment products are not yet available, and neither are takaful insurance products, although we expect this to change later this year.

Despite these numerous challenges, the participatory finance industry has shown remarkable resilience. The professionalism of all those involved in the sector will continue to lead participatory banking from strength to strength over the coming years.

What are the sector’s long-term ambitions?
We hope to see Morocco emerge as an African hub for Sharia-compliant banking. This goal has already been realised in the traditional banking sector, with Morocco boasting one of the most robust and developed banking industries in Africa and serving as an important economic crossroad between the continent and Europe, along with other parts of the world.

We also believe that the participatory banking industry will help to accelerate economic development for Morocco. Not only has participatory finance seen an expansion in financial inclusion among previously unbanked Moroccan citizens, but it has also allowed the country’s SMEs to flourish, which has boosted the national economy. We expect to see an increase in foreign investment in the country as a result of the thriving participatory finance industry.

What is the story behind BTI Bank?
BTI Bank was created when two renowned groups – BMCE Bank and Al Baraka Banking Group – decided to bring their skills, experience and industry knowledge together. Both of these banking groups had previously found success independently, making an international name for themselves thanks to their outstanding performance and notable expertise. While BMCE Bank covered all areas of banking and financial services, Al Baraka Banking Group had established itself as a pioneer in participatory banking.

The alliance between the two groups successfully united these two areas of expertise, and in December 2017, BTI Bank made its official debut as a participatory bank. The launch marked the culmination of five years of work by the bank’s founders, who have always been, and always will be, committed to delivering the very highest standards in participatory products and services.

What are BTI Bank’s values? What are its biggest strengths?
At BTI Bank, we believe society needs a fair and equitable financial system – one that rewards effort and contributes to the development of the wider community. We want to meet the financial needs of communities across the world by conducting business ethically, in accordance with our beliefs, and by upholding the highest professional standards across every level of our company. We strongly believe that participatory banking plays an important role in our society, and we understand that we have a responsibility to our customers and stakeholders. We are therefore committed to sharing mutual benefits with our customers, staff, stakeholders and anyone else who helps to make our business a success. These partnerships are crucial to BTI Bank, and we are proud of our long-term relationships with customers and staff.

The business is driven by its mission to have a positive impact on our customers’ lives, and we respect and value the communities we serve. Our customers can be sure of a warm welcome when visiting BTI Bank and can enjoy unparalleled peace of mind, secure in the knowledge that our experienced team is working to the highest possible ethical standards. Finally, we are also extremely aware of the social contribution that we want to make as a business. By banking with us, our customers can feel confident that they are contributing to a better society, understanding that while we grow, we will strive to effect a positive change in the world around us.

What are BTI Bank’s ambitions for the future?
We hope to build on our early successes by continuing with our strategic development plan, which is set to involve further network expansion, advanced product innovation and a commitment to delivering excellent customer service. Our ambitions are to meet the financial needs of the Moroccan people and to have a profoundly positive impact on the communities we serve. As the nation’s participatory finance industry continues to grow, we are firmly setting our sights on becoming a key player in this exciting new sector.

Opportunities to be found in the Guangdong-Hong Kong-Macau Greater Bay Area

Posted on by Helen

In February 2019, the Chinese Central Government officially released the Outline Development Plan (ODP) for the Guangdong-Hong Kong-Macau Greater Bay Area. The ODP’s strategic objective is to create a vibrant, world-class locality by connecting technology, ecology and culture, as well as the finance, trade and tourism industries, throughout the region. This will be achieved through the joint efforts of the Pearl River Delta’s nine municipalities and two Special Administrative Regions.

Achieving the ODP’s objectives will not be straightforward: the Greater Bay Area consists of one country, two political systems and three customs territories. Reaching the goals will require an unprecedented level of regional cooperation. Every tier of bureaucracy will need to remain focused on the Greater Bay Area’s core tenet: the comprehensive integration and regional coordination of culture, society and the economy. Under the principle of ‘one country, two systems’, the aim is to improve the regional connection of legal and social systems and gradually eliminate the various obstacles that make doing business difficult. This in turn will facilitate the efficient flow of people, goods, capital and information throughout the Greater Bay Area.

As one of the four core cities of the Greater Bay Area, the ODP seeks to develop Macau into a world-class tourism and leisure centre, as well as a hub for commerce and trade that can facilitate relations between China and Portuguese-speaking countries. This will help promote the region’s economic diversification while also creating a base that allows a diverse array of people to coexist. Macau can therefore make a unique contribution to the Greater Bay Area’s transformation into a first-class region for trade and tourism.

Macau plays a vital role in the Greater Bay Area’s progress through its ‘one centre, one platform’ strategic plan

Regional focus
Macau plays a vital role in the Greater Bay Area’s progress through its ‘one centre, one platform’ strategic plan. In particular, the city will utilise its strengths in order to link mainland China with Portuguese-speaking countries, the EU and the Association of South-East Asian Nations. This will firmly establish Macau as a platform for international exchange.

To reach this goal, Macau is implementing policy measures that are designed to construct a Sino-Portuguese economic platform. This includes the development of specialised financial services, the effective use of the Sino-Portuguese Cooperation and Development Fund, and the provision of financing services to Sino-Portuguese enterprises. The region also plans to strengthen its cooperation with the Chinese medicine industry in order to pursue previously untapped international markets. This will include cooperation on research, the cultivation of talent and the widespread application of new technologies.

In addition, Macau will take full advantage of its development as a tourism and leisure hub in order to establish the Greater Bay Area as a world-class travel destination. As Macau already has outstanding tourist facilities, it is now developing as a tourism training and education base for the entire Greater Bay Area. Building on its history of facilitating the coexistence of western and eastern cultures, Macau will, as a result, promote cultural exchange between China and the rest of the world. What’s more, Macau will expedite this development with countries that are part of the One Belt, One Road trade route – particularly those that speak Portuguese.

The ODP’s implementation presents Macau with several opportunities to further its own growth. Macau is small, crowded and has limited space, which restricts further development and economic diversification. Fortunately, however, the ODP has laid several paths that Macau can take in order to ensure its future growth.

One such option is the progressive development of ‘enclave economies’. In other words, Macau could exploit the infrastructure of several bases built in Guangdong, such as the cooperation demonstration zone located in Zhongshan, or the Traditional Chinese Medicine Science and Technology Industrial Park in Hengqin. These provide new spaces for the transformation of Macau’s industry, as well as new destinations for the Macanese people to work and live in.

The ODP also hopes to broaden the living space available to the people of Macau. As such, Macau residents who are currently working and living in Guangdong can enjoy the same benefits as those in mainland China, such as education, medical care, housing and elderly care. This will be further improved by enhancing border clearance facilities and the interconnection of several public services.

Pursuing diversification
The economic structure of Macau is relatively homogeneous, which limits the further development of its economy. Macau, therefore, needs to increase cooperation with the mainland in order to extend its industrial chain while also increasing market integration and sharing resources with other cities in the Greater Bay Area. Given this backdrop, the mission of the Macau Government at present is to develop the locality’s economic diversification, particularly within the field of tourism.

The development of Macau’s tourism industry also supports the growth of related industries, such as retail, commerce and trading, Chinese medicine, culture, and healthcare. To help further this development, Macau is committed to attracting conventions and exhibitions with global influence, particularly those that relate to industries that are part of the One Belt, One Road policy.

Macau’s credentials as a tourism and leisure centre could improve further by developing nearby Hengqin into a leisure and tourism island. This would subsequently support the coordinated development of the Hengqin and Zhuhai free-trade zones and the construction of a Guangdong-Hong Kong-Macau logistics park. It could also act as a role model and thus expedite the development of other major projects that require significant regional cooperation.

To promote the idea of Macau as a regional hub, the ODP is in full support of the further development of an international airport in the city, which will be followed by the improvement of regional business aircraft services. The ODP also aims to bring forward the construction of both Guangdong-Macau border access facilities and Hengqin’s port, and suggests better use of the Hong Kong-Zhuhai-Macau Bridge as well. Development of these areas will result in the creation of a rapid transport network that can serve the entire Greater Bay Area.

Finally, the ODP encourages the exploration of sharing utilities across the region, such as connecting electricity, water and gas networks in order to ensure the stable supply of energy. It is also important for Macau to vigorously develop its marine economy in order to lay a solid foundation for the future.

Bigger is better
Macau has several other important roles to play in the development of the Greater Bay Area. The ODP emphasises the growth of a healthy population; as such, it supports Macau’s medical and healthcare providers as they expand their facilities throughout the Pearl River Delta. Through sole proprietorship, joint ventures and other cooperative projects, Macau will lead the development of a regional healthcare cluster. Macau is also encouraged to further develop the Traditional Chinese Medicine Science and Technology Industrial Park and promote the standardisation of Chinese medicine, as well as bring new products and enterprises to One Belt, One Road countries.

There are several benefits to building an open community of innovation and technology throughout the Greater Bay Area. For instance, it will establish collaboration across numerous key areas, such as entrepreneurship, incubation, financial technology and commercial applications. It would also support Macau as a training base for talented entrepreneurs who are fluent in both Chinese and Portuguese, thereby turning the Greater Bay Area into a base for education and training.

Furthermore, the ODP plans to develop the Greater Bay Area into an international financial hub, making it an important component of the One Belt, One Road initiative. To achieve this feat, it encourages the development of Macau into a Sino-Portuguese platform for financial services, while also supporting the development of specialised and green financial products in the city. Moreover, the ODP suggests exploring the development of a Macau-Zhuhai cross-boundary financial cooperation demonstration zone.

To this end, Macau will collaborate with the Silk Road Fund, the China-Latin American Production Capacity Cooperation Investment Fund, and the Asian Infrastructure Investment Bank. Macau has abundant fiscal reserves with an advanced business network and a good environment for productivity. The region aims to leverage these advantages to develop special products and services, such as finance leases, wealth management tools and new styles of bonds.

ICBC (Macau), the largest locally registered bank in Macau, actively participates in the strategy to develop the Greater Bay Area by promoting the development of Macau’s specialised finance system. In March 2018, the Macau Government and the ICBC Group signed a memorandum of cooperation to this effect. With the support of the Macau Government and the ICBC Group, ICBC (Macau) successfully launched an asset platform for Portuguese-speaking countries in Q2 2018.

ICBC (Macau) will remain focused on Macau’s strategic position in the Greater Bay Area and comply with the development of specialised, Silk Road, green and marine financial products and services. ICBC (Macau) will also assist Macau by playing a leading role in the One Belt, One Road initiative and will contribute to creating a vibrant and internationally competitive city cluster. In no time, the Greater Bay Area will grow to become a globally renowned hub for tourism, business and culture.

The pros and cons of external hiring

Posted on by Helen

When Tim Sloan became CEO of Wells Fargo in October 2016, he inherited the mammoth task of saving the lender’s reputation in the wake of a string of damaging scandals. Following a revelation in the same year that the bank’s employees had been financially incentivised to set up fake accounts, Wells Fargo had drawn the ire of a host of lawmakers, regulators and, most importantly, customers. All were demanding reform across every level of the bank.

Sloan, who was serving as president and COO at the time, was charged with restoring trust and building a prosperous future for the lender in the wake of the abrupt departure of his predecessor, John Stumpf.

Almost three years later, it appears the challenge was too great. On March 29, Wells Fargo announced that Sloan would be stepping down, effective immediately. His resignation came just two weeks after he had testified before congressional lawmakers that the bank was a better place than when he had started – a statement few were convinced by. In the wake of the announcement, Wells Fargo’s General Counsel C Allen Parker was named interim CEO, and the company’s board began the daunting task of searching for Sloan’s permanent successor.

Not only is Wells Fargo looking outside the company for its new CEO, but it is likely to eschew traditional candidates altogether

A new challenge
This search is markedly different to the one undertaken by board members in 2016. “They had three goals in replacing Stumpf: speed, integrity and competence,” Peter Conti-Brown, a business ethics and law professor at the Wharton School of the University of Pennsylvania, told Reuters at the time. “If you want to move very fast and find someone intimately familiar with the business, you’ve got to hire an insider.” This time, it appears that speed and company knowledge are not preferential qualities for Sloan’s successor: rather, the board is seeking a candidate with the power to definitively reform the bank’s public image and provide vital impetus for recovery.

For this reason, Wells Fargo has made the decision to solely consider external candidates for the CEO position. Furthermore, not only is the lender looking outside the company, but it is likely to eschew traditional candidates altogether. Warren Buffett, who owns Berkshire Hathaway, the bank’s single largest shareholder, told the Financial Times in an interview: “They just have to come from someplace [outside Wells Fargo], and they shouldn’t come from Wall Street. They probably shouldn’t come from JPMorgan or Goldman Sachs.”

While Buffett’s reasoning was based on the fact that poaching a candidate from another Wall Street lender would draw scrutiny from Congress, there are plenty of other benefits to an external candidate search: it will help to bring fresh thinking to the bank, thereby avoiding the perpetuation of industry echo chambers. Furthermore, searching outside the typical remit provides the opportunity to increase diversity in a sector where, according to the IMF, women only account for less than a quarter of leading supervisory roles (see Fig 1).

Up to the job
According to Paul Twine, the director of banking and financial services at executive search firm Carmichael Fisher, there are three key factors to take into account when searching for a new CEO: market conditions, regulatory scrutiny and overall business strategy. In the Wells Fargo case, scrutiny is the most important consideration due to the accounts scandal, which means any candidate will have to stand up to a number of regulatory tests. The fact that the bank is in hot water also won’t make its search easy, as the new CEO will be expected (to a greater or lesser extent) to identify and tackle corruption within the business.

“That role is not for the faint-hearted,” Twine told World Finance. “They need to identify very quickly not only what the strategy is for that business going forwards and set a compelling vision for the board and for the shareholders, but they also need [to] get into the weeds and figure out where the rot is as quickly as possible.” This task, while challenging for any new CEO, is particularly difficult for an external candidate: as they didn’t hire any of the executive team or work their way up through the business, they will not have any internal allies. There is a risk, therefore, that they will struggle to achieve any meaningful change if they do not rapidly identify those with significant influence within the business and get them on side. They may also find themselves the target of resentment from internal candidates who were not considered for the position.

On the other hand, the benefit of bringing in an external CEO eliminates the possibility that they could be tarnished in any way by existing internal issues. “Hiring someone [who] could not be implicated [in the scandal] is a positive solution for the business,” said Twine. Given the necessity for business reform at Wells Fargo, the external candidate would have to be someone who had navigated a company through transformational change.

The position is likely to attract a highly specific candidate pool, made up of those who have overseen this kind of high-profile transformation before and understand the risks – not only of potential failure when carrying out necessary changes, but also of damage to their own reputation. “Some will see it as an opportunity to make a name for themselves, because they’ll be able to tangibly demonstrate what they’ve done,” said Twine.

It’s a high-risk, high-reward opportunity. In the eyes of competitors and the press, the new CEO could be seen as Wells Fargo’s saviour, provided they succeed in extinguishing the fires currently burning bright at the American lender. Conversely, if expectations are not met, there is a risk the candidate could be seen as a failure. “It’s a case of deciding what failing looks like,” Twine told World Finance. “If they manage to solve some of the problems but not all of them, maybe that’s actually been a great result – maybe that’s all the next CEO was going to be able to achieve.”

The new CEO could be seen as Wells Fargo’s saviour, provided they succeed in extinguishing the fires currently burning bright at the American lender

Reaping the rewards
While Buffett’s desire to look beyond Wells Fargo and Wall Street more broadly is guaranteed to bring in some fresh thinking, there are also certain criteria that the new CEO must meet on a logistical level. “You can’t have someone [who’s] never been in a financially regulated entity go and run a bank,” said Twine. “However, it depends on how creative [Wells Fargo] wants to be – if it wants to look for someone outside of investment banking, they could consider hedge funds or asset management, or large-scale retail and commercial banking businesses.” While this will mean the candidate will have to learn the ropes extremely quickly, it also guarantees they will bring an entirely different perspective to the business. “The market’s changing, there’s a lot of disintermediation, plus fintech firms are nipping at the heels of larger financial services firms,” said Twine. “Perhaps a fresh set of eyes is exactly what’s needed to stay current.”

An external search also provides a sorely needed opportunity to collate a more diverse talent pool and consider candidates who would perhaps not have been on the radar had the company looked internally. According to a 2019 report by Refinitiv, women occupied just 13.4 percent of executive positions in banking and financial services in the 2017/18 financial year, despite making up 49.4 percent and 54.5 percent of the workforce respectively. There are a variety of reasons for this executive underrepresentation, from a lack of flexible working options for women re-entering the workplace after maternity leave to male executives remaining in positions for decades, meaning women may not get a look-in for a promotion for 20 years. These issues may be alleviated by moving between companies; as such, by looking externally, Wells Fargo could nab itself a highly talented female candidate who feels disenfranchised in her current role.

Not only that, but for firms such as Wells Fargo that are under scrutiny, a female leadership style can be a more productive way of achieving change. According to research by McKinsey, women tend to adopt people-focused, reward-based leadership behaviours that are known to improve organisational performance. “That consultative leadership approach that is typically associated with women is very appropriate for a business under transformation,” said Twine. Moreover, a 2016 study of more than 21,000 public companies by the Peterson Institute for International Economics found that a firm with 30 percent female leadership could expect to add up to six percentage points to its net margin in comparison to a business with no female leaders.

For Wells Fargo, hiring an external female candidate could prove a fruitful method of pursuing transformational change. Certainly, by looking externally, the bank is guaranteeing the introduction of new ideas. By choosing a female candidate on top, though, the bank would send a powerful message to the financial sector that diversity is not a tick-box exercise, but a way of achieving real reform and boosting bottom lines. After all, Wells Fargo is the world’s fourth-largest bank, and according to Buffett, one in three US households does business with it in one form or another. For better or for worse, its actions have an impact – it now has an opportunity to make sure it sets a positive example for the future.

Seeking security in the forex market

Posted on by Helen

Despite being one of the world’s most precious metals, there was little interest in trading gold as a commodity for much of the 20th century. Global economies were seen as relatively stable, with many experiencing periods of significant growth. This meant stock markets were flying high. Investors became wrapped up in the excitement of buying shares in companies such as Apple, which were tipped to make them millions, rather than purchasing a commodity that would offer low, albeit consistent, returns.

At the beginning of the 21st century, however, demand for gold skyrocketed, reaching a peak price of more than $1,900 an ounce in late 2011. Unlike cryptocurrencies, gold became known as an investment that is likely to retain its value: it is durable, portable and uniform across the globe, making it a shrewd purchase for any investor.

Since its establishment a decade ago, Acetop Group has focused on gold trading in order to keep the number of non-traditional/high-volatility currency pairs offered to clients as low as possible. Rather than moving towards cryptocurrencies, which are extremely volatile and a huge investment risk, we have chosen to centre our business model on what we believe to be a wise investment that will deliver excellent returns to clients for years to come.

At Acetop, we consider it imperative to keep up to date with all new regulations – even those that don’t directly affect our industry

Staying on top
Our considered approach does not mean we sit on our laurels. Rather, we consider it imperative to keep up to date with all new regulations – even those that don’t directly affect our industry. This is because we believe it is wise to keep abreast of anything affecting the overall business environment.

In terms of forex, the biggest changes the market saw last year were focused on regulation – most notably, those implemented by the European Securities and Markets Authority (ESMA), which came into force on August 1, 2018. These serve two key purposes: first, they ensure the consistent treatment of investors, protecting them through effective regulation and supervision. Second, they promote equal conditions of competition for financial services providers, while also ensuring the effectiveness and cost efficiency of their supervision.

ESMA’s new regulations, together with the still-unknown economic impact of Brexit, means stakeholders could see significant shifts when trading in the forex market in the coming months. While the changes are much needed and will positively affect retail customers, they may also lead to consolidation in the market and pave the way for more substantial changes in the future.

With this in mind, we have taken numerous steps to minimise the impact on our retail clients. For UK customers, we have advised that they are eligible for the Financial Services Compensation Scheme (FSCS). This is the UK’s statutory deposit insurance and investors compensation scheme, which is designed for customers of authorised financial services firms. Customers are eligible for protection under this scheme, provided the value of their funds falls under a certain threshold. This means that the FSCS will pay compensation if a firm is unable, or likely to be unable, to pay claims against it. We are also working on securing further protection for our clients, which will be announced in the coming months.

Putting the customer first
In light of the new ESMA regulations, and in accordance with Acetop Group’s growth plans, we have chosen to continue investing in client-orientated services. Our team works 24 hours a day, seven days a week, to respond to all clients’ queries via different communication channels, including telephone, email and various live chat platforms. We aim to provide as many methods of contact as possible to ensure our clients are able to communicate with us easily and directly. Our promise to answer client enquiries in less than a minute sets us apart from competitors.

Our customer service providers undergo rigorous training to ensure they are equipped with all the skills needed to perform their role to the standard we expect. Over a period of three to six months, an internal instruction programme is delivered to all new employees. At the end of this period, they must pass an examination consisting of 6,000 sets of typical questions and answers, and must also have a minimum typing speed of 60 words per minute.

We are also improving our payment services – another way in which we distinguish ourselves from other forex brokers. We believe the traditional way of depositing and withdrawing money via bank transfers is outdated; we are therefore exploring digital solutions to simplify and speed up this process. Our finance department employees are all professionally trained and selected from an international talent pool. Due to the 24-hour nature of global trading, they aim to deal with all deposit and withdrawal requests within just one day.

Furthermore, customers in China should be able to deposit funds in less than 10 minutes and withdraw funds in under two hours. There is also no limit to the number of withdrawal requests customers can make. We understand that forex markets move incredibly quickly and wouldn’t wish to hold up our customers’ crucial investment decisions – that’s why our finance department is on standby 24 hours a day. With the help of world-class technology, we aim to verify and audit transactions compliant with local laws and regulations faster than any of our competitors.

Overall, Acetop Group is striving to provide satisfaction to each and every stakeholder in order to ensure a constant company growth path. The technology revolution has led to greater freedom and mobility for investors, who are now able to monitor price changes from almost anywhere as long as they are connected to the internet. As a result, our IT department works 24 hours a day, every day of the year, alongside our customer service team.

As a company, we understand the importance of every second gained, and always aim to use the best technology to safeguard customers’ money and personal data. This has been our mission over the past decade, and it has resulted in a world-class reputation and the trust of our investors, customers and the overall industry.

A knowledge-based approach
Moreover, we are working to empower our customers with a wealth of knowledge so as to increase the possibility of a greater return on their investment. Trading forex successfully is not easy – it takes a lot of practice and study time. For this reason, we have introduced an educational programme of webinars, seminars and industry gatherings to pass some of the trading knowledge we have amassed over the past decade to our customers. We have also launched a real-time educational streaming service, which is available on weekdays to Chinese clients.

We encourage our customers to continue the education process in their own time. There are many free forex e-books available that provide general information on the basics of trading, money management, trading psychology and strategies, and technical and fundamental analysis. Their accessibility makes them a clear choice for people who want to learn more about forex trading. Another advantage to these resources is that you can select a recently published e-book with timely information, avoiding outdated material. We provide many e-books on our online educational platform, along with crucial industry news.

In our Asia division, we have recently begun a series of seminars, for which we invite experts and well-known industry representatives to share their thoughts on forex issues in Asia and Europe. We aim to provide every customer with up-to-date market news and unique expert opinions on a variety of countries, as we understand that investors may want to explore different markets in their trading choices.

Through these measures, we hope to better serve our forex clients, allowing them to make wiser trading decisions. It is important to remember that the economic outlook for a country is the ultimate determinant of its currency’s value, so knowing which factors and indicators to watch will help traders keep pace in the competitive and fast-moving world of forex. By equipping our customers with the knowledge to ensure their success, as well as investing in our own workforce and technology, we hope to consolidate our already-strong market position.

Astana Finance Days convention showcases Kazakhstan’s financial potential

Posted on by Helen

The Astana Finance Days (AFD) conference, held in Nur-Sultan, the capital of Kazakhstan, came to a close on July 4, with the city reaffirming its aim of becoming one of the world’s foremost financial centres. Approximately 300 experts from the worlds of business and finance took part in the event, which covered topics such as infrastructural development, fintech and Islamic finance.

The conference was the second of its kind to take place in the city, which changed its name from Astana earlier this year. While the inaugural event in 2018 looked at the establishment of the Astana International Financial Centre (AIFC), the talks held from July 1 to July 4, 2019 have focused on ways to build the centre’s standing among the international business and investment community.

The building blocks for further development are certainly there, with Kazakhstan’s location at the junction of Europe and Asia a powerful advantage, but it will have to overcome stern competition

Among a number of noteworthy announcements, Kazakhstani President Kassym-Jomart Tokayev formally opened the premises of the AIFC Court and International Arbitration Centre (IAC). It is hoped that the two legal bodies, both of which operate on English common law rather than Kazakh civil law, will give investors greater confidence in the country’s regulatory environment.

Christopher Campbell-Holt, Registrar and CEO of the AIFC Court, told assembled journalists that the common law system would bring greater credibility to the investment climate and provide assurances to business operators should any potential disputes arise.

“Our team has been trained in London with some of the best arbitrators and judges from the English common law system,” Campbell-Holt explained. “So we have some of the very best staff we could find and we’re training them up to mould them into the common law way of thinking for the AIFC Court and [IAC]. We’re not trying to compete with every country in the world: we want to be the number one choice for dispute resolution in Eurasia.”

Also discussed during the AFD was the continuing growth of the Astana International Exchange, the government’s privatisation plans and how China’s Belt and Road Initiative is likely to impact the region. Perhaps the most commonly mentioned topic, however, was Nur-Sultan’s potential as an international financial centre. Its growth has certainly been impressive – in March, the AIFC was ranked 51st in the Global Financial Centres Index – but such a rapid rise should perhaps have been expected given that the city began its journey from such a low starting point.

The building blocks for further development are certainly there, with Kazakhstan’s location at the junction of Europe and Asia a powerful advantage, but it will have to overcome stern competition. It will certainly take time for Nur-Sultan to catch up with the likes of London, New York and other long-established finance hubs, regardless of how much progress has been made so far.

World Finance Pension Fund Awards 2019

Posted on by Helen

Across the relatively sleepy pensions sector, a storm is brewing. The industry is a behemoth of the global economy, particularly in terms of assets managed, and commands a tremendous amount of force. However, given the conservative approach many people take to their retirement savings, it lacks the drama and adventure that is commonplace in the private banking and venture capital sectors. A little bit of risk is fine – even necessary – but when it comes to retirement, there are very few people willing to bet on the proverbial two in the bush over the one in the hand.

This aversion to risk, accompanied by a lack of innovation, has led to several critical challenges across the sector. Looking to end people’s malaise as well as boost returns to members, regulators in some regions are stepping in to take control. It might have been easy to slip under the radar before, but underperforming funds will soon have nowhere to hide. The measures that may be put in place would add an unprecedented level of scrutiny and make it impossible to operate at any level that is less than excellent.

Defined benefit pensions may be gradually disappearing, but this does not necessarily mean that their replacement is up to the task

The World Finance Pension Fund Awards 2019 celebrate the leaders who will shape the dramatic overhaul the sector will soon endure. The firms receiving awards this year have demonstrated an ability to adapt to any market conditions, and are positioned to be trendsetters for the foreseeable future.

Cashed up
In terms of financial performance, 2018 was a year to forget. Last year, the world’s seven largest pension markets – Australia, Canada, Japan, the Netherlands, Switzerland, the UK and the US, which collectively control 91 percent of global assets under management – saw their third-worst year of the last 20, according to the Willis Towers Watson Thinking Ahead Institute’s Global Pension Assets Study report. While the five-year trend of 2.9 percent growth per annum and 10-year trend of 6.5 percent per annum are perhaps more indicative of the pension sector’s true performance, the results seen in the past 12 months should still prompt concerns.

The pension industry’s two unquestionable strengths are its necessity and size, and Willis Towers Watson’s report makes this particularly clear. The 22 major pension markets examined in the study have a sum total of $40.173trn in assets under management. Altogether, this accounts for 60 percent of the same 22 countries’ combined GDP. Since defined contribution (DC) schemes have started being implemented, member coverage, contributions and, subsequently, assets under management have steadily increased since the 1980s.

Defined benefit pensions may be gradually disappearing, but this does not necessarily mean that their replacement is up to the task. Willis Towers Watson’s report warns that “DC is still weakly designed, untidily executed and poorly appreciated; it will take better design and engagement models to create meaningful contributions to retirement security.” This level of underdevelopment is part of what has led global regulators to take a close look at the sector. After all, a public with insufficient access to retirement savings suddenly becomes an expensive cost for any government to manage. Fully aware of this problem, governments are beginning to act.

Australian underperformance
In 2018, Australia’s financial sector received a rude wake-up call. Following a slew of media reports detailing the sector’s culture of greed and profit at any cost, the government launched a royal commission in 2017 into misconduct in the banking, superannuation and financial services industry. The final report was released at the beginning of 2019 and illustrated a sector that is ineffective, inefficient and, in some cases, downright malicious. While much of the criticism was levied at banks, the pensions sector ended up being tarred by the same brush. Adding to that was a report from the Australian Productivity Commission revealing that a multitude of pension products were underperforming. Any good faith in the sector quickly dried up.

The Productivity Commission’s report was particularly important as it proposed a new model designed to name and shame underperforming funds. Under the commission’s proposal, superannuation products would have to earn a ‘right to remain’ by passing outcome tests every year. Funds that were persistent underperformers would be shut down, and the best performers would become the default funds offered to employees. Under these changes, there would be nowhere for underperforming funds to hide.

The language used in the report was pointed. “While there may be an element of ‘rough justice’ for funds, this is unambiguously preferable to the ‘rough justice’ the system has frequently meted out to millions of members – whose interests trustees are required by law to prioritise,” it said.

With compulsory enrolment still a relatively new feature, the UK is a good model for how modern pension markets are changing

Following the victory of the Liberal National Party in the 2019 Australian election, Treasurer Josh Frydenberg said he was “positively disposed to a review of the retirement income system as recommended by the Productivity Commission”. While the exact extent to which the Productivity Commission’s recommendations will be implemented is not yet known, the sector appears to be guaranteed a shake-up. The rest of the world will be looking at Australia to see the repercussions and assess whether similar changes could be implemented in their respective markets.

Global opportunities
To understand exactly what the future for global pension markets might look like, it is worth paying attention to the UK. With compulsory enrolment still a relatively new feature, the UK is a good model for how modern pension markets are changing. Speaking at the end of 2018, James Tufts, UK Life and Pensions Leader at EY, said that the country’s industry will need to navigate mergers, demergers, joint ventures, disruptive value-chain plays and the macroeconomic and political climate, all while engaging customers, pleasing shareholders and satisfying the regulator.

“Not an easy task, particularly considering the Brexit headwinds and an unsustainable savings and protection gap, but one that it has to succeed at,” he continued. “The industry, at over £1.5trn [$1.9trn] of [assets under management] and over £150bn [$190bn] of annual premium income, is a vital one – but it will need to transform in order to flourish, with technology and data at the heart of the changes.”
One area of improvement is cybersecurity, an issue taken up by the Treasury Select Committee. In 2018, an inquiry into a spate of IT failures in the sector was announced. “As insurers, wealth and asset managers complete their digital transformations, they can expect the same level of scrutiny,” Tufts said in 2018.

The sector’s future will also be defined by the companies that are seen as a safe, though exceptional, pair of hands. “The real challenge for 2019 and beyond is how to safely and sustainably achieve the level of transformative, digitally led change required to compete and win in today’s market, [while] delivering on the regulatory agenda,” Tufts said, according to the EY website. “The task is a tricky one, but the reward for success is market leadership and playing a key role in delivering on the industry’s social purpose.”

The global pensions sector should spend the next year looking to both Australia and the UK to see what the future of the industry might be. With the myriad challenges the future will bring, winners will be sorted from losers. The World Finance Pension Fund Awards 2019 identify the companies to watch and highlight those that are setting higher standards around the world.

World Finance Pension Fund Awards 2019

Australia
Asgard

Austria
VBV – Pensionskasse

Belgium
Pensioenfonds UZ Gent

Bolivia
BISA Seguros y Reaseguros

Brazil
Itaú Unibanco

Canada
RBC

Caribbean 
NCB Insurance

Chile
AFP Capital

Colombia
Grupo Sura

Czech Republic
KB Pension Company

Denmark
Velliv

Estonia
Swedbank

Finland
Elo

Germany
Bosch Pensionsfonds

Ghana
Pensions Alliance Trust

Greece
NN Hellas

Iceland
Gildi

Ireland
Allianz

Italy
Fondo Pensione Nazionale

Japan
Government Pension Investment Fund

Macedonia 
KB First Pension Company

Malaysia
Gibraltar BSN

Mexico
Afore XXI Banorte

Mozambique 
Moçambique Previdente

Netherlands
Stichting Pensioenfonds PGB

Nigeria
Fidelity Pension Managers

Norway
Nordea

Peru
Prima AFP

Poland
ING

Portugal
Banco Santander Totta

Serbia
Dunav VFMC

South Korea
KEB Hana Bank

Spain
Pensions Caixa 30

Sweden
Alecta

Switzerland
CPEG

Thailand
Kasikorn Asset Management

Turkey
Yapi Kredi Asset Management

UK
National Employment Savings Trust

Banking Awards 2019

Posted on by Ashton Wenborn

With Brexit looming and trade wars causing political uncertainty around the world, it’s easy to believe the economic landscape is equally tumultuous. However, almost the opposite is true: a decade after the financial crisis and the banking sector is in one of its strongest states in recent history. The Banker’s Top 1,000 World Banks ranking showed that in 2018, total assets reached $124trn, with the return on assets standing at 0.9 percent.

Banking Guide 2019

Click here to view the World Finance Banking Guide 2019

Instrumental to the recovery of the industry has been the US, which has had one of the fastest recoveries since the financial crisis. Total assets at US banks reached a peak of $17.5trn at the end of last year, according to Deloitte’s 2019 Banking and Capital Markets Outlook, while capital levels are also on the rise. Return on equity for banking is at a post-crisis high of 11.83 percent, and in other metrics, including non-performing loans, the US has fared well. Furthermore, the Deloitte report suggested that aggressive policy inventions and forceful regulations are behind the excellent performance of the country’s banks.

China has also provided a boost to the sector over the past decade, with its banking industry having overtaken that of the eurozone in terms of assets in 2017, according to the Financial Times. In 2007, none of the top five banks in the world were Chinese, but now – thanks to the overwhelming profitability of its institutions – four of them are (see Fig 1). Analysts at Accenture have credited China’s impressive digital strategy for its rapid growth: the country has more than a billion regular users of mobile payments, thanks to apps like Alipay and WeChat, through which Chinese citizens conducted two thirds of all global mobile payment transactions in 2018.

Top Five Banks

Varied landscape
Though the overall performance of banks has been robust, there has been mixed success across specific regions. European banks have become smaller and more risk-averse in their approach, causing them to retreat from international markets. A mixture of low and negative interest rates, a lack of pan-European regulatory agency, structural deficiencies and overcapacity saw the profits of the top five European banks fall from $60bn in 2007 to $17.5bn in 2017. Japan has suffered too, thanks to the impact of slow domestic growth and disappointing exports.

The future for these countries is as varied as their current economic situations. There are indicators that Europe’s fortunes are about to change, with return on equity for the top 1,000 Western European banks rising from 5.5 percent in 2016 to 8.6 percent in 2017. Analysts are cautious about other parts of the world, though: the IMF’s real GDP growth forecasts suggest there will be a deceleration in all regions. Meanwhile, Deloitte economists have said there is a 25 percent chance of a recession in the US this year. China and the US’ tariff war could also drag on, to the detriment of global markets.

In order to accelerate the banking industry, leaders must innovate as much as possible, particularly with regards to their technological processes. Digitalisation is perhaps the most important area for them to stay on top of, with experts warning banks not to be complacent, as a large number of new players are already sweeping in where legacy banks have failed to take hold. The UK is just one example of this, with more than a third of new revenue and 15 percent of overall revenue now flowing to new entrants, according to Accenture. Organisations like Monzo, Starling Bank and Revolut have snapped up millions of customers, many of whom are seeking out a service that’s quick, convenient and easily accessible.

Tech revolution
In the coming years, artificial intelligence (AI), the cloud, robotic process automation (RPA) and blockchain will become increasingly important to banks’ success. Though these systems are complex and difficult to integrate into existing processes, when done correctly, they create a win-win situation for banks and their customers, building trust and engagement in the process. RPA can also lead to better productivity gains, while AI is able to streamline operations and provide important insights into consumer behaviour.

By implementing these technologies, banks can also better meet regulatory requirements. The EU General Data Protection Regulation, for example, requires banks to ensure the privacy of their customers’ data, which they can do much more easily when they have modernised platforms. Institutions that do not prioritise digital transformation can create major hazards for themselves, particularly if their systems do not adequately protect customers. There’s also the growing pressure to provide adequate cybersecurity to contend with.

In order to bolster technological services, human capital is vital. In its Banking and Capital Market Trends 2019 report, PwC suggested this is one of the biggest stumbling blocks for institutions that are trying to evolve, with almost 80 percent of banking and capital market CEOs seeing skills shortages as a threat to their growth prospects. According to the report, 35 percent of CEOs are ‘extremely concerned’, with 44 percent being ‘somewhat concerned’.

Clearly, a large number of institutions understand the need to digitalise: it can help them create more seamless interactions with customers and can bring their brands to life. According to the PwC report, more than 90 percent of CEOs believe AI will be key to their development, but they also need savvy individuals to knit these technologies together. PwC noted: “Technology alone can’t meet customer expectations; consumers still value human interaction and accountability.”

Overall, there is reason to be optimistic about the future of banking, which has made astronomical strides since the financial crisis. But its outlook rests upon a huge number of intricate variables, such as transparency, regulatory compliance and institutions’ ability to harmonise and expand their digital offerings. Organisations that are bold in their approach are most likely to reap the rewards and enhance the overall health of the sector.

The 2019 World Finance Banking Awards have sought to identify the banks that have excelled across a number of areas, including corporate governance, sustainability and innovation, and have played a key role in the industry’s growth. Congratulations to all our winners.

 

World Finance Banking Awards 2019

Best Banking Groups

Australia Westpac
Finland Nordea
Cyprus Eurobank Cyprus
Chile Banco Internacional
France Crédit Mutuel
Dominican Republic Banreservas
Costa Rica BAC Credomatic
Brunei Baiduri Bank
Spain Santander Group
Russia Sovcombank
Turkey Akbank
Nigeria Guaranty Trust Bank
Myanmar AYA Bank
Macau ICBC (Macau)
Jordan Jordan Islamic Bank
Ghana Zenith Bank (Ghana)

Best Investment Banks

Argentina Columbus Merchant Bank
Germany Berenberg Bank
Greece AXIA Ventured Group
France BNP Paribas
Dominican Republic Banreservas
Colombia BTG Pactual
Chile BTG Pactual
Brazil BTG Pactual
Kazakhstan Tengri Partners Investment Banking
Saudi Arabia GIB Capital
Switzerland Credit Suisse
Thailand Siam Commercial Bank
Russia Sberbank CIB
Norway Carnegie
The Netherlands ABN AMRO
Turkey Akbank
Nigeria Coronation Merchant Bank

Best Private Banks

Belgium ABN AMRO
Liechtenstein Kaiser Partner
Italy BNL-BNP Paribas
Greece Eurobank
France BNP Paribas Banque Privée
Czech Republic Česká Spořitelna
Canada BMO Private Wealth
Brazil BTG Pactual
Singapore DBS Private Banking
The Netherlands Triodos Bank
Poland BNP Paribas Bank Polska
UAE Julius Bär
Nigeria First Bank of Nigeria
Sweden Carnegie Private Banking
Turkey TEB Private Banking
Monaco CMB

Best Commercial Banks

Most Innovative Savings Bank, Greece Eurobank Ergasias
Hungary ING
Belgium ABN AMRO
France BNP Paribas
Germany Commerzbank
Chile Banco Bci
Dominican Republic Banreservas
Canada BMO Bank of Montreal
Sweden Handelsbanken
Macau Bank of China
Nigeria Zenith Bank
The Netherlands ING
Vietnam SCB
Portugal ActivoBank
US Bank of the West
Sri Lanka Sampath Bank

Best Retail Banks

Kenya KCB Bank
Austria BAWAG Group
Bulgaria Postbank
France BNP Paribas
Germany Commerzbank
Chile Banco Bci
Greece Eurobank
Dominican Republic Banreservas
Mexico Citibanamex
Portugal Santander Portugal
Poland mBank
Vietnam Saigon Commercial Bank
Turkey Garanti Bank
Myanmar AYA Bank
Nigeria Guaranty Trust Bank
Sri Lanka Sampath Bank

Best Sustainable Banks

France BNP Paribas
Egypt Arab African International Bank
Chile Banco Bci
Belgium Orange Bank
Poland mBank
The Philippines Bank of the Philippine Islands
Nigeria Access Bank
Jordan Jordan Islamic Bank

Most Innovative Banks

Africa First National Bank
Asia Maybank
Australasia ANZ
Europe EVO Banco
Latin America and The Caribbean Banco Popular Dominicano
Middle East National Commercial Bank
North America US Bank

Bankers of the Year

Africa Segun Abaje – Guaranty Trust Bank
Asia Tatsufumi Sakai – Mizuho Financial Group
Australasia Lyn Cobley – Westpack
Europe Zbigniew Jagiełło – PKO Bank Polski
Latin America and The Caribbean Gianfranco Ferrari – Banco de Crédito del Perú
Middle East Adnan Chilwan – Dubai Islamic Bank
North America Thasunda Duckett – Chase Bank

US mega deals dominate global M&A in Q2 2019

Posted on by Max Tomlin

Global merger and acquisition (M&A) volume stood at $842bn in Q2 2019, representing a 13 percent drop from the previous quarter. According to preliminary data from Refinitiv, this figure would have been significantly lower were it not for a flurry of US mega deals.

Around the world, M&A activity has suffered as a result of escalating geopolitical tensions. Dealmaking in Europe totalled $152bn – down 54 percent from a year ago – while Asia saw M&As decline by 49 percent to $132bn. By comparison, US dealmaking witnessed only a three percent drop, falling to $466bn.

Cross-border M&As have slowed as a result of global trade tensions, with buyers preferring to seek acquisitions in their domestic markets

The US’ relatively strong M&A performance can be attributed to a number of mega deals that took place in the past three months. These included the $121bn merger between United Technologies and the US defence contractor Raytheon, and US drugmaker AbbVie’s agreement to acquire Allergan for $63bn.

However, these mega deals, and the level of sector consolidation they represent, have raised some concerns. The United Technologies-Raytheon merger, for example, would be the biggest in US defence sector history, but President Donald Trump has warned that the deal could ultimately harm competition.

Notably, cross-border M&As have slowed as a result of global trade tensions, with buyers preferring to seek acquisitions in their domestic markets instead. Reuters reported that it has been more than 400 days since a cross-border deal worth over $20bn was announced.

The slowdown in global M&A activity is predominantly a reflection of sinking confidence due to geopolitical risks. It’s possible, though, that US dealmakers have experienced a comparative confidence boost as a result of growing cash reserves and a more relaxed regulatory environment. However, regulators in the US should be careful to ensure that this trend of consolidation does not stifle competition at home.

Kuwait to be given emerging market status

Posted on by Max Tomlin

On June 25, the MSCI announced it would upgrade Kuwait to its main emerging markets index in 2020. The MSCI, the world’s largest index provider, previously classified Kuwait as a frontier market. Its decision to alter the country’s status could attract billions of dollars of investment from passive funds.

The new classification comes after enhancements were made to Kuwait’s equity market, making it more accessible to international institutional investors. In 2017, for instance, Kuwait began its Market Development Project. Since then, it has removed foreign ownership restrictions on listed banks and simplified investor registration requirements. The country also plans to introduce omnibus accounts by November 2019, allowing foreign investors to trade while remaining anonymous. This would grant international investors the same privileges that local Kuwaiti investors have today.

The MSCI’s decision to alter Kuwait’s status could attract billions of dollars of investment from passive funds

Mohammad Al-Osaimi, the acting CEO of Boursa Kuwait, the country’s national stock market, welcomed the MSCI’s decision: “[The] MSCI’s reclassification of Kuwait to emerging markets [status] represents a recognition of the instrumental role Boursa Kuwait played in improving market access and efficiency… and strengthening investor confidence over the last two years.”

The inclusion of the MSCI Kuwait Index will involve nine stocks being added into the MSCI Emerging Markets Index, putting the country’s weight at about 0.5 percent of the index. Kuwait is the only country expected to see an upgrade of this kind and is just the fourth Middle Eastern country to obtain the classification, after the UAE, Qatar and Saudi Arabia.

The MSCI also announced that it would start a consultation on reclassifying the MSCI Iceland Index to frontier market status. Although a subset of emerging markets, frontier markets are considered to be riskier and less liquid. The MSCI has warned that the same consultation could be launched for the MSCI Peru Index, which is also at risk of losing its emerging market status.

Top 5 ways that GDPR has impacted digital banking

Posted on by Helen

Having reached the one-year anniversary of the implementation of the General Data Protection Regulation (GDPR), we can now begin to assess how the past 12 months have marked a transition to a new data-protection regime and what the consequences have been for digital banking.

Although the legislation has no doubt resulted in a more demanding regulatory landscape, many of the initial fears – for example, maximum penalties for data breaches – have not occurred. Furthermore, the regulation has largely been well integrated into the financial services sector.

But an increasingly digitalised banking sector is more dependent than ever on consumer trust – notably, with the advent of open banking, making it all the more critical to get data privacy and cybersecurity right. In that context, opportunity has emerged in the five key areas listed below as a result of the GDPR and the rise of data protection.

 

1 – The first-mover advantage
The GDPR has further improved the already-high standards of European financial firms in the handling of customer data, and has helped foster greater confidence in financial institutions as a result. This has also provided a useful example for other countries that are looking to integrate further data privacy and protection measures into their financial systems.

With jurisdictions such as California, Brazil and India looking to adopt laws offering similar protections to the GDPR (such as California’s Consumer Protection Act), UK banks and fintech firms are leading the international pack. This is likely to have a global impact, feeding into standards being evaluated around the world and encouraging the growth of digital banking, driven by high levels of consumer trust in technology and data protection.

One year on from the GDPR taking effect, banks and fintech firms have the resources and expertise to
turn regulatory compliance into an asset

 

2 – Promoting open banking
The GDPR pushed compliance to strengthen data handling practices and security procedures. In doing so, it also emphasised customer control of personal data, shifting power towards consumers. Open banking had just come into effect at the time of the GDPR’s implementation, which paved the way for a host of new digital banking products and services from non-traditional providers.

Under the GDPR, consumers can choose which providers have access to their data, the extent of the information shared, and the time period for which the data can be accessed. The twin push of GDPR and open banking therefore puts digital banking customers in an enviable position, allowing them to not only protect their data, but also to willingly share that data with third parties and fintech providers that offer innovative services.

As more open banking products and services are launched and the benefits of data sharing become ever more apparent, the control and protection from the GDPR could help further drive consumer adoption of open banking services.

 

3 – Creating opportunities for innovation
Public discussion about the GDPR has helped reinforce data protection as a central issue in financial services. Indeed, boards and executives understand the value of data to businesses and consumers, and the extent to which data protection is a prominent issue in society. With data privacy and security now often identified as a leading concern for boards, business leaders have become increasingly sophisticated in how they think about data.

For many firms working in financial services, the GDPR is more than simply an addition to the regulatory toolkit: it is a genuine strategic advantage. Integrating data protection into core development strategies means that bolder and more innovative decisions can be made. Any observer of the financial services sector can see that banks are innovating more than ever – a testament to their increasing technological and data expertise.

 

4 – Realising the benefits of ethical data
Technology, increased competition and consumer protection laws have empowered customers, and many of them – especially Millennials – now take ethics into consideration when looking to purchase new goods and services. This focus on ethics has also been reflected in the business community, with firms committing to corporate social responsibility and taking a closer look at environmental, social and governance issues in their supply chains and investments.

In this environment, maintaining an ethical approach to data is a significant advantage. Given how financial institutions are the gatekeepers to sensitive customer data, they have rigorously complied with the GDPR and made the ethical handling of data a priority, as evidenced in the publication of data ethics frameworks by numerous firms. The result is a succinct and easily comprehensible data policy that consumers can engage with – which is good for keeping customers happy, as well as boosting corporate reputation.

 

5 – Driving a digital defence
With hackers and malicious actors becoming increasingly sophisticated, most organisations operating in financial services will know that it is a case of when, rather than if, a data breach will occur. Any hack or cyber breach certainly runs the risk of having damaging consequences, but the reputational impact depends, to a large extent, on how such a breach is handled.

The GDPR has reinforced banks’ data processes and the procedures to follow in the event of a breach, which could prove vital in stemming reputational loss and demonstrating robust practices to the regulator. In the age of digital and open banking, the GDPR acts as another line of defence, helping to ensure the survival of banking platforms operating online.

One year on from the GDPR taking effect, banks and fintech firms have the resources and expertise to turn regulatory compliance into an asset. While concerns may still exist around what is undoubtedly a stringent compliance process, and issues still arise in how this interacts with business processes and decisions, it has clearly also created opportunities for innovation, differentiation and strategic advantage in an increasingly competitive marketplace.

Liechtenstein walks the walk when it comes to sustainable banking

Posted on by Ashton Wenborn

Quality, stability and sustainability are the three long-term cornerstones of Liechtenstein’s economy and its financial strategy. For the country’s banks, this means offering integrated solutions, tailored products and premium services for their domestic and international clients.

Figures published in April this year prove that Liechtenstein’s banks are on the right track; in 2018, assets under management surpassed CHF 300bn. More than half are booked in Liechtenstein, which underlines its appeal as a location, but also the international reach of the banks the country attracts.

Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from the top

At the start of June, S&P confirmed Liechtenstein’s long-term AAA country rating, highlighting its stability. Not only does the country have a track record of economic reliability, its financial institutions share the same approach. Banks operating in Liechtenstein stand for low-risk business models, as demonstrated by their average Tier 1 capital ratio of over 20 percent.

Weaving sustainability into corporate culture
With its reputation for stability solidified, Liechtenstein’s banks are turning their attention towards sustainability, the third cornerstone of the banking centre strategy. Sustainability is a factor affecting the entire value chain and all levels of a business’s hierarchy. As such, Liechtenstein’s financial institutions operate with a business model that prioritises long-term success over short-term gains. This sustainable approach has become an integral part of their corporate culture.

Sustainable investments will soon become banking’s new normal. Since the Paris Agreement was signed in 2015, there has been an urgent need for action, however, the challenges of achieving sustainability are multi-layered and complex. Therefore, the United Nations developed its own guidelines in the form of its 17 Sustainable Development Goals.

According to consulting firm PwC, the annual global investment volume required to achieve these goals is $7trn. Currently, only one seventh of this immense amount is financed by public funds. Thus, the financial sector, particularly banks, must play a central role in mobilising and channelling these resources. This brings with it great responsibility, but also huge opportunities.

Change comes from the top
Sustainability must be embodied in corporate culture and promoted at the strategic level, with commitment coming from business leaders. This is precisely where the strength of Liechtenstein’s financial centre comes from. Consequently, acting in a responsible manner, with long-term outcomes in mind, is a distinguishing feature of the country’s economic landscape.

In Liechtenstein, sustainability is broadly enshrined in policymaking and upheld by the population, reflecting the importance that has traditionally been placed on acting in a sustainable and responsible way. Hence, Liechtenstein and its banks are perfectly positioned to play an active role in guiding the world towards a more sustainable economy. They have shown in the past that they are not just able to talk the talk, but are prepared to walk the walk too.

As proof of their commitment to sustainability, many banks operating in Liechtenstein have set up their own sustainable commitments. For example, LGT’s social and corporate responsibility initiatives focus on the UN’s Sustainable Development Goals. The agenda outlines 17 goals that encompass economic, social and environmental domains, forming the scaffolding of LGT’s sustainable objectives.

Meanwhile, the Liechtensteinische Landesbank offers an ecological and renovation mortgage, which invests in new buildings that meet Minergie energy standards. Neue Bank has also launched a sustainable investment option, in the form of its Primus-Ethics mandate. The asset management product places investment in morally irreproachable securities.

Asset managers and private banks can generate a much greater leverage effect through balance-neutral transactions, incentivising companies towards more sustainable behaviour than is possible through lending alone.

Creating clear guidelines
While some progress has been made, Liechtenstein’s banking sector has not yet achieved its sustainability goals. A major challenge will be to use technology to transform the economy’s environmentally friendly credentials. Younger generations will play a key role in this respect. Schroders’ 2017 Global Investor Study shows that 52 percent of Millennials often or always invest in sustainable funds, compared with 31 percent of Baby Boomers.

Millennials are not only interested in short-term performance, but also in whether their money is being invested in a meaningful and responsible way. What’s more, for this generation, the daily use of digital technology is a given.

The combination of these two factors is set to be a powerful force in the finance sector. The banks and economies that take advantage of the Millennial mindset will find their sustainable transformation significantly more effective.

Additionally, asset owners will be crucial for a more sustainable future. Their preferences ultimately decide how capital is channelled into the economy. At present, there is no commonly agreed definition of sustainable investment. The taxonomy that is currently being developed under the leadership of the European Commission aims to establish an EU-wide classification system.

With a robust and workable definition, banks and other stakeholders will be better equipped to enhance awareness, deliver on investors’ preferences and improve investment advisory and suitability.

The Liechtenstein Bankers Association aims to help the country develop into one of the leading financial centres in sustainable finance. We want to be part of the solution, not the problem. Ultimately, we must make a real impact for the benefit of our clients, future generations and the planet.

Fukuoka G20 summit: financial leaders express concern about intensifying geopolitical tensions

Posted on by Max Tomlin

On the weekend of June 8-9, finance leaders from around the world gathered for the G20 Finance Ministers and Central Bank Governors Meeting in Fukuoka, Japan. In its final communique, the group stated that trade and geopolitical tensions had “intensified”, but remained noticeably muted on the US-China trade conflict.

“Global growth appears to be stabilising and is generally projected to pick up moderately later this year and into 2020,” the announcement read. “However, growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks and stand ready to take further action.”

The G20’s suggestion that growth is stabilising comes in spite of the IMF warning that the trade deadlock between China and the US could cut global output by 0.5 percent

The group’s suggestion that growth is stabilising comes in spite of the IMF warning that the deadlock between China and the US could cut global output by 0.5 percent in 2020. In fact, the collective’s response to the superpowers’ trade dispute was conspicuous by its absence, with the group reportedly removing a clause included in an earlier draft of the communique addressing the “pressing need to resolve trade tensions”. Further, there was no direct admission in the final announcement that the US-China trade conflict was hurting global growth. According to G20 sources quoted by Reuters, this came at the insistence of the US.

Another key takeaway from the summit was the promise to crack down on tax loopholes. The leaders present at the summit agreed to compile common rules that would close loopholes that allow global technology firms like Facebook and Google to reduce their corporate tax payments. Such companies provide services across international borders and can therefore book profits in low-tax countries. While the proposal would increase the tax bills of large multinational firms, it could also make it harder for countries like Ireland to attract foreign investment.

Regarding a potential end to the US-China stalemate, the summit in Fukuoka left many questions unanswered. According to US Secretary of the Treasury Steven Mnuchin, the “main progress” is likely to be made when presidents Donald Trump and Xi Jinping meet at the Osaka G20 summit later in June.

Building a bright future for Kuwait

Posted on by Ashton Wenborn

The global economy is changing: technology is becoming more deeply integrated into everything we do; the invisible hand of the market is ever-changing in its preferences; and geopolitics is, as always, casting its shadow across global financial systems. The government of Kuwait and Kuwait International Bank (KIB) understand that it is not possible to stand still amid these moving tides. In order for the economy to grow, we need to understand the dynamics of global finances and be flexible in matching them.

Kuwait aims to strengthen its private sector and drastically increase investment from outside the country

Kuwait has successfully made changes and commitments that will help navigate these coming changes, while also improving the economy’s standing in the international system. In fact, Kuwait’s entry into the upper tiers of the global economy is being carried out against the backdrop of its Vision 2035 plan, which was launched in 2017 as a blueprint for diversifying the economy. As with similar plans like Saudi Arabia’s Vision 2030, Kuwait aims to strengthen its private sector and drastically increase investment from outside the country.

Rising stock
Over the past year, the Kuwait stock exchange, Boursa Kuwait, has been among the best-performing markets in the Gulf Cooperation Council (GCC). In 2018, it advanced its plans to attract international investment via the progressive implementation of international standards, thereby bridging the gap between Boursa Kuwait and the best-performing stock exchanges in the world.

This progress was perhaps best demonstrated by Kuwait’s transition to secondary emerging market status within the FTSE Global Equity Index Series. During a semi-annual review that took place in September 2018, the first half of the market transitioned, and was followed in short order by the second half in December.

Boursa Kuwait’s rapid ascent does not stop there. According to S&P Dow Jones, Kuwait is on track for an upgrade to emerging market status. London-based MSCI, for its part, is also weighing a potential reclassification of Kuwait from being a frontier market to an emerging market.

The exchange has also taken steps to drastically improve its transparency and liquidity, and to increase the number of shares traded by reclassifying its indices. Creating a transparent environment for trading has strengthened confidence in the market itself. The comprehensively supervised mechanisms that Boursa Kuwait has implemented have effectively removed any lingering doubts buyers and sellers may have had about participating in the market.

Further, Boursa Kuwait is increasingly important for the country’s long-term economic prospects. As a result of the significant efforts that have been made to reform it, stocks traded in the market are increasingly attractive to both Kuwaiti and international investors. It is one of the largest stock exchanges in the MENA region, and the country’s economic prosperity is further reflected in its position among the top 10 countries in the region in the World Bank’s Doing Business 2019 report.

Since the stock exchange was privatised, its transition into a competitive trading platform in the region has required the implementation of numerous tools and mechanisms. Today, the stock market has more efficient and accessible capital from both within and outside Kuwait as a result.

Foreign investment
The progress already made does not mean that the country is not taking additional steps to accelerate its climb. A medley of strict standards, international best practices and legislative measures are being implemented across the country to further pry open the floodgates to foreign investment.

The structural modifications made to the stock market, in tandem with changes to the legislative framework governing it, have paved the way for foreign investment. Foreign ownership of local banks, for example, was previously banned before the passing of Decree 694/2018.

An influx of foreign money has had a marked effect not just on capital markets, but on the entire economy, as envisioned in Kuwait’s long-term development plan. Currently, indirect foreign investment stock in Kuwait stands at around $800m. Additionally, Kuwait is one of several Gulf nations whose governments have pivoted towards digitalisation.

This trend is bringing modern technological systems to markets that foreign investors might have otherwise perceived as static or antiquated.
Technological change has not only been pushed at the governmental level, but also by financial institutions that have been at the forefront of the digital revolution. Innovation is both encouraged from the top down and grown organically from the ground up, which in turn is driving innovative business models across the Kuwaiti economy.

Moreover, Kuwait’s high level of political stability had been recognised by the major credit agencies, which see the country as having low political risk. Moody’s has given Kuwait an Aa2 rating, reflecting its strong investment opportunities. Increased investment flows have already had the knock-on effect of stimulating entrepreneurship and creating new businesses, which has then led to increased job creation. Programmes that have been initiated across Kuwait to feed the private sector have further buttressed this.

Human capital
For KIB, a crucial pillar of Vision 2035 is ‘creative human capital’, as it aligns with one of the bank’s core driving principles: supporting Kuwait’s national workforce. It is to this end that KIB has developed a series of training programmes for its staff and devoted significant resources to developing its employee base.

The bank has also implemented a comprehensive financial literacy programme for the wider community, with the aim of improving financial and economic awareness. In so doing, KIB is effectively investing in the future of the country’s financial system, as incoming employees are more in tune with how the economy works. The aggregate effect of this education will benefit not just Kuwait’s financial sector, but every industry in the country.

Human capital is the foundation of financial prosperity, and nurturing it is as important as any investment that can be made. Economies are, after all, managed by humans, and it is only through their success that economies grow. Through such investments, economic growth is not only achieved faster, but more sustainably, as workers become more productive and technologically savvy.

Oil prices
Like most Gulf states, Kuwait’s economy has historically been heavily dependent on its oil revenues. The government is well aware of the fluctuating nature of oil prices and the effects they can have on the economy. This was most starkly demonstrated in 2014 when the price of oil crashed due to high global production, the effects of which were felt not just in Kuwait, but across the Gulf.

Daily oil prices in 2018 were relatively unpredictable, and thereby acted as a function of unprecedented volatility in the market. The macroeconomic, geopolitical and technological factors that have caused instability in oil prices are not expected to see any meaningful change any time soon – these factors include a decrease in aggregate global economic growth and oil consumption.

This slowdown is reflected in industrial activity and freight transportation, which is expected to expand at a slower pace over the next year. Another is increasingly weak demand for oil in Europe and Asia: this can be attributed to environmental concerns and the accelerating uptake of renewable energy, which is maturing to the point of not needing government subsidies.

Separate from the demand-side factors, supply-side considerations include OPEC policies and the growth of shale production in the US, as well as sanctions imposed by the US on oil-producing nations. Kuwait has taken steps to mitigate these effects. In the near-term, the country’s sovereign financial reserves will continue to act as a buffer that softens economic shocks. Sovereign wealth vehicles like the Kuwait Investment Authority provide other revenue streams that reduce the country’s reliance on oil income.

In the long term, the government has a number of fiscal reforms in the pipeline that will apply more stringent measures aimed at bringing government debt under control and spurring economic growth. These reforms include the slashing of unnecessary expenses and the implementation of a value-added tax. The country’s budget will also be restructured to absorb market volatility. Below the governmental level, companies will have to further their technological advances while maintaining strict market discipline and improving their productivity.

Over the next year, we expect Kuwait’s economy to grow despite challenges posed by oil fluctuations and low prices. The fact that Kuwait is largely dependent on oil revenues also means that the country’s finances are heavily influenced by factors outside its full control. One of the more important external factors are policies set forth by OPEC – namely, the level of oil production agreed upon by the organisation. To stabilise prices, OPEC has already made efforts to decrease oil production in a bid to balance the market, carrying out a round of production cuts that took effect in January.

Naturally, steering the economy towards more private sector activity, as well as exploiting other potential markets, will continue to grow as national priorities. The first steps have already been made, and for Kuwait, the only way is up. KIB has been at the forefront of Kuwait’s financial relations with the rest of the world since its creation in the early 1970s and will continue to lead the way for decades to come.