Year: 2019

Venezuelan President Nicolas Maduro remains defiant as his second term begins

Posted on by Ashton Wenborn

On January 10, Venezuelan President Nicolas Maduro began a second six-year term in power, despite an international outcry over the legitimacy of his re-election, further isolating the South American country in the iron grip of an economic and humanitarian crisis.

The 56-year-old heir of Hugo Chávez, Maduro has presided over the Venezuela’s worst economic crisis in history. The country’s economy has collapsed by almost 50 percent in the past five years, contracting by 15.7 percent in 2017 alone.

While this so-called ‘economic war’ originated under Chávez, it has been exacerbated by Maduro’s failure to cut public spending during the 2014-15 oil glut and the subsequent devaluation of the country’s most precious commodity. Maduro, meanwhile, has blamed the crisis on a capitalist plot to drive up inflation rates.

Maduro was elected after Chávez’s death in 2013 by a margin of just 1.6 percentage points, the closest vote in the country’s history. His re-election in May last year was also mired in scandal, with accusations of vote buying and corrupt electoral processes running rife.

Last week, 13 of the 14 members of the so-called Lima Group, a Latin American bloc that includes Brazil, Argentina and Canada, announced that they would not recognise Maduro as a legitimate leader of Venezuela. The most fervent critics within the bloc include Brazil’s far-right leader Jair Bolsonaro, who has described Maduro’s communist ideology as “despicable and murderous” and in 2017 vowed to “do whatever is possible to see that government deposed.”

In the US, the Trump administration has also stepped up pressure on Maduro through the application of economic sanctions. The latest measures, announced this week by the US Treasury Department, aim to curb a currency exchange scheme that allowed corrupt government officials to siphon off billions of dollars in illegal profits.

“Our actions against this corrupt currency exchange network expose yet another deplorable practice that Venezuela regime insiders have used to benefit themselves at the expense of the Venezuelan people,” US Treasury Secretary Steven Mnuchin said in a statement on January 8.

President Trump himself has also suggested that the US was prepared to use military action against Venezuela if necessary.

Most members of the Lima Group have called their diplomats home from Venezuela and will not send delegates to Maduro’s inauguration as per international custom, according to diplomatic sources.

Meanwhile, while the rest of the world turns its back on Venezuela, its citizens are desperately crying out for help. Rampant hyperinflation, currently approaching two million percent, has devalued salaries in the country to the point that the monthly minimum wage is not longer sufficient to purchase a box of eggs. The IMF expects it to rise to 10 million percent by the end of the year.

Venezuela’s Living Conditions Survey found in 2017 that 75 percent of the country’s citizens has lost an average of at least 19 pounds (7kg) over the previous year as they simply could not afford to feed themselves adequately. The same survey revealed that 87 percent of the country was living below the poverty line in 2017, with a staggering 61.2 percent classed as extremely poor.

Maduro’s response to hyperinflation has been to raise the national minimum wage, which has only fuelled the issue further, meaning that Venezuelans spending ability actually decreases with every raise. In August 2018, Maduro launched a new currency, named the ‘sovereign bolivar’, which was pegged to the state-backed petro cryptocurrency. This did nothing to solve hyperinflation, which simply began again from the base benchmark set by the new currency, while the policy drew international ire as the petro cryptocurrency is regarded as fanciful by many other world powers.

According to the United Nations, some three million people have emigrated from Venezuela since 2015, in a frantic bid to escape malnutrition and the rising crime epidemic. While Maduro’s government has repealed access to crime data and has ceased to publish official figures, research from the NGO Venezuelan Violence Observatory put the country’s violent death rate at 81.4 per 100,000 citizens in 2018. This makes Venezuela the most violent country in Latin America, with more deaths than notorious crime hotspots like El Salvador and Honduras.

As the country sinks further into socio-economic ruin, it seems increasingly less likely that it will be able to pull itself free without substantial international aid. All the while Maduro remains in power, however, there is scant chance of that aid coming to fruition. Meanwhile, the country’s impoverished citizens become ever more desperate, with malnutrition, disease and rising crime posing ever greater threats to their lives.

The EU banking union looks well placed to defend against another crisis

Posted on by Max Tomlin

The financial crisis of 2008 should have served as a worldwide wake-up call, but it seems some people are still sleeping. Back then, light-touch regulation allowed banks to grow fat on speculation. When the crisis came, those that were deemed ‘too big to fail’ had to be bailed out at the taxpayer’s expense.

During the last financial crisis, the people and institutions responsible were not held to account, and instead were rescued by the public purse

In the decade or so that has passed since, the global economic climate has improved significantly, but this comes with its own risks. Speaking at the annual conference of the Single Resolution Board (SRB), the EU’s banking resolution authority, in Brussels back in October, Olivier Guersent, the European Commission’s director-general for financial stability, financial services and capital markets union, issued a warning against complacency. “I have the impression that [EU member states] have the false impression that everything’s fine, but everything’s not fine and the job is half done,” Guersent said.

Guersent’s concerns stem from that fact that Europe’s banking union, launched in the wake of the financial crisis, remains incomplete. The union is predicated on three pillars: the Single Supervisory Mechanism (SSM), which came into effect in late 2014; the Single Resolution Mechanism (SRM), which is tasked with restructuring and winding up failing banks; and a European deposit insurance scheme that has
yet to receive approval.

Although the yet-to-be-launched insurance scheme is a concern, issues remain unresolved regarding the SRM as well. Plans are underway to bolster the fund that underpins the mechanism, but challenges preventing a resilient fiscal union remain in place.

Fast and loose
Global capital flows meant the events of 2008 had a wide-ranging impact, with the EU subjected to a particularly protracted downturn. The issues that made the eurozone crisis so pronounced were multifaceted: certain member states must take some of the blame for misrepresenting their levels of debt, while the adoption of a single currency also played a part. Nations that previously had relatively weak currencies were given more favourable credit terms after they began using the euro, contributing to the creation of an economic bubble. When this bubble burst – as it did so spectacularly in 2008 – the result was catastrophic.

The effects of the eurozone debt crisis are likely to be felt for years to come

Eurozone banks that played fast and loose with their customers’ money suddenly found themselves in financial trouble. National governments were faced with a difficult decision: they could allow the struggling banks to fail, resulting in losses for shareholders and members of the public alike, but there was little way of knowing what kind of social panic might ensue. The size of some of the banks in question made this option particularly problematic. Instead, eurozone governments decided to recapitalise the debt-ridden banks using taxpayer money.

Liabilities were shifted from the private to the public sector on a monumental scale. By 2010, the average public deficit in the eurozone had increased from 0.7 percent before the crisis to six percent (see Fig 1), and overall public debt had gone up from 66 to 85 percent. Collectively, since 2008, more than €1.5trn ($1.7trn) in taxpayer money has been used to bail out failing banks in Europe. Understandably, the public reaction has been a mixture of indignation and fury.

Never again
Although the effects of the eurozone debt crisis are likely to be felt for years to come, the European Commission has acted quickly in its efforts to prevent a similar situation occurring in the future. One of its most important steps has been the introduction of the SRM. The SRB is part of the SRM and was set up in 2015 to work alongside the Resolution Authorities of EU member states to ensure that the problems of banks can be resolved with minimal damage to the real economy.

“In assessing the role of the [SRB], it is important to note that if a bank fails, this must not be seen as a failure of the system,” Elke König, chair of the SRB, explained in September. “On the contrary, banks should be able to fail; the exit of failing firms in a free market system is normal. Part of the SRB’s raison d’être is to ensure that we end the concept of ‘too big to fail’.”

The SRB, therefore, is not simply tasked with protecting the global economy: it is part of an effort to change the way national governments think about the financial system. It is also about fairness. During the last financial crisis, the people and institutions responsible were not held to account, and instead were rescued by the public purse. The SRM could help prevent that from happening in the future.

For a rainy day
Essentially, the aim of the SRM is to create a uniform procedure for the resolution of credit institutions and investment firms. Alongside the SSM, it grants the European Central Bank supervisory powers over the euro area’s banks. Should a crisis develop at any of these institutions, action can be taken at EU level to protect the bloc’s financial system from widespread damage.

One of the primary methods the SRM is employing to reform the behaviour of banks is through the creation of a Single Resolution Fund (SRF). This is funded by the banks themselves and is intended to be equal to one percent of insured deposits held by EU credit institutions by 31 December 2023. The fund has been building steadily since 2016 and now holds around €25bn ($28.3bn). While the mix of similar-sounding EU organisations and acronyms can make for confusing reading, the adoption of the SRM should make the act of resolving failing banks simpler and more consistent.

6%

Average public deficit in the eurozone in 2010

85%

Overall public debt in 2010

$1.7trn

of taxpayer money was use to bail out European banks

“The European [SRM] establishes that banks’ losses should be privatised without, in principle, recourse to public funds,” Jean Dermine, a professor of banking and finance at business school INSEAD, told World Finance. “[The SRB] has been created with authority to deal with distressed banks. If needed, the resolution board can use the funds of the SRF to facilitate the restructuring of a distressed bank.”

For the SRF to achieve its one percent goal, it is estimated that it will need to hold between » €55bn ($62.2bn) and €60bn ($67.9bn) by the end of 2023. As such, the SRB confirmed that there are plans to grow the fund to just short of €33bn ($37.3bn) this year. That would be in keeping with the fund’s previous annual growth levels of approximately €7.5bn ($8.5bn).

It should be noted that the SRF is not to be used flippantly – it is not a crutch for substandard bank officials to lean on. In fact, the SRF is only intended to be used to guarantee assets or liabilities, make loans to institutions under resolution, or compensate shareholders. It is not to be used to allow banks to absorb their losses.

Trouble ahead
When the debt crisis took hold in Europe a decade ago, ‘resolution’ was not even a banking term. Since then, the EU has managed to set up its banking watchdog and convince financial institutions from across the single market to pool their resources together to protect themselves – and the taxpayer – from future crises. These are impressive achievements, no doubt, but more work needs to be done. In a July 2018 report, the IMF made it clear that the time has come for the eurozone to develop its banking union further.

“The euro area expansion, while still vigorous, is slowing to a more moderate pace,” the report read. “But global and domestic risks are rising, including escalating trade tensions, policy complacency among member states and political shocks. Rebuilding fiscal buffers and addressing structural issues to improve resilience and build support for euro area reforms is now even more urgent. At the same time, completing the banking union and advancing the capital markets union is necessary to foster greater private sector risk sharing.”

A growing SRF may be enough to protect taxpayers from the failure of a smaller bank, but it is likely to come up short if more widespread financial instability occurs. As such, eurozone states have begun discussing the formation of a public backstop to the SRF, allowing the European Stability Mechanism to step in as a lender of last resort. The idea is controversial, however, with European political leaders debating how to ensure the backstop is credible and capable of being deployed rapidly. A robust backstop, if it can be agreed upon, would bolster confidence that resolution can be achieved even when large, complex banks fail.

Second time lucky
Currently, it is not difficult to envisage a scenario where the SRF would struggle to facilitate the orderly resolution of a larger institution. The SRB admitted as much in June 2017, when it forced the sale of the failing Banco Popular bank to Spanish rival Santander for a nominal fee of one euro. Talking about the sale, König confirmed that Santander was able to provide more liquidity than would have been possible through the SRF. Fortunately, a buyer for Banco Popular could be found immediately. For situations where this is not the case, the SRF may be needed.

The EU must act now to solidify its banking union while in a period of relative stability

When the 2008 financial crisis struck, talk of banks requiring an extra $100bn or $200bn of liquidity was not uncommon. If a similar situation were to arise again, the SRF’s holdings would quickly be exhausted. The EU must act now to solidify its banking union while in a period of relative stability.

“Privatisation of bank losses is a step in the right direction,” Dermine said. “However, two other issues must be dealt with. Since deposits with more than seven days maturity could potentially bear losses, this creates a tremendous risk of a bank run. One needs tools to deal with a bank run. Secondly, one cannot ignore the political dimension of imposing losses on retail investors.”

The developing political situation in certain eurozone states will undoubtedly be at the forefront of many people’s minds at the SRB. In Italy, proposals to increase the country’s deficit have been rejected by the European Commission. They may be pursued nonetheless. With debt already standing at more than 130 percent of GDP and much of it being held by the country’s banks, it is here where the next eurozone crisis may emerge. If it does, EU officials will be hoping that its banking union is able to stand up to the challenge this time.

World Bank slashes 2019 forecast amid global economic slowdown

Posted on by Ashton Wenborn

The World Bank has warned of “darkening skies” for the global economy, leading it to cut its growth forecast from three percent to 2.9 percent for 2019.

A downturn in the US economy increases the probability of a global recession to 50 percent

In its Global Economic Prospects (GEP) report, issued on January 8, the international financial institution cited elevated trade tensions and the contraction of financing conditions as key reasons for the downgrade.

The US-China trade war is named as a significant concern, along with dismal performance in the US, the world’s largest economy. In 2021, the US’ economic expansion is forecasted to be just 1.6 percent, compared to last year’s 2.9 percent rate, as a result of rising protectionism and the diminishing effect of tax cuts.

Unlike some commentators, the World Bank is not forecasting a recession for the US in 2019. It has said, however, that a downturn in the US economy increases the probability of a global recession to 50 percent.

The 200-page document also highlighted that emerging markets have been hit particularly hard by adverse macroeconomic conditions.  “In a nutshell, growth has weakened, trade tensions remain high, several developing economies have experienced financial stress, and risks to the outlook have increased,” it stated.

Increasing debt in emerging markets is also marked out as a source of concern, particularly if the global economic downturn gathers pace. According to the report, median government debt has risen by more than 17 percentage points of GDP since 2013, creating vulnerabilities in developing economies and leaving them more susceptible to market fluctuations and compromised rapid recoverability.

“The majority of Low Income Countries would be hard hit by a sudden weakening in trade or global financial conditions given their high levels of external debt, lack of fiscal space, low foreign currency reserves, and undiversified exports,” the GEP document observes.

Prospects for sub-Saharan Africa are notably poor, with the report predicting per capita growth of less than one percent. This rate is not sufficient to lift the region, which is forecasted to hold 86 percent of the world’s poorest people by 2030, out of poverty.

The World Bank expects challenging financial conditions to continue into 2020, for which it has also cut its growth predictions from 2.9 to 2.8 percent.

The global financial institution is also facing its own challenges, as its president Jim Yong Kim unexpectedly resigned on January 7, three years before he was expected to retire. While the succession process is supposed to be open, the World Bank has been governed by an American since its inception in 1944, due to an unwritten rule struck up between the US and its European allies after the Second World War.

Developing nations are now expected to redouble their efforts to nominate non-American candidates for the prestigious position, creating a challenging environment for the US, which has always typically nominated a successor. The final decision lies with World Bank shareholders.

Thai Life Insurance is succeeding by putting its customers first

Posted on by Max Tomlin

The Thai economy is going from strength to strength. Recognised by the World Bank as “one of the great development success stories”, the nation has embarked on a programme of rapid economic expansion over the last 50 years, with steady growth and widespread poverty reduction moving Thailand into its current upper-middle-income status. Today, Thailand boasts the second-largest economy in South-East Asia, and this impressive growth is showing no signs of slowing down. The nation is expected to post a growth rate of 4.7 percent for 2018, marking its fastest rate of economic expansion in five years.

Thailand’s rapidly ageing population is driving a growing demand for life insurance products

Amid these positive developments, one sector is showing particularly impressive results. Bolstered by increased financial inclusion and a growing middle class, the Thai life insurance market has emerged as an economic bright spot in recent years, with premiums and policy penetration rates both on the rise. What’s more, the nation’s rapidly ageing population is driving a growing demand for life insurance products, creating a valuable opportunity for insurance companies to connect with Thailand’s elderly citizens.

While the future certainly looks bright for the Thai life insurance industry, competition is posing a significant challenge to established insurers and fledgling companies alike. A host of new players have begun to flood the market, putting insurers under increasing pressure to stand out from the growing crowd. At Thai Life Insurance, we understand the importance of a unique selling point in a saturated and competitive market, and have successfully distinguished ourselves from our competitors through our effective viral video campaigns. By tapping into viewers’ emotions, our touching commercials have helped us to craft our internationally recognised brand image as a company that cares.

A powerful message
Television advertising is notoriously difficult to get right. Many traditional adverts have viewers immediately reaching for the remote, while other instantly forgettable offerings simply serve as background noise for households around the world. Amid this sea of unremarkable commercials, Thailand has emerged as a world leader in creative advertising, producing an array of heartwarming and engaging viral videos that have been shared and enjoyed internationally. Thai Life Insurance is one of the country’s advertising pioneers, consistently using cinematic storytelling and emotive messages to connect with audiences and highlight the importance of insurance in the face of life’s many challenges.

One of our most successful commercials, named Unsung Hero, has more than 36 million views as of 2018, with its moving message continuing to connect with viewers around the world some four years after its release. This uplifting video shows a young man performing acts of kindness in his local community, helping those around him without any form of reward or recognition. Along with our other viral videos, this commercial serves to remind viewers of the value of life and the importance of caring for the people we love. Our campaigns – and our wider brand image as a whole – are crafted around the core concepts of life and love, as these features truly form the cornerstone of the life insurance business.

These intrinsic human values are at the very heart of our operations at Thai Life Insurance – the needs of our customers always come first. In 2014, we reaffirmed our commitment to serving the Thai people by rebranding as a ‘people business’, with the aim of deepening our bond with our valued customers. Our customer-first approach has inspired us to create a diverse portfolio of more than 200 life insurance products to serve our clients at every stage of their lives, from their youth through to their retirement and old age. These ‘total life solutions’ were designed to meet the varied and continually changing needs of our customers, ranging from retirement planning to health insurance and practical financial advice.

This vast array of products has enabled Thai Life Insurance to connect with clients of all ages, winning loyal customers from multiple generations. For younger consumers, for instance, Thai Life Insurance offers a range of medical plans and accident insurance options designed to suit their current needs. One such solution is the pioneering Thai Life Insurance hotline, which enables customers to receive compensation within 24 hours of a public disaster. Given Thailand’s unfortunate vulnerability to natural disasters, this coverage has proved invaluable to many of our cherished policyholders. By offering practical and diverse products such as these, Thai Life Insurance hopes to cater to customers’ evolving needs at different life stages, building a lifelong relationship as a consequence.

The caring culture
As a company that cares, it is important that our core values are carried through to every part of our business. Along with attentively serving our customers, at Thai Life Insurance we also strive to be a force for good in the wider community, helping to enhance Thai society wherever we can. Corporate social responsibility (CSR) is therefore an integral part of our business, as it enables us to put our firmly held beliefs into action. As one of the nation’s leading insurance providers, we understand the importance of using our platform responsibly, and we hope to effect positive change in the community through a range of exciting projects and activities.

In 1995, we embarked on a long and rewarding partnership with the One for Lives Foundation, which provides medical assistance to the most vulnerable members of Thai society, including underprivileged children, impoverished families and the elderly. Through our close work with the charity, we have lent our support to a number of worthy causes including the Thai Red Cross Society, which we have championed for over 30 years. In addition to donating a state-of-the-art ambulance to the Red Cross Organ Donation Centre, Thai Life Insurance also organises blood donation drives in its head office every three months, with similar blood donation initiatives now beginning to take off in the company’s regional branches.

Furthermore, Thai Life Insurance has also played an important role in raising public awareness and understanding of organ donations, working diligently with the Thai Red Cross Society to distribute informative material and organise educational events. Since Thai Life Insurance embarked on this awareness drive, a total of 16,514 people have signed up to be organ donors, reflecting the remarkable success of this campaign.

In addition to supporting these deserving causes, Thai Life Insurance is also committed to providing essential relief to the nation’s many disaster victims. In the wake of natural catastrophes such as the severe floods that devastated Southern Thailand in 2017, Thai Life Insurance always endeavours to play its part in relieving the suffering of those affected in the immediate aftermath of such events. During the catastrophic floods – the worst to hit Thailand in over 30 years – scores of Thai Life Insurance employees and volunteers headed to the affected areas to distribute food and relief packs to the many disaster victims. More than 1,000 relief bags were issued to families across the region, while company volunteers prepared more than 3,000 meal kits for doctors, nurses, staff and patients at Maharaj Nakhon Si Thammarat Hospital, where many flood victims were taken for treatment. This crucial, on-the-ground assistance provided by Thai Life Insurance workers reflects our ethical company culture, and we are proud that all our employees share our core values of love and generosity.

What’s more, according to studies carried out by Harvard Business School, those who regularly perform acts of charity tend to report higher levels of personal happiness, while the act of volunteering can lead to a reduction in stress hormones and increased emotional wellbeing. By encouraging our employees to volunteer their time, we therefore hope to boost worker morale at Thai Life Insurance.

Inspiring values
In addition to serving the Thai public through our far-reaching CSR initiatives, at Thai Life Insurance we also seek to take care of staff and personnel at every level of our business. From our valued stakeholders to our business partners and branch-based employees, we firmly believe that people are the heart of our success. As a people business, our staff and customers always come first, and we aim to meet their evolving needs through a range of innovative products, services and distribution channels. Our loyal staff members are encouraged to be more than life insurance agents; to act as a friend and a consultant for our many policyholders.

With hundreds of types of life insurance on offer at Thai Life Insurance, it is important that customers are well matched with a policy that suits their requirements and their financial situation. By conducting in-depth needs analyses and offering pertinent advice, our attentive staff members can effectively connect customers with their ideal plan. Along with offering life insurance advice, Thai Life Insurance employees are also on hand to provide valuable health insurance guidance, taking each customer’s individual health concerns into consideration when making tailored recommendations. If customers are looking for financial advice, our team is also able to offer informed suggestions in this area, helping customers to grow their savings and make sound investments. In this way, our staff members take on the role of life solutions providers, caring for our respected customers at every stage of their lives.

This commitment to customer care has established Thai Life Insurance as an ethically conscious company, with a unique people-first vision. Our strongly held values continue to set us apart from our competitors, and will allow Thai Life Insurance to stay relevant and profitable for many years to come.

World Finance Digital Banking Awards 2018

Posted on by Max Tomlin

Technology’s steady march into nearly every aspect of our lives has brought sweeping changes to the way companies are created and run. The digitalisation of the banking sector in particular has been widespread, and has accelerated noticeably in recent years.

Cybersecurity should be at the heart of each financial institution’s digital strategy, and it must inform every technological implementation

In fact, nearly 2,900 physical bank branches have closed in the UK alone over the past three years, as more customers turn to online banking instead. In the US, meanwhile, the number of brick-and-mortar bank branches dropped by more than 1,700 in the 12 months to June 2017, the biggest decline on record.

But breaking from tradition to adopt modern practices is no easy task: banks must grapple with new regulations while attempting to update legacy systems and integrate new, often disruptive technologies. What’s more, consumers are increasingly demanding: they expect their banks to provide a convenient and flexible service that seamlessly incorporates the latest developments.

The World Finance Digital Banking Awards 2018 celebrate the organisations that are successfully tackling the industry’s challenges and driving the digital revolution with dynamic business strategies and groundbreaking technologies.

On the defensive
A number of high-profile cyberattacks have shaken the business world in recent years. In 2017, Ransomware and malware attacks – such as NotPetya and WannaCry – opened executives’ eyes to the sophistication and complexity of the threats they face, highlighting the fact that large businesses cannot simply outsmart cyberattackers.

Unfortunately, these threats haven’t abated: according to cybersecurity firm McAfee, cybercrime now costs the world economy nearly $600bn annually, or 0.8 percent of global GDP. With threats continuing to make the headlines in 2018, the financial services industry has finally started connecting the dots, investing more money in cybersecurity. In fact, the number of jobs addressing cyberthreats in the sector is expected to grow by 37 percent annually until 2022.

While this is undoubtedly a good start, banks’ responsibility to financial markets and customers means they must go further. Moving forward, cybersecurity should be at the heart of each institution’s digital strategy, and it must inform every technological implementation. The banks that prove resilient through these challenges will secure the trust of consumers and achieve commercial success.

Best foot forward
In 2016 and 2017, many financial institutions became increasingly aware of the opportunities presented by new technologies and business models. Last year, however, that awareness turned into action. Whether used to communicate with customers via chatbots, identify fraudulent activity online or analyse large data sets, artificial intelligence (AI) is being adopted across the financial landscape to improve efficiency and cut costs. AI has also helped reshape banks’ trading departments and allowed for the introduction of personalised products.

Distributed ledger technology is another area that banks are eyeing closely. When cryptocurrency prices spiked in late 2017, corporate interest in blockchain – the technology underpinning many digital tokens – surged. While the price of bitcoin and other cryptocurrencies has since tumbled from those heights, many institutions remain optimistic about the potential applications of blockchain technology – namely, its use in execution, clearing and settlement processes. Global management consultancy firm Accenture even estimates that distributed ledger technology could save investment banks as much as $10bn through improved efficiency.

Blockchain could also benefit cross-border payments: experts in the field have said their tech will transfer money across international borders quicker and with fewer costs. Further, it will help institutions meet Know Your Customer and anti-money-laundering standards by providing a secure record of customers’ identities.

As banks jump into these new and exciting technologies, they must remember that resources need to be properly managed for them to benefit the entire organisation. The operations of legacy infrastructure must be kept running smoothly as modernisation and digitalisation occur, and any internal disruption should be minimised. For this reason, IT budgets are expected to expand: a 2017 study by Celent, a research consultancy focused on financial services technology, suggested IT spending will increase by 4.2 percent annually over the current four-year period, reaching $296.5bn by 2021.

Welcoming disruption
Fintech continued to be a huge area of development and growth for the banking industry in 2018. According to KPMG’s Pulse of Fintech 2018 report, global investment in fintech had surpassed the total spent in 2017 within the first six months of the year, and was on course to exceed the peak recorded in 2015.

Fintech firms continued to raise the bar for more established banks last year by using their agility to respond quickly and efficiently to consumer demands, while finding new solutions to long-standing issues. The growth of fintech was particularly pronounced in the insurance and regulatory industries during the first six months of 2018. Europe was the main beneficiary, with the introduction of the Second Payment Services Directive and General Data Protection Regulation forcing companies to adapt quickly. As a result of the new requirements, ‘regtech’ companies witnessed a substantial increase in funding.

Neobanks (sometimes referred to as challenger banks) also present an exciting prospect for investors, especially in Europe. According to Sven Korschinowski, a financial services partner at KPMG in Germany, digital challengers such as N26 in Germany and Revolut in the UK were attracting attention from global investors like Chinese tech giant Tencent: “This interest highlights the potential [that] investors see in the market. Many global investors see digital banks as an entry point into the European market.”

The digitalisation of banks is engendering real change throughout the industry – from established investment banks adopting AI, to agile neobanks giving consumers advanced mobile offerings. But even as the industry sits on the cusp of a digital revolution, there is work to be done, especially with regards to preventing data breaches and ensuring the integration of new technologies does not hinder day-to-day business operations. The World Finance Digital Banking Awards 2018 highlight the companies that have achieved success in the face of these multifaceted challenges.

World Finance Digital Banking Awards 2018

Best Digital Banks
Andorra: MoraBanc

Argentina: Nación Servicios

Barbados: CIBC FirstCaribbean

Brazil: Nubank

Canada: Tangerine

Chile: Banco de Chile 

Colombia: Bancolombia 

Costa Rica: BAC Credomatic 

Dominican Republic: Banco Popular Dominicano

France: BNP Paribas Fortis 

Germany: N26

Kuwait: Gulf Bank

Mexico: BBVA Bancomer

Myanmar: CB Bank 

Nigeria: Access Bank

Panama: BAC Credomatic

Portugal: ActivoBank

Russia: Sberbank

Singapore: OCBC

Spain: BBVA

Turkey: Garanti Bank

UAE: Mashreq Bank 

UK: Revolut

US: GoBank

 

Best Mobile Apps
Andorra: MoraBanc App – MoraBanc

Argentina: Pim – Nación Servicios

Barbados: CIBC FirstCaribbean Mobile – CIBC FirstCaribbean

Brazil: Banco Itaú – Itaú Unibanco

Canada: EQ Bank Mobile Banking – EQ Bank 

Chile: Mi Banco – Banco de Chile

Colombia: Bancolombia App Personas – Bancolombia 

Costa Rica: Banca Móvil – BAC Credomatic  

Dominican Republic: Banco Popular Dominicano

France: Hello bank! – BNP Paribas Fortis 

Germany: ING-DiBa Banking to go – ING-DiBa  

Kuwait: Gulf Bank Mobile Banking – Gulf Bank

Mexico: Bancomer móvil – BBVA Bancomer

Myanmar: CB Bank Mobile Banking – CB Bank 

Nigeria: Access Bank – Access Bank

Panama: Banca Móvil – BAC Credomatic 

Portugal: ActivoBank – ActivoBank

Russia: Touch Bank – Touch Bank

Singapore: OCBC SG Mobile Banking – OCBC 

Spain: BBVA Spain – BBVA

Turkey: Garanti Mobile Banking – Garanti Bank    

UAE: Snapp – Mashreq Bank  

UK: Tide Business Banking – Tide 

US: Ally Mobile Banking – Ally Financial

Former Barclays executives face trial over crisis-era cash deals with Qatar

Posted on by Max Tomlin

Four of Barclays’ most senior bankers will stand trial today in London in what is set to be one of the most high-profile financial crime cases since the 2008 market crash.

The case relates to an £11.8bn ($15bn) emergency fund that investment firms Qatar Holdings and Challenger Universal gave to Barclays in 2008

Former Barclays chief executive John Varley, along with colleagues Roger Jenkins, Tom Kalaris and Richard Boath, face charges relating to a bailout deal the bank secured from Qatar in the midst of the financial crisis.

All four men are charged with conspiracy to commit fraud by false representation. Varley and Jenkins also face separate charges of unlawful financial assistance, the practice by which companies provide loans to facilitate the purchase of its own stock. Qatar has not been accused of any wrongdoing.

The case relates to an £11.8bn ($15bn) emergency fund that investment firms Qatar Holdings and Challenger Universal gave to Barclays in 2008, to help the British lender avoid a government bailout. Under the terms of the deal, the British lender also lent £2.3bn to Qatar Holdings.

It is alleged that these reciprocal loans were used to unlawfully fund, either directly or indirectly, the Qatari purchase of Barclays shares.

The trial is expected to last up to four months. It has been brought by the UK’s Serious Fraud Office, partly in a bid to restore its reputation after two previous prominent cases were scrapped before going to trial.

Charges brought against a group of senior Tesco officials accused of orchestrating a major accounting scandal were thrown out in December 2018 after a judge decreed that the SFO’s evidence was not strong enough to warrant a trial.

A separate case brought by the SFO relating to the Qatari funding was also dismissed by a Southwark court last year. The organisation’s attempt to reinstate the case was unsuccessful. As such, the SFO is hoping to avoid a third consecutive embarrassment in this case against Varley and his compatriots.

World Finance Oil & Gas Awards 2018

Posted on by Max Tomlin

In 2014, the oil sector received a huge shock. After a few years of prices hovering around or above $100 per barrel, a combination of falling demand and new production methods resulted in a monumental price crash. Continuing declines saw the price fall to just $35 a barrel in early 2016. Due to factors linking crude oil and natural gas markets, the two fuels have historically exhibited a price relationship. As such, natural gas also experienced a fall in price over the period.

The most strategic oil and gas producers have invested in productivity improvements and new technologies even when prices remained some way below their highest levels

Today, optimism has returned to the oil and gas sector. Prices, although not at historically high levels, are largely stable. In 2018, oil mostly remained between $60 and $70 a barrel, while natural gas prices climbed steadily during the second half of the year. Higher prices reflect a multitude of factors. The decision by the Organisation of the Petroleum Exporting Countries (OPEC) and other major oil producers such as Russia not to increase supply had an impact, as did rising geopolitical tensions. US President Donald Trump’s decision to re-impose economic sanctions on Iran, as well as the ongoing crisis in Venezuela, has raised concerns over both countries’ ability to maintain their current export levels.

Price rises are good news for producers, obviously, but they do not mean oil and gas firms have nothing to worry about. Challenges remain aplenty, not least of all the worldwide movement away from fossil fuels and towards renewable energy sources. The World Finance Oil and Gas Awards 2018 recognise the companies that are not only aware of these challenges, but are overcoming them by forging a long-term strategy in an industry fraught with volatility.

Up and down
One of the biggest changes the oil and gas industry had to contend with in recent years is the development of hydraulic fracturing, or ‘fracking’. The process, during which high-pressure fluid is injected into the ground to release subterranean oil or gas, has had a major impact on the energy sector, particularly in the US.

Although the US has always been a major player in the petrochemical sphere, the use of fracking has caused production volumes to be ramped up. In 2011, the country became a net exporter of refined petroleum products, and forecasts indicate it will overtake Saudi Arabia as the world’s top oil exporter in 2019. America’s oil exports have boosted supply at a time when demand is falling. The IMF has predicted that global growth is set for a slowdown, indicating that oil consumption is about to take a hit too.

While prices experienced suppression in 2018, some factors have helped prop up the sector, especially supply-side issues in Iran and Venezuela. This has contributed to an unpredictable market, a situation not helped by the erratic behaviour of the US president: in November, Trump used his Twitter account to express his thoughts on OPEC’s proposed cuts to supply. Prices fell in response.

Greasing the wheel
Market volatility is, to some extent, part and parcel of operating in the oil and gas trade. However, there are steps businesses can take to limit the impact sudden price movements will have on their finances. The most strategic oil and gas producers have invested in productivity improvements and new technologies even when prices remained some way below their highest levels. Digitalisation has been a key concern for these firms, whether in the form of digital twins, drones or data analytics. Some companies are even making investments in green energy as a way of future-proofing their operations.

Not all businesses have taken a long-term approach, however. Understandably, many oil and gas companies were reluctant to invest while prices – and revenues – were low. Away from the US shale market, investment in conventional oil and gas supplies has fallen significantly over the last few years. As a result, the International Energy Agency’s World Energy Outlook 2018 notes that an additional 2.5 million barrels of oil per day must be produced annually just to keep output level.

Maintenance has also been affected by lower prices. Some companies saw maintenance as a noncritical cost in 2018 and chose to defer it until prices increased. This resulted in many rigs suffering from outdated infrastructure. Similarly, employee numbers have been reduced. Between 2014 and 2016, one major oil producer cut staff numbers by as much as 16 percent.

However, businesses that have adopted a short-term outlook could see their approach come back to haunt them. Increasing production now that prices have recovered will not be easy, particularly with failing assets and a limited number of employees. It is not as simple as turning the tap back on.

Digging deep
Even considering recent price increases, many oil and gas companies are well aware that they face significant long-term challenges. Consumers are demanding their governments and energy companies take the health of the planet more seriously and a move to a low-carbon world seems inevitable. It is a question of when, not if, businesses move away from fossil fuels.

This does not mean traditional oil and gas firms do not have a role to play in the planet’s future energy make-up. The transition to renewables will certainly be a gradual process, but one that businesses need to react to immediately. Investing in smart drilling technology will be necessary, as will incorporating real-time analytics and best-in-class smart sensors.

If demand does fall because green technologies are being embraced on a larger scale, oil and gas firms will have little choice but to become more productive and efficient to survive. Investment in new technologies will allow them to achieve this.

Some in the oil and gas industry are beginning to explore alternative uses for their products in anticipation of renewables fully replacing combustible fuels. Oil and gas, for example, can be used in the creation of other petrochemical products, so they are unlikely to disappear even if their utility as a fuel source is diminished.

The most forward-looking fossil fuel firms are investing in renewable energy. Often, the engineering expertise possessed by major oil and gas companies translates well into renewable technologies. Nevertheless, businesses that are used to the high-risk, high-return world of oil and gas should not run headfirst into the renewable energy market: businesses would do well to ensure they take the necessary time to acquaint themselves with the renewable market before making investments.

Long-term environmental challenges persist even when firms have finished drilling for oil or gas. Decommissioning rigs that have come to the end of their lifespan is a sensitive issue, with environmental considerations often coming into conflict with safety concerns. Globally, there are more than 600 rigs that must be decommissioned by 2021, and this figure may rise if supply-side challenges become more pronounced.

The future may hold challenges for the oil and gas industry, but they are not insurmountable. In recent years, agile businesses have proven themselves capable of withstanding a price crash and growing demands from environmentally conscious consumers. The best among them have turned their biggest challenges into new opportunities, investing with the future in mind. These are the businesses that have been recognised by the World Finance Oil and Gas Awards 2018.

World Finance Oil & Gas Awards 2018

Best Fully Integrated Company
Africa: Sonangol
Asia: PETRONAS
Middle East: Saudi Aramco
Eastern Europe: LUKOIL
Western Europe: BP
Latin America: YPF
North America: Chevron

Best Independent Company
Africa: Shoreline Natural Resources
Asia: Cairn India
Middle East: Genel Energy
Eastern Europe: Irkutsk Oil Company
Western Europe: Wintershall
Latin America: GeoPark
North America: Apache Corporation

Best Exploration & Production Company
Africa: Tullow Oil
Asia: JX Nippon Oil & Gas Exploration
Middle East: Petroleum Development Oman
Eastern Europe: Novatek
Western Europe: Equinor
Latin America: Pluspetrol
North America: Concho Resources

Best Downstream Company
Africa: Petrolex
Asia: PETRONAS
Middle East: ADNOC
Eastern Europe: Tatneft
Western Europe: Repsol
Latin America: Ecopetrol
North America: Motiva Enterprises

Best Upstream Service & Solutions Company
Africa: Aquashield Oil & Marine Services
Asia: Sapura Energy
Middle East: MB Petroleum Services
Eastern Europe: Rosneft
Western Europe: Halliburton
Latin America: Baker Hughes
North America: Schlumberger

Best Downstream Service & Solutions Company
Africa: Puma Energy
Asia: PTTEP
Middle East: Kuwait Petroleum International
Eastern Europe: LITASCO
Western Europe: VARO Energy
Latin America: Ipiranga
North America: Marathon Petroleum

Best Drilling Contractor
Africa: Shelf Drilling
Asia: COSL
Middle East: ADES International Holding
Eastern Europe: Eurasia Drilling Company
Western Europe: KCA Deutag
Latin America: San Antonio Internacional
North America: Rowan Companies

Best EPC Service & Solutions Company
Africa: Amec Foster Wheeler
Asia: JGC
Middle East: NPCC
Eastern Europe: ZAVKOM
Western Europe: Wood Group
Latin America: Techint Engineering & Construction
North America: McDermott

Best Sustainability Company
Africa: SPDC
Asia: PTTEP
Middle East: ADNOC
Eastern Europe: Gazprom
Western Europe: Total
Latin America: YPF
North America: Pioneer Natural Resources

Best CEO
Africa: Benedict Peters, Aiteo Group
Asia: Wan Zulkiflee, Petronas
Middle East: Ahmed Al Jaber, ADNOC
Eastern Europe: Alexey Miller, Gazprom
Western Europe: Patrick Pouyanné, Total
Latin America: James Park, GeoPark
North America: Timothy Dove, Pioneer Natural Resources

Best Oil & Gas Law Firm
Africa: Templars
Asia: Weerawong C&P
Middle East: White & Case
Eastern Europe: CMS Russia
Western Europe: Ashurst
Latin America: Canales Auty
North America: Maalouf Ashford & Talbot

Best CTRM Company
Global: Allegro Development

World Finance Global Insurance Awards 2018

Posted on by Max Tomlin

From small-scale insurance policies on personal technological goods to vast national guarantees that protect nations from natural disasters, insurance plays a role in the lives of everyone. This has been the case since 3000 BC, when Chinese and Babylonian sailing merchants would seek out wealthy lenders to underwrite their goods in case they were lost when crossing treacherous waters. While modern-day policies are far more sophisticated, the underlying principles of the insurance sector have remained constant since its inception.
In its simplest form, an insurance policy is a guarantee against unforeseen circumstances that is designed to protect against financial loss. As the definition of ‘unforeseen circumstances’ has expanded to encompass things like cyberattacks and mass data breaches, insurers have had to adapt to meet the challenges posed by the modern world. This protective attitude must then be weighed against actions that can increase revenue and drive the industry forward – a fine balance to strike. With this in mind, World Finance has selected those firms that succeeded in maintaining this delicate equilibrium for the 2018 edition of the Global Insurance Awards.

Macro concerns
At an institutional level, the past year has principally been characterised by an increased willingness by insurers to expose themselves to risk, as evidenced by BlackRock’s Global Insurance Report 2018. By surveying 372 senior executives in the insurance and reinsurance industries across 27 countries, BlackRock learned that almost half of insurers plan to increase portfolio risk exposure over the next 12 to 24 months, compared with just nine percent in 2017.

In a strange twist, an increase in macro issues facing insurers has actually reduced the overall perception of risk, with companies now inclined to see this consistent level of risk as the new normal. Global trade tensions, geopolitical instability and the risk of currency inflation are all issues that have been rumbling on for some time; it appears their longevity has led insurers to be more sanguine about the overall environment. With this in mind, insurers have moved away from the climate of constant concern into a more risk-inclined space.

Think green
One macro concern that has featured heavily in insurers’ minds over the past year is the environment, which remains a significant concern on a national and multinational level. The largest insured loss year to date was 2017, which saw three Atlantic hurricanes classed as category four or higher, the Puebla earthquake in Mexico and wildfires that ripped through California, collectively accounting for over $135bn in losses. The total for 2018 could be set to overtake 2017 although, at the time of printing, calculations for the deadly California wildfires that took place over the course of November are yet to be finalised.

Environmental, social and corporate governance (ESG) policy has been high on the insurance industry’s priority list this year, with 83 percent of BlackRock respondents considering it imperative to have one in place. This is symptomatic of a wider corporate shift towards social responsibility as insurers recognise the significance of safeguarding the planet, as well as their public image, by being more environmentally conscious.

Companies must overcome a number of challenges before ESG policies can be implemented, including a general lack of expertise in modelling ESG variables, given their relatively recent introduction into the marketplace. Changing geopolitical factors also make it difficult for insurers to ascertain a clear picture of the return on investment for these policies.

Many insurers have called for better clarity and global consistency regarding ESG policies. In Europe, the European Commission has responded to these demands by suggesting rule changes that would explicitly require the integration of sustainability risks into investment decisions or advisory processes. The changes are currently under consideration by key EU financial supervisory bodies.

In the black
Financially, the domestic insurance industry entered 2018 on strong footing after positive premium growth in the previous year. According to the OECD’s Insurance Markets in Figures report, life and non-life premiums of domestic insurance increased in 40 out of 43 countries surveyed in 2017; these countries include all members of the OECD and the Association of Insurance Supervisors of Latin America, as well as India and Russia, among others.

Global insurance growth has remained in the black this year. Experts, however, are divided as to whether this profitability will continue. The Swiss Re Institute has predicted that global premiums will rise up to three percent annually in real terms, driven by economic momentum in Asian markets, where premiums are forecast to increase at three times the global rate. Others, including PwC, are advising insurers to exercise caution as the introduction of new regulatory frameworks has the potential to stall the market by making processes more complex and time-consuming.

Meanwhile, the global industry continues to prepare for the introduction of the International Financial Reporting Standard (IFRS) 9 and 17. IFRS 9 measures how an entity should classify and measure financial assets, and is likely to increase volatility in quotidian profits and losses sheets for most insurers. The regulation technically came into force on January 1, 2018, but many qualifying insurers have opted to take advantage of the policy’s deferral option to January 1, 2021. IFRS 17 requires insurance providers to provide high-quality financial information that is globally comparable and consistent. The directive is designed to increase transparency in the industry and is set to come into force on January 1, 2021.

On its toes
With regards to key industry players, the insurance behemoths continue to be disrupted by the rise of ‘insurtech’ firms – insurance companies employing digital technologies – challenging multinationals for a percentage of their market share. These technologies include the Internet of Things, robotic process automation, advanced consumer analytics, artificial intelligence and blockchain. Smaller start-up firms have the advantage of being highly agile in terms of their business approach. As such, they are able to adopt and implement new technologies more quickly and efficiently than larger firms. Confidence in these firms’ transformative abilities is reflected in investor interest, with the insurtech sector experiencing a 36.5 percent uplift in investment annually between 2014 and 2017.

Innovation is also an effective tool for companies to better engage with consumers. According to Capgemini’s World Insurance Report: Past, Present and Future, digital technology is a “game changer” with the “potential to redefine insurers’ ability to manage customers’ evolving preferences via seamless, real-time and direct communication”. While many companies have boosted their technological capabilities over the past 12 months, the constantly evolving nature of the industry means the most successful players are those that remain nimble and responsive to developments by becoming digitally agile.

As ever, the firms that keenly evaluate risks and make intelligent investment choices while remaining engaged with their customers are most likely to come out on top. The World Finance Global Insurance awards celebrate those industry leaders that commit to maintaining the highest standards of efficiency and transparency while forging a path for others to follow.

World Finance Global Insurance Awards 2018

Argentina
General – Caja de Seguros
Life – BNP Paribas Cardif

Australia
General – IAG
Life – BT Financial Group

Austria
General – UNIQA Group
Life – SparkassenVersicherung

Bahrain
General – Gulf Union Insurance
Life – Bahrain National Life Assurance

Bangladesh
General – Nitol Insurance
Life – Popular Life Insurance Company

Belgium
General – Baloise
Life – Baloise

Brazil
General – Allianz Brazil
Life – Brasilprev

Bulgaria
General – Armeec Insurance
Life – SiVZK (TUMICO)

Canada
General – Intact Insurance
Life – BMO Insurance

Caribbean
General – National Commercial Bank
Life – ScotiaLife Financial

Chile
General – ACE Group
Life – SURA

China
General – China Pacific Insurance
Life – Ping An Life Insurance

Colombia
General – Liberty Seguros
Life – Seguros Bolivar

Costa Rica
General – ASSA Compañía de Seguros
Life – Adisa

Cyprus
General – General Insurance of Cyprus
Life – Universal Life

Czech Republic
General – Komercní banka
Life – Allianz pojišt’ovna

Denmark
General – Skandia
Life – Danica Pension

Egypt
General – Allianz Egypt
Life – Allianz Egypt

Finland
General – OP Financial Group
Life – Nordea Life Assurance

France
General – Covéa
Life – SCOR

Georgia
General – Aldagi
Life – Aldagi

Greece
General – INTERAMERICAN
Life – NN Hellas

Hong Kong
General – China Taiping Insurance
Life – Habib Bank Zurich Hong Kong

Hungary
General – Allianz Hungária
Life – Magyar Posta Eletbiztosito

India
General – ICICI Lombard
Life – Max Life Insurance

Indonesia
General – PT Asuransi Jasa Indonesia
Life – Asuransi Jiwasraya

Israel
General – Harel Insurance
Life – Clal Insurance

Italy
General – UnipolSai
Life – Poste Vita

Jordan
General – Middle East Insurance Company
Life – Arab Orient Insurance

Kazakhstan
General – Nomad Insurance
Life – Kazkommerts-Life

Kenya
General – CIC Insurance Group
Life – Britam

Kuwait
General – Kuwait Insurance
Life – Al Ahleia Insurance

Lebanon
General – AXA Middle East
Life – Bancassurance

Luxembourg
General – AXA Luxembourg
Life – Swiss Life

Malaysia
General – Etiqa
Life – Hong Leong Assurance Berhad

Malta
General – GasanMamo Insurance
Life – HSBC Life Assurance Malta

Mexico
General – GNP
Life – Seguros Monterrey New York Life

Netherlands
General – Univé
Life – ING Netherlands

New Zealand
General – Tower Insurance
Life – Asteron Life

Nigeria
General – Zenith Insurance
Life – FBNInsurance

Norway
General – Gjensidige
Life – Nordea Liv

Oman
General – Oman United Insurance
Life – Dhofar Insurance

Pakistan
General – Adamjee Insurance
Life – EFU Life

Panama
General – ASSA Compañía de Seguros
Life – Pan-American Life Insurance

Peru
General – RIMAC Seguros
Life – MAPFRE

Philippines
General – Standard Insurance
Life – BPI-Philam Life Assurance

Poland
General – UNIQA Group
Life – MetLife

Portugal
General – Allianz Seguros
Life – Ocidental Seguros

Qatar
General – Qatar General Insurance
Life – Q Life and Medical Insurance

Romania
General – ERGO
Life – Allianz-Tiriac

Russia
General – AlfaStrakhovanie
Life – Renaissance Zhizn Insurance

Saudi Arabia
General – Al Rajhi Takaful
Life – Medgulf

Serbia
General – Generali Osiguranje
Life – Generali Osiguranje

Singapore
General – United Overseas Insurance
Life – Great Eastern Life

South Korea
General – Samsung Life
Life – Hanwha Life

Spain
General – BBVA Seguros
Life – Seguros RGA

Sri Lanka
General – Sri Lanka Insurance
Life – Ceylinco Life Insurance

Sweden
General – Trygg-Hansa
Life – Nordea Liv

Switzerland
General – Helvetia
Life – Swiss Life

Taiwan
General – Cathay Century Insurance
Life – Fubon Life Insurance

Thailand
General – The Viriyah Insurance
Life – Thai Life Insurance

Turkey
General – Zurich Sigorta
Life – Anadolu Hayat Emeklilik

UAE
General – ADNIC
Life – ADNIC

UK
General – AXA UK
Life – Legal & General

US
General – Progressive
Life – Lincoln Financial Group

Uzbekistan
General – Uzagrosugurta
Life – O’zbekinvest Hayot

Vietnam
General – PVI
Life – Bao Viet Life

GCC Investment and Development Awards 2018

Posted on by Max Tomlin

Since its inception in 1981, the Gulf Cooperation Council (GCC) has pushed an ambitious programme of infrastructure development and economic reform, with the aim of reducing the region’s dependence on oil. The importance of this diversification project has become clear over the past 12 months, as fluctuations in crude oil prices have revealed weaknesses in the region’s economies.

All GCC countries have been opening up their economies to foreign direct investment over the past year as part of their respective diversification strategies

Global trade tensions and the reimposition of US sanctions on Iran have also contributed to a challenging fiscal environment. However, this has only spurred the GCC’s programme further, with countries including Qatar and Saudi Arabia accelerating development projects. Investment has also been catalysed by the renewed drive for diversification, with foreign investment increasingly encouraged by regional governments. This has led the IMF to raise its economic growth predictions to 3.9 percent over the next 12 months, according to its Regional Economic Outlook.

In the quest for growth, the most successful players are, as ever, those that balance speed and sustainability by implementing structural reforms alongside investment. The World Finance GCC Investment & Development awards recognise those that are taking action now to safeguard the future economy.

Leaving oil behind
Economic growth in the GCC bottomed out in 2017, falling by 0.2 percent across all six member states. Saudi Arabia saw its first economic contraction since 2009, due for the most part to oil production cuts introduced by the so-called ‘OPEC+’ group. Historic heavy reliance on oil revenues has left many GCC nations beholden to the fluctuations of the market, which has been particularly volatile since hitting a low point in 2014.

The outlook for oil was far brighter in 2018, with prices climbing to four-year highs of $82.16 per barrel in September. This provided a spell of relief for the GCC’s five oil-exporting nations, with Oman registering the region’s leading GDP recovery of 3.8 percent. Nevertheless, past oil fluctuations have clearly spooked the GCC states, with all opting to pour additional funds into non-oil ventures in 2018.

Infrastructure development in particular has accelerated in the context of several high-profile global events, notably Expo 2020 Dubai and the 2022 FIFA World Cup in Qatar. Qatar is forecast to spend $220bn in preparation for the tournament, which includes the construction of an entirely new city, Lusail, featuring a 90,000-seat stadium where the final game will be held. Once complete, the city is expected to house 250,000 future residents. Meanwhile, Dubai has allocated AED 56.6bn ($15.41bn) to Expo preparations, which comprise the conference site itself, an extension of the metro line to access the area, and the AED 735m ($200m) Museum of the Future, which is widely considered to be one of the most complex buildings in the world.

In Kuwait, construction forms part of the country’s seven-pillar New Kuwait Vision 2035 strategy, which aims to transform the country into a financial and trade centre. At the annual Leaders in Construction Summit, the country’s chief of development, Talal Al-Shammari, announced a 46 percent increase in capital expenditure on infrastructure projects for the 2018-19 financial year, to $14.4bn.

Supportive substructure
Many GCC countries have also embarked on a programme of bureaucratic reform to complement infrastructure development and allow the private sector to thrive. In February 2018, Bahrain introduced a wage protection scheme that seeks to end the exploitation of staff by ensuring they are paid on time. It was launched in May and will be rolled out in a controlled release programme until May 2019.

Qatar’s visa-free entry programme, launched in 2017 in an effort to boost tourism, has been expanded this year to include Indian and Ukrainian nationals in a sign of increased openness from the Qatari Government. It has also pledged to put an end to the notorious kafala system that disadvantages migrant workers. However, more transparency is needed with regards to workers’ rights.

In May, Kuwait’s parliament voted to delay the introduction of VAT until 2021, ensuring operating costs remain at the current rate for private companies. To date, Saudi Arabia and the UAE are the only GCC countries to have implemented VAT.

With regards to the international sphere, all GCC countries have been opening up their economies to foreign direct investment (FDI) over the past year as part of their respective diversification strategies. In terms of volume, the UAE is the region’s largest destination for FDI, drawing in around $9bn in 2018. The country has also announced key changes to its residency programme, offering foreign investors a 10-year residency visa with the aim of boosting FDI by 15 percent over the next year. Meanwhile, FDI inflows to Bahrain grew 138 percent over the first three quarters of the year, the fastest rate of all GCC nations. In May, the country announced it would extend the term of residence visas for qualified investors and professionals from two years to 10 to further attract foreign interest.

In the past 12 months, under its Saudi Vision 2030 plan to transform economic and social infrastructure, Saudi Arabia has implemented more business-related reforms to boost international investment than any other GCC country. The World Bank noted it introduced reforms across six of its 10 pillars in its Doing Business 2018 report, from reducing documents needed for customs clearance to implementing online systems for administrative tasks.

The kingdom has welcomed western banks in particular, with Citibank becoming the latest firm to receive a banking licence, joining JPMorgan Chase and HSBC. International fiscal interest was reignited at the beginning of 2018 when Saudi Arabia announced it would float five percent of state oil giant Saudi Aramco. This was predicted to be the largest IPO in history before it was called off in August, with the company’s chairman, Khalid al-Falih, announcing in a statement: “The government remains committed to the IPO of Saudi Aramco at a time of its own choosing when conditions are optimum.” He added that the timing of the IPO will depend on “favourable market conditions” and a “downstream acquisition”, which the company will pursue in 2019. London, New York and Hong Kong exchanges have been vying for some time to list the Saudi oil giant, which is expected to be valued at around $5trn at IPO.

Looking ahead
The GCC has plenty to look forward to over the next few years, with high-profile events bringing prosperity and new interest to the region. The IMF named the FIFA World Cup and Kuwait’s implementation of five-year growth plans as key stimuli over the next 12 months. Increased FDI and further progress on key infrastructure development projects will also help diversify the economies of all six member nations.

As ever, those that are committed to economic diversification, welcoming foreign investment and opening up their nations are the firms that are reaping the rewards of the affluent region. It is these individuals and companies that World Finance recognises in the 2018 GCC Investment & Development Awards.

World Finance GCC Investment and Development Awards 2018

Individual Awards

Chairman of the Year
Sheikh Mohammed Jarrah AI-Sabah
Chairman of Kuwait International Bank, Kuwait

Banker of the Year
André Sayegh
Deputy CEO of First Abu Dhabi Bank, UAE

Best CEO in the Investment Industry
Faisal Mansour Sarkhou
CEO of KAMCO, Kuwait

Most Employee-Focused CEO
Mohammad Nasr Abdeen
CEO of Union National Bank, UAE

Best Jewellery Designer
Fatima bint Ali Al Dhaheri
Founder of Ruwaya, UAE

 

Companies

Best Custodian
HSBC, Middle East

Best Fund & Asset Management
Qatar National Bank, Qatar

Best CSR Business Model
Kuwait International Bank, Kuwait

Best Commercial Bank 
Samba Financial Group, Saudi Arabia

Best ISLAMIC Bank
Kuwait International Bank, Kuwait

Best Brokerage House
NBK Capital, Kuwait

Best SME Finance program
Bank Muscat, Oman

Best Islamic Insurance Company
Tawuniya, Saudi Arabia

Best Banking & Finance Software Solutions 
International Turnkey Systems, Kuwait  

Best Real Estate Investment Company
Mohammed Al Subeaei & Sons Investment Company, Saudi Arabia

Best Luxury Car Dealer
Al Ghassan Motors, Saudi Arabia

Best Financial Centre
Dubai International Financial Centre, UAE

Best Tourism Development Strategy
Saudi Commission for Tourism and National Heritage, Saudi Arabia

Outstanding Employee Engagement Strategy
Union National Bank, UAE

Best Investment Banking Advisory & Research Company
KAMCO, Kuwait

Top 5 mistakes to avoid when you’re new to trading

Posted on by Max Tomlin

In today’s world, you do not have to be a billionaire with significant capital to begin trading. Previously, there has been a belief that trading is too complicated or risky for beginners to try but the reality is that as long as you understand the rules and how to approach it, it is simple.

The advances and developments in technology have meant that anyone with an internet connection and an understanding of the rules is able to trade on the market. Plus, with innovations such as Artificial Intelligence (AI) now being used in the trading sector, producing top-level results and streamlining the whole process, there is no better time for beginners to enter the industry. Here we outline the five most common mistakes made by new traders.

1 – Trading without a strategy
It is vital that you approach trading as a business and create a strategic plan that includes short- and long-term goals, the amount of capital you have available and a plan of action. You need to determine what you will be trading – stock, commodities, currency pairs and so forth – as well as how you want to trade. A good trading plan needs to be concise, objective, researched and continually evaluated at regular intervals. Even professionals struggle with the analysis needed for a strategy, which is why the development of AI technology is useful for both experienced and new traders and can support you in making the right decisions.

2 – Not taking advantage of technology
AI (or automated) trading consists of a computer programme that does the hard work for you, significantly simplifying and streamlining both the planning and trading process. Not only does it collect the mass amounts of data needed for the analysis, allowing you keep up to date with price development patterns and real-time quotes, but it acts as a guide for the best times to trade, using machine learning to train itself and its strategies over time. Particularly volatile markets need technology that recognises developments in pricing, overvaluations, undervaluations or anticipates reactions to market events. Additionally, new traders can gain valuable experience without the risk of a live environment through ‘backtesting’, which operates a trading simulation.

3 – Underestimating the time commitment
While you can trade on the side, make sure you have a plan that accounts for that and that you stick to the time schedule. You must devote substantial time and effort if you want to be successful. Lots of new traders are anxious to get into the market and begin trading but be careful not to rush straight in. Those who put their money in the market too soon without a thought-out trading strategy or automated trading program often find themselves back at the beginning, but with less capital.

4 – Having unrealistic expectations
There is a very steep learning curve involved with trading. Often new and inexperienced traders underestimate how difficult it is to be successful and mistake the ease with which you can start trading with being able to make sustainable profits quickly. If you treat trading as a serious business venture – not just as a hobby or a get-rich-quick scheme – and develop a realistic outlook for what you believe could happen, it will relieve some of the pressure on getting an immediate return on investment. Alternatively, some traders like to ensure emotional human elements are fully removed from the decision-making process by using automated trading systems.

5 – Getting cocky
Being unaware of the risks associated with trading is one of the biggest mistakes new traders experience – risk management is the cornerstone of trading. It is important that new traders can handle the volatility and constant ups and downs of the markets as well as keeping sight on their capacity to take on risk. High volatility, as seen on the crypto markets, further emphasises the importance of a good risk management. By handling the risks with a strategic plan or an AI trading platform in place, you can immensely improve your trading performance and significantly curtail any losses.

Trading technology can seem quite daunting to those new to the industry, but recent innovations have introduced greater freedom and flexibility for all types of traders. This, paired with the vast amount of information you can access at your fingertips, is a winning combination. Crucially, being successful in trading requires hard work, stamina and as much support as possible. Ultimately, though, this can produce fantastic results.