2024 | World Finance

Breaking from tradition

Posted on July 17, 2024June 13, 2024 by itsupport

At the turn of the millennium on Wall Street, there was a feeling in the air that anything was possible. The dot-com bubble was growing and companies like Amazon and Google were beginning to reshape how we use technology from a useful tool to an integral part of everyday life. Tech was also fast becoming a key force underpinning financial markets, and someone who was taking notice was Lynn Martin, a programmer at IBM who had just graduated from Manhattan College with a degree in computer science and a passion for writing code. As a lover of puzzles, it was no surprise that Martin soon developed an interest in the mathematics of financial markets, leading her to gain a master’s degree in statistics from Columbia University and leave IBM for the New York Stock Exchange’s (NYSE) derivatives business.

Today, technology is even further entangled in global financial markets, which means Martin’s unique blend of skills and experience make her a fitting boss for the world’s largest stock exchange. When she was named president of the NYSE in late 2021, two decades after beginning her career there, Martin said she was “floored” – and not only because of what the promotion meant for her future. “I was honoured, mainly because I understood the gravity of being asked to do this role as a woman and what it represents to have the confidence of a Fortune 500 CEO and entrepreneur whom I have admired for years,” she said, referring to Jeff Sprecher, chair and CEO of Intercontinental Exchange (ICE), which owns the NYSE.

The appointment of a woman with Martin’s vast experience and potential opens the door to even more innovation for the exchange, Carole Crawford, chair of the board of directors for the non-profit 100 Women in Finance, told World Finance. Indeed, Martin is the first to admit that her route from computer programmer to exchange boss was not a traditional career path that girls could follow when she was young.

From Commodore 64 to the Big Board
While Martin was growing up on Long Island in Smithtown, New York, her parents did something that changed her life: they brought home a Commodore 64 computer. “That initial exposure to computers turned into a college major, got me my first job, and then created the cornerstone of my career,” Martin wrote in an op-ed for Fortune in January 2022, just as her tenure as president of NYSE began.

Martin’s first full-time job as a programmer at IBM during the dot-com boom put her at the heart of a pivotal moment in the tech industry, and her early experience with technology instilled a lifelong “appreciation for the value of data and what technology can create,” she wrote. This understanding catapulted her from “that girl who loved to code” on Long Island right into the centre of the action in lower Manhattan, heading up one of the world’s most significant exchanges. Her familiarity with technology is one of Martin’s superpowers, and she is keenly aware that succeeding at the NYSE “will require me to look both forward and back, to view the future through the lens of my unique experience and to help guide an iconic institution in an uncertain age.”

Martin came to the top job at the NYSE at a time when the economy was still reeling from the pandemic. Two years in, and while Covid-related issues are fading, the exchange is under increasing pressure from rival Nasdaq, which beat the NYSE in the battle for initial public offerings (IPOs) in 2023 for the fifth consecutive year.

There is also the rapidly shifting landscape for environmental, social and governance (ESG) standards to contend with, and the small task of ensuring that global firms continue to see the US capital markets as the most attractive place to take their business. Martin is tackling the challenges head-on, applying her unique brand of data-driven insights to come up with new ways for the NYSE to work. In ICE’s fourth-quarter earnings for 2023, its exchanges segment posted a 16 percent rise in revenue to $1.1bn, equating to half of the total company revenue in the quarter.

Recalling the first time he spoke with Martin in 2013, just after ICE acquired the NYSE in a massive $8.2bn deal, CEO Sprecher said, “I remember thinking about how bold and determined she was. And I liked that about her.” It is what led him to appoint Martin, who had been working in the NYSE’s listed derivatives business at the time, to run Interactive Data, a market data company that ICE bought for $5.2bn in 2015. Although the business had potential, growth was lagging, and Martin was challenged with improving its prospects. She did this and then some, proceeding to double the company’s growth rate and build it into ICE’s multi-billion-dollar fixed income and data services segment. However, considering current market challenges, the NYSE still faces hurdles. Despite earnings from the exchange business helping ICE to beat Wall Street’s fourth-quarter expectations, the listings segment declined by four percent due to a lacklustre market for IPOs. IPO proceeds in the US reached $23.9bn in 2023, according to Jessica Chen and Joel Rubinstein, partners at White & Case, but this was less than half of the $62.6bn in proceeds seen pre-pandemic in 2019.

While 2023 was yet another year of stubbornly low IPOs, experts say the tide could finally be turning this year. So far, 2024 was off to a good start, Chen and Rubinstein said, and what’s more, “the US’s position as a global magnet for cross-border listings has remained undiminished,” with listings like Germany’s Birkenstock on the NYSE securing a market valuation of $8.6bn. “It is hoped that the steady performance observed post-IPO and across US stock markets generally will encourage more companies to pursue IPOs in the coming months,” they added, noting that the Renaissance IPO Index, which tracks the performance of companies that have listed within the past three years, rose 44 percent in 2023, beating the S&P 500. Plus, there is strong interest in the technology sector, where deals involving chipmakers and artificial intelligence (AI) are gathering momentum. In March, social media platform Reddit went public after a long-awaited IPO, and on the first day of trading, shares jumped 48 percent. “The IPO markets are definitely opening back up,” Martin told CNBC in April. “Deals are getting done,” she said, adding that these were “really optimistic signs for the IPO market.”

The issue, then, is attracting them to the NYSE over its rivals. Between January 2018 and July 2023, the NYSE’s market cap for domestic listed companies grew from $23trn to $25trn, according to data from Statista. Meanwhile, Nasdaq’s shot up from $11trn to $22trn. Nasdaq, which has a reputation for being the ‘tech exchange,’ boasts lower listing fees and costs, which can attract smaller companies. NYSE, meanwhile, is associated with a sense of prestige and history – executives who list on the exchange have the opportunity to ring its famous opening bell in front of live traders. Yet as Mark Mandel, chair of Baker McKenzie’s North America capital markets group, told the Financial Times, choosing between the two is like picking between a Bentley and a Tesla: “You won’t go wrong with either, but companies, like people, tend to gravitate towards certain brands.”

Blazing a trail
Becoming president of the NYSE, Martin had big shoes to fill. She replaced Stacey Cunningham, who was the first woman to lead the exchange in its more than two centuries of operation in 2018. Following ICE’s acquisition of NYSE, Cunningham “embraced the challenge to reinvent a global icon,” Sprecher said. The NYSE’s entire portfolio was worth more than $25trn as of December 2023, including four fully electronic stock exchanges and two options exchanges. Running this operation requires a skill set balancing strong leadership with in-depth knowledge of the fundamentals of its systems.

As a leader, Martin is focused on innovation. “I don’t accept the phrase ‘We’ve always done it that way.’ Because with that mindset you don’t grow and innovate,” she said in a NYSE Communications release. In a sign of her openness to new ideas, the NYSE revealed in April that it was polling market participants on round-the-clock trading. The poll followed news of start-up 24 Exchange, backed by Steve Cohen’s Point72 Ventures fund, going to the Securities and Exchange Commission (SEC) for approval to launch the first 24-hour exchange. Such a move could shake up US stock markets, which, unlike cryptocurrencies or even US treasuries and major currencies, don’t operate at all hours.

As someone who has continually been at the cutting edge of a rapidly growing industry – and as a trailblazer herself – Martin is in tune with the bold thinking needed to innovate in financial markets. In 2013, she was named CEO of NYSE Liffe US, the American division of NYSE Euronext’s international derivatives business. Having worked her way up from COO of the firm and senior vice president at NYSE Euronext, the appointment made her the first woman to head a US exchange since the 1980s. Martin didn’t know about this milestone until it was pointed out to her in an interview with John Lothian News, but she did not shrug off the landmark moment, saying it made the appointment special “not just from a professional standpoint, but also from a personal standpoint.”

Martin continued, “When I was growing up, my mom and my grandma always used to say to me that I was so fortunate to be born when I was born, at a time when a woman had all the opportunities in the world in front of her. Being reminded of that every day forced me to work hard throughout my life, and it motivates me to continue to work hard, and also to be thankful for any opportunities that are presented to me, because women in the past didn’t always have those opportunities.”

Within global financial services institutions, as of 2021, women held 21 percent of board seats, 19 percent of C-suite roles and just five percent of CEO positions, according to the report by Deloitte, Advancing more women leaders in financial services. While progress has been made over the past two decades, the report’s authors concluded that these efforts must continue, as inaction could reverse hard-won gains by as soon as 2030. “These statistics illustrate that more work needs to be done to advance gender equity across the industry,” they said. To find evidence of this, one does not have to look far. In April, a Wells Fargo employee accused the company of an “unapologetically sexist” workplace, the latest in a slew of lawsuits against large US banks related to their treatment of women employees. Other suits have been lobbied against the likes of Citigroup and Goldman Sachs, the latter of which agreed to pay $215m to settle a class action lawsuit alleging widespread bias against women in pay and promotions.

What’s more, the independent think tank the Official Monetary and Financial Institutions Forum found in its Gender Balance Index 2023 that progress is very slow going. At the current rate, it will take 140 years to achieve parity between men and women in leadership positions in the industry, it found.

However, Deloitte’s report identified an important caveat: when there are enough women in leadership ranks at the organisational level, there is strong evidence for the ‘multiplier effect,’ whereby for each woman added to the C-suite, there was a positive, quantifiable impact on the number of women in senior leadership levels just below the C-suite. “For decades, companies have focused largely on activities to improve the pipeline for DEI [diversity, equality and inclusion] efforts. Based on our findings related to the multiplier effect it is equally, if not more, important to focus on diversity at the highest levels of the organisation to drive progress and improve the overall pipeline of diverse talent,” said Neda Shemluck, Deloitte’s US financial services industry DEI leader. “In the finance industry, female role models are not just desirable, they are imperative,” Crawford of 100 Women in Finance said. “Their presence not only inspires confidence and ambition in aspiring women but also challenges the status quo, driving much-needed diversity and innovation.”

“Lynn Martin,” she told World Finance, “is a trailblazer whose journey exemplifies the immense potential of female talent and reaffirms the necessity of ensuring representation of women at every level of leadership in the industry.”

The ESG question
One of Martin’s core guiding principles is her belief that ESG considerations are only growing in importance in the US market. ESG is “top of mind for virtually every public company CEO and board of directors,” Martin wrote in Fortune. And the reason was not, she said, government regulations or quotas, but instead “the free market at work.”

Ioannis Ioannou, an associate professor of strategy and entrepreneurship at London Business School, agreed that businesses – and investors – are recognising the importance of addressing ESG. “The impacts of climate change, resource scarcity, and shifting consumer preferences because of these issues pose significant risks to companies’ operations, supply chains, and overall business models and strategies,” he told World Finance. “Therefore, businesses cannot afford to ignore these challenges; addressing ESG issues is crucial for building resilience, cultivating innovation, and maintaining a competitive edge.” Andreas Hoepner, a professor at University College Dublin’s School of Business, identified the biggest ESG issues of the moment as: carbon emissions, the energy transition, the gender power gap and responsible AI. He said these areas of focus are becoming “increasingly important in fundraising and risk management.”

NYSE and ICE are keenly aware of the way the market environment has changed over recent decades. In a note to staff in late 2021, Sprecher outlined what $130trn worth of finance commitments pledged by the private sector to address climate change at the COP26 gathering in Glasgow meant for ICE, saying it “provides great opportunity in many areas of our exchanges segment.”

Today, investors are demanding that companies pay close attention to issues like climate change and diversity, and shareholders are making their voices heard through their investment decisions. “Investors recognise that environmental, social, and governance issues pose genuine risks to a company’s business model, performance, and long-term viability,” Ioannou said. “Therefore, they are looking for ESG data that effectively captures these risks and enables them to make well-informed choices.”

As a financial data scientist, Hoepner told World Finance, he regularly checks updates on corporations’ individual risks filed with the SEC – which he is seeing more and more of. “Filing risks on key ESG issues and even greenwashing accusations themselves keep rising at considerable pace,” he said.

However, the quality, accuracy and comparability of this data “still leaves significant room for improvement,” Ioannou said. Especially at a time when ‘anti-ESG backlash’ in the political domain has led some companies to take a more cautious approach to ESG issues – at least publicly – to minimise the risk of ideological targeting, Ioannou said. “Given the current political climate, I expect the term ‘ESG’ to become more contested in the US during this election year, even as the approach remains pragmatic and necessary in other parts of the world, with the EU leading the charge,” he added.

Yet despite these challenges for ESG investing, Martin remains a big believer in the work the NYSE can do to boost transparency. It’s an area Martin has direct experience with, having helped to create databases that tracked board diversity, climate risk and other ESG measures as part of her previous role at ICE.

Ioannou said he expects the current quality and accuracy of ESG data to continue improving as issues like climate change, biodiversity loss, societal issues and political division underscore the need for robust ESG risk management, enabling more informed decision-making by companies and investors alike. And with more transparent data will come increased interest from investors. “As these efforts progress, I believe that ESG considerations will inevitably become a core component of investment decision-making,” Ioannou said.

In 2022, Martin put another stake in the ground when she launched the NYSE Sustainability Advisory Council. The council brings together select sustainability leaders within the NYSE community of more than 2,400 listed companies to identify and share global best practices addressing ESG issues. “The NYSE Sustainability Advisory Council is designed to help companies navigate this complex and evolving terrain,” Martin said in a press release about the council’s launch. Chair Elizabeth King added that the group hoped to leverage the power of the NYSE community to “raise all boats and advance the identification, development and adoption of best practices at organisations of all sizes.”

As Martin wrote in Fortune, “The Fearless Girl statue stands vigil outside the NYSE and reminds us every day that while there is still much work to be done, ESG-driven risk management is here to stay, and will only become a larger factor in the years ahead.”

What is next?
While Martin has taken a tech-led approach to issues like ESG investing, the creation of the Sustainability Advisory Council shows she recognises that it is people working together that make the difference in business. “Data and technology allow each of us to do much more, much faster, but at the core of any successful enterprise is people collaborating toward common goals,” she wrote in her op-ed. “It is important that we keep this in mind as we move into a future that will demand the best combination of humanity and processing power that we can muster.”

I don’t accept the phrase ‘We’ve always done it that way.’ Because with that mindset you don’t grow and innovate

To do this in practice at the NYSE, she takes a collaborative and open approach, inspiring colleagues to work together across business lines in order to inspire innovation and creative thinking. For Sprecher, Martin’s transparency with colleagues was a key reason he has kept her as part of his inner circle. “When she took that job running our data division, I would periodically receive an unsolicited communication from her that told me exactly what was going on in the business,” he said. “She is very organised and she shares a lot of data and information with others. She is very transparent, which builds a level of trust and endearment that very few people really have.”

In 2022, Martin launched a new initiative to build trust further, not only within the NYSE, but within US capital markets on the world stage. “As the world’s largest stock exchange with a storied history of more than 230 years, the NYSE has a unique platform and substantive role to play as a leading advocate for capital formation around the world,” said Martin at the launch of the NYSE Institute. The institute was created to use the NYSE’s resources, expertise and relationships to support public companies, advance sound public policy and foster economic growth around the world. “The NYSE Institute provides us with a new structure to formally advance this agenda and offer a strong voice supporting the innovative work of our listed companies and the markets we operate,” Martin said.

Martin has long used her voice to champion her core beliefs around the values of technology in our modern world, the importance of transparency of ESG risks and the resilience of US capital markets. As her position as president of the NYSE amplifies her voice further than ever before, executives, exchanges and business leaders around the world are sitting up and taking note.

Reflections on 30 years of banking in ASEAN’s heart

Posted on July 16, 2024June 13, 2024 by itsupport

As Baiduri Bank celebrates 30 years serving our customers in Brunei, we reflect on some of the ‘firsts’ we have achieved during this time. There are several worth noting. We were the first bank in Brunei to offer internet banking in 2001, followed by mobile banking services in 2007. We were first to offer in-store and in-mall banking seven days a week, and the first to launch internationally accepted Visa Electron debit cards, Mastercard Electronic CashCards, and Visa payWave in the country. Additionally, we were the first and only bank to provide money remittance services through Western Union and to introduce multi-currency ATM dispensing in euros and US, Singapore and Brunei dollars. We were the first to receive PCI-DSS certification for card payment systems and processes, and to offer online securities trading through our subsidiary, Baiduri Capital.

Building a solid foundation
We are incredibly proud of our achievements since Baiduri Bank was established in 1994, including weathering the storm of the global pandemic and proving our resilience to external shocks. Soon after launch, the business positioned itself as a key player in Brunei’s financial sector. Initially focusing on corporate and private banking clients, Baiduri Bank soon expanded into retail banking to meet the needs of its fast-growing customer base. By the end of the 1990s, Baiduri Bank had opened several branches and a finance arm, becoming a leader in automobile finance in Brunei.

More recent milestones include our relocation in 2020 to new headquarters, designed with environmental sustainability in mind. The building attained the Green Mark Certified Award from the Building and Construction Authority of Singapore in recognition of its innovative green features. Later that same year, we undertook a brand refresh to better communicate Baiduri Bank’s strengths and values, ensuring that we stay ahead in a changing world.

Investing in digital transformation
We aim to keep setting trends as our business evolves to remain fit for the future. One key theme we continue to embrace is digital transformation. As early innovators in online and mobile banking, in 2022 we took our own digital capabilities a step further. We partnered with Temenos to replace our legacy systems with a new cloud-based core banking system designed to improve operational efficiency. This collaboration made Baiduri Bank the first bank in Brunei to operate its core banking platform in the cloud under the SaaS model.

We are especially mindful of cybersecurity threats and the need to guard data carefully

Last year we added a new digital wallet, Baiduri Qpay, to our suite of digital payment services. We also introduced a first-of-its-kind e-Marketplace initiative, Maribali, in collaboration with a local SME. Maribali offers a platform for local businesses to market and sell their products and services online with secure and convenient payment options. We are also currently developing API-based microservices which allow us to smoothly integrate legacy and cloud applications, improving service delivery and personalisation.

Improving the customer experience
We have made all these investments in digital transformation with the customer in mind. Our aim has always been to provide personalised and efficient banking. Digital banking platforms and mobile apps improve the customer experience, while automation and AI streamline operations, reduce costs and increase accuracy. We use robotic process automation to make our operational processes more efficient and reduce the time spent on routine tasks. Our AI chatbot Emmi was an industry first, and has helped us create higher-quality customer interaction and better engagement. For instance, we saw a 169 percent increase in live chats through our platform between 2022 and 2023.

Of course, with all opportunities may come risks, and we are especially mindful of cybersecurity threats and the need to guard data carefully. We have included robust cybersecurity and testing into our digital solutions right from the start to protect customer data and build trust in our digital services.
We also recognise that not all our customers will have the same level of access to or comfort with digital tools. Technological disparities can widen the gap between different user groups. We want to promote both financial and technological inclusivity so our customers can enjoy all the benefits of banking’s digital revolution.

Supporting a greener future
Another key theme we focus on is sustainability and green finance. There is growing regulatory support for sustainable finance in the ASEAN region, and we note that global regulators have, quite rightly, been increasingly focused on protecting consumers from ‘greenwashing.’ Banks offering green finance products can attract customers and investors who are taking a growing interest in sustainability, but implementing green finance solutions can be costly and resource-intensive. The reputational risks associated with greenwashing could be high, so we believe the banking sector should ensure its green finance initiatives are genuine and impactful.

In Brunei, the oil and gas sectors have long been a cornerstone of the economy. As sustainable investing gains momentum, we recognise the need for a dual strategy: supporting the energy transition within the oil and gas sector and promoting economic diversification in line with Wawasan Brunei 2035. We urge businesses to explore new growth areas and identify how they can both contribute to and benefit from the evolving ecosystem that supports the leading sectors of the future.

Baiduri Bank is committed to a more sustainable future. We have a comprehensive range of corporate social responsibility (CSR) initiatives focusing on environmental sustainability and empowering micro, small, and medium-sized enterprises (MSMEs). Our efforts include promoting environmental awareness and supporting local businesses with platforms like the Maribali e-Marketplace and the Baiduri Enterprise Hub, a co-working space for MSMEs and budding entrepreneurs. We also support the adoption of green technology through our EV charging stations, established in partnership with QAF Auto and Porsche.

Additionally, we engage in community projects such as the Mengalinga volunteerism app and environmental conservation efforts like the ‘Zero to Hero’ workshops.

Nurturing our human capital
In addition to environmental sustainability, we also think about sustainability in the context of our greatest asset – human capital. Our people are the key to our success, and we understand the importance of supporting their growth and development. To build a more resilient workforce and a more sustainable business, we need to be both agile and adaptable. Business dynamics have shifted worldwide, especially post-pandemic, and talent management has changed with it. It has never been more important to foster a culture of continuous learning and development and recognise the individual contributions of our colleagues.

Baiduri Bank envisions a future marked by continued innovation, sustainability, and strategic growth

Since the start of 2022, we have been working hard to upskill our people across our organisation through several initiatives and programmes aimed at nurturing leadership capabilities. For example, our Leadership Academy and Emerging Leaders Mentoring Programme are designed to identify high-potential employees and provide them with the necessary skills and training to succeed in senior leadership roles. Participants in these programmes receive comprehensive development opportunities, both technical and professional, through mentorship and diverse learning experiences.

We have also significantly increased our investment in training hours. This includes a variety of technical learning and certification programmes, as well as leadership courses, employee wellness initiatives, and ad-hoc workshops and e-learning courses.

Investing strategically in our employees has boosted engagement levels above Asia Pacific and global benchmarks. Our focus on internal talent development has also improved retention and employee satisfaction. By equipping our team members with essential skills and supporting continuous improvement, we build a more efficient business and deliver better service to our customers. This, in turn, boosts business performance and gives us a stronger competitive position in the financial services market.

Our vision for the next 30 years
What will the next 30 years hold for our business? Looking forward, Baiduri Bank envisions a future marked by continued innovation, sustainability, and strategic growth. Our primary focus is on enhancing and fortifying our domestic presence, while preparing for potential expansion to diversify our market base. We will leverage regional economic opportunities as they arise.

Our digital transformation journey is set to continue, as we upgrade our digital banking services and make the most of the exciting developments we are seeing in AI. As always, our priority is customer-centric innovation. We have plans to further improve our personalised banking solutions and continue to support local MSMEs. We are also committed to sustainability and supporting community initiatives through our CSR activities that are aligned with global sustainability goals.
Baiduri Bank boasts an impressive financial record over the last five years, particularly during turbulent times for the global economy. We attribute our success to the strong foundations we have built, and the legacy of excellence we have cultivated over the past 30 years. We are excited to see what the next 30 years will hold, and what new ‘firsts’ we will achieve.

The democratisation of wealth management in Africa

Posted on July 15, 2024June 13, 2024 by itsupport

World Finance gets the low-down on the future of the private wealth industry in Nigeria, as FirstBank wades deep into hyper-powered tech, artificial intelligence, and highly dispersed client ambitions. What are the risks and responsibilities – and how are these safeguarded for this demanding, switched-on client base?

The high-net-worth client business catering to Africa’s growing affluent population is super-competitive. What challenges does this pose for FirstBank, and how are they met head-on?
Africa is home to 135,200 high-net-worth individuals (with $1m or more in investable assets), 312 centi-millionaires ($100m in investable assets or more), and 21 billionaires. Summed up, the bank is faced with the challenges of anticipating and responding to the changing investment and wealth management needs of well-educated and well-travelled individuals who routinely benchmark the bank’s products and services against those of offshore service providers.

So how is this demand met?
We combine a mix of highly personalised service delivery and technology to enhance the client’s experiences with us. We seek to attract the affluent next gen and new money – both to sustain business growth and leadership in the private wealth industry. We leverage technology as an enabler but not to replace humans wholly in the client experience.

What do clients want, in your view?
Speed and competence in service delivery. Our approach has been to focus on the client’s journey, and to seek the most creative ways to make their customer experiences both more personable and rewarding at the right cost. This is achieved by providing highly competent support and leveraging the right technology and tools.

What of political stability, crucial for client risk confidence?
Political instability and governance issues can undermine confidence in the banking system. Affluent individuals can always invest in other jurisdictions to safeguard their wealth.

So how does FirstBank negotiate these tensions?
Political instability anywhere – either remotely or directly – shapes the responses of the players in any market. Private wealth organisations in Africa are no exceptions. These tensions guide how we organise ourselves and also respond to changes in the market.

Is it about a different attitude?
Tensions pose a serious challenge to developing sustainable business models. At FirstBank Private Banking and Wealth Management, we see opportunities where others may focus on challenges. We do this by anticipating high impact changes that could affect personal wealth, and by providing our clients with seamless investment and wealth management solutions to protect and grow their wealth. FirstBank also maintains a presence in the UK providing options for those with offshore banking, mortgage and asset-based lending, and investment needs. A well-trained private banking team sits in this jurisdiction and caters to the needs of these clients.

Where is the Nigerian economy seeing most entrepreneurial growth and potential – and how does FirstBank frame itself as a trusted player in this space?
In the private banking and wealth management business specifically, there are new growth areas in tech and innovation. More private equity firms are showing greater interest in our markets now. Inflows to start-up and tech firms were estimated at $4.5bn in 2023 though this was a decline on the 2022 figures in response to some of the headwinds experienced in some African markets. This sector, however, continues to remain very relevant.

Due to Nigeria’s oil exports, fluctuating oil prices and its impact on the Nigerian Naira, currency volatility is part of life. How does FirstBank manage guidance to clients?
The private banking and wealth management business seeks new growth areas and in turn, more contemporary sources of wealth outside the traditional resource driven areas. We help our clients articulate long-term financial goals and offer a range of investment, wealth management and lifestyle interventions to support these goals. We encourage our clients to adopt risk-mitigating strategies in building investment portfolios to ensure the sustainability of their wealth, while leveraging a range of solutions like mutual funds, fixed income (investment) as well as estate planning (fiduciary) working conjointly with proprietary product partners in FirstBank and our holding companies.

What is the FirstBank view of the Nigerian economy for the next three to five years?
In the recent past we have seen several policy changes aimed at placing the economy on track. With a 600 basis points upward adjustment in the monetary policy rate and in turn higher lending rates, there is guided depreciation of the local currency with a focus on promoting price discovery and stability in the value of the currency. These changes have come with challenges and especially for clients who are constrained to deal with rising inflation (33.69 percent) as of April 2024. It is expected the various government interventions would impact the economy positively with stronger outcomes and a high degree of stability in the next three to five years.

African banks need to offer investment options that match changing values without compromising on profitability. How is this managed?
By being more agile and less reactive. Recognising new growth opportunities while simultaneously protecting the core of their businesses. A good example is the adoption of a well-defined digital wealth management application to cater to a wider and potentially profitable upper affluent base, and to attract the millennial and Gen X future wealth cohorts.

Your competitors aren’t just banks now but fintech and IT companies. With so much blurring of lines, how do you plot a long-term strategy?
Africa is home to seven unicorns – companies with a valuation of more than $1bn. Our long-term strategy is to leverage the distinct advantage of our own franchise – a deep knowledge of the market backed by our long and enviable history, stretching back more than 130 years. We offer solid competence to our private banking and wealth management, institutional and commercial clients. The bank continues to invest heavily in technology as we target more opportunities in adjacent areas for growth.

African countries often compete to attract foreign direct investment (FDI). A favourable tax regime can be an incentive for foreign investors, especially for tech entrepreneurs. Does FirstBank want to see change for clients here?
The government has a policy framework around this with several designated free trade zones listed across the country offering varying incentives to companies ranging from tax breaks to preferential access to regulatory interventions and more.

We have seen several policy changes aimed at placing the economy on track

Tech privacy makes headlines daily. What security and confidentiality safeguards for client peace of mind are in place?
The private wealth business model recognises the high need for confidentiality as distinct from secrecy which may exist outside of regulatory ambits. Chinese walls are built around sensitive data (static and non-static) leveraging technology. We invest in the training of personnel for an in-depth appreciation of the needs and requirements for confidentiality for a highly personalised private banking and wealth management business.

What about corporate governance structure and practices, in relation to board composition?
The bank has an internal governance framework built around best practices and regulatory standards. There is a significant increase at board level understanding of the HNWI and ultra-HNWI business. This is evident in the stronger levels of advocacy and a heightened interest of its role in our overall enterprise strategy.

Are African regulators moving fast enough to support the future digital landscape changes? Is it always a game of catch-up?
Yes. Most of the regulators in the key markets in Africa have a clear stance and view of the role of digitisation. However, there is always room for improvement.

What are the tensions between strong corporate governance, profitability and long-term client trust?
The bank would never sacrifice the trust of its long-term clients or indeed its corporate integrity in the pursuit of profit. We are absolutely woven into the fabric of society in the markets we operate.

The balance of taxes and incentives are particularly important in the African banking landscape. Has the government got the mix right?
These are choices dictated by practicalities and the needs of the sovereign. Nigeria has and would continue to pursue an optimal mix of attracting offshore investors while also ensuring the viability of its local industries.

What can the Western financial services industry learn from African players? Where are African players clearly ahead, do you feel?
Resilience. Banking is a business of managing risks and less about avoiding risks. The ability to deliver despite the intervening uncertainties.

Which financial services companies do you admire most, regardless of jurisdiction?
Other than FirstBank, personally it would be the DBS (Development Bank of Singapore). A practical example of a financial institution that surmounted deep-seated challenges to transition from a conservatively traditional bank to a nimble and opportunity-seeking business reputed to be Asia’s safest bank.

Improve your carbon footprint with packaging for tomorrow

Posted on July 15, 2024July 15, 2024 by itsupport

The packaging of the future will be environmentally friendly, lighter, more efficient, and driven by technological advancements. While smart packaging and the Internet of Things (IoT) offer tremendous potential for the future of packaging, the development of sustainable and eco-friendly packaging materials that can be reintegrated into existing waste cycles and are easily compostable is most important.

PAPACKS is now a leading manufacturer of moulded fibre packaging solutions, setting the standard in Europe for sustainable, fibre-based packaging. With production capacities of over 600 million units annually, we are leaders in both production volume and innovation, boasting an impressive array of over 75 patent families, 30 awards, and more than 10 years of continuous development and research. With a focus on climate protection and the conservation of natural resources, we emphasise the use of renewable raw materials and production processes, especially virgin fibres and industrial hemp. This approach enables us to make a significant contribution to reducing the CO₂ footprint, offering tangible benefits to clients and the environment alike.

By investing in sustainable packaging technologies, we can transform the packaging industry to benefit our planet

Following circular design principles, we consider all life stages of packaging – from development to disposal. A key aspect is choosing raw materials that minimise the ecological footprint, like our moulded fibre technology, which is more sustainable than traditional materials and easily recyclable or compostable. We continuously improve our packaging to reduce its ecological impact and meet circular economy demands.

Moulded fibers
Biodegradable and compostable materials are crucial for sustainable packaging, breaking down naturally without causing environmental harm. Compostable materials, especially useful for food packaging, can be fully converted into compost. Moulded pulp from renewable sources like cellulose or hemp fibres offers a sustainable, cost-effective alternative to traditional packaging, integrating easily into recycling systems.

Moulded pulp packaging is competitive in cost and performance, often providing better protection, durability, and user-friendliness. It is environmentally cost-effective, offers excellent shock absorption, is lightweight, and can be produced in various shapes and sizes.

At PAPACKS, we use compostable tree or hemp fibres for our moulded fibre technology. Our virgin tree cellulose fibre, sourced from sustainably managed forests, is high-quality but resource-intensive. Conversely, industrial hemp is a highly sustainable alternative, growing faster, using less water, and absorbing four times more CO₂ than trees. Hemp fibres match tree fibres in performance, making them an efficient, eco-friendly packaging choice that helps offset CO₂ emissions.

Avoiding rising costs and shortages
The packaging industry faces shortages of virgin fibre raw materials, and a shift to paper-like packaging will exacerbate this scarcity, driving up prices. This will increase production costs, which companies will likely pass on to customers, leading to higher consumer prices – especially problematic for industries with thin profit margins. To mitigate future cost increases due to shortages, PAPACKS, in partnership with the European Material Bank (EMBA), has planted over 2,000 hectares of industrial hemp in Ukraine. This strategic move ensures a self-sufficient supply of high-quality virgin fibre, insulating us from market fluctuations.

Investing in the future of packaging is economically crucial, and companies that do not invest will fall behind. Sustainable, innovative packaging solutions are essential to addressing plastic and waste issues and will gain industrial adoption rapidly.

As the founder and CEO of PAPACKS, I am also the president of the European Moulded Pulp Producer Association (EMPPA). In this role, I aim to unite the moulded pulp industry, promoting innovation and political awareness to support new legislation like the EPS ban. By investing in sustainable packaging technologies, we can transform the packaging industry to benefit our planet, not just corporate marketing. Further information can be found at www.papacks.com

New pathways to trading success

Posted on July 12, 2024June 13, 2024 by itsupport

Forex trading – the act of buying and selling global currencies – is thought to date back as far as the Babylonian period, some 4,000 years ago. From its humble barter-based beginnings, the forex market has grown to become one of the biggest and most liquid of all financial markets, with a daily trading volume of $6.6bn. The dawn of the digital age has made forex trading more accessible than ever before. In the pre-Internet era, trading was something of an exclusive and limited club, where social connections and deep pockets were prerequisites to investing. Now, an internet connection is all that is needed to start trading. In just a few short clicks, traders can check real-time currency rates and view how their investments are performing. Online brokers have helped to further open the world of trading to a wider community, by providing user-friendly platforms on which to trade, along with educational content and trading tips for beginners and experts alike.

With such a wealth of information at new traders’ fingertips, investing is becoming more democratic and more diverse. But as Artificial Intelligence (AI) and algorithmic trading begin to rapidly reshape this fast-paced and changeable market, finding a path to profit has never been so complex. In these turbulent times, the right brokerage firm can make all the difference to a trader’s investment journey.

Seizing new opportunities
The forex market is experiencing a period of considerable change. Advances in AI technologies are transforming the industry as we know it, while a post-pandemic influx of novice traders has seen the market become an ever more competitive place for established brokers. Increasingly, brokerage firms are looking to set themselves apart from other players in the online trading space, offering enhanced, mobile-friendly trading platforms, expert educational resources and attractive partnership programmes.

“FBS has been in the market since 2009, and we have witnessed many trends over these past 15 years,” Diego Lima, Partnership Managers Team Lead at FBS, told World Finance. “Brokers should provide a sense of confidence on every step – and that is particularly important in the current climate.”

For more experienced traders, some of the most valuable advice a broker can share is on new ways to potentially increase their profits – and some of these opportunities don’t even involve trading, at all. In recent years, Introducing Broker (IB) programmes have become a popular way for traders to generate additional income. In an IB programme, an individual acts as an intermediary – an ‘IB’ – between a broker and other traders, introducing potential clients to the brokerage firm in exchange for a commission.

This kind of collaborative venture can prove lucrative for clients looking to boost their income stream, as it allows traders to earn money outside of their direct investments. The client, or ‘IB,’ promotes their broker’s services to potential new traders, and once the secondary client signs up with the broker, the IB receives a commission on the trades that they make from that point onward.

“The FBS IB programme presents a compelling opportunity for individuals looking to earn money in the forex market without actively trading,” Lima explained. “With its competitive commission rates, comprehensive support tools and commitment to partner success, FBS stands out as a premier choice for those seeking to capitalise on the lucrative world of forex IB partnerships.”

A learning curve
While Introducing Broker programmes may be best suited to more experienced traders, leading broker FBS also boasts an impressive offer for novice investors. Forex is a competitive and periodically volatile market, and new entrants can sometimes find that their self-taught knowledge only takes them so far. For those who are just starting out on their trading journey, expert advice and educational training can prove invaluable.

This is particularly pertinent given the rapid rise of ‘finfluencers’ and other forms of alternative financial advice that circulate on social media. While there is a wealth of information to be found online, it can be difficult to know which resources are truly trustworthy. In fact, a recent report carried out by stock research platform WallStreetZen found that over 60 percent of TikTok videos using the hashtag #StockTok contain inaccurate or misleading information. In this climate of widespread misinformation, advice from experienced financial professionals can make all the difference to those new to online trading.

AI can be a powerful tool for traders looking to stay competitive in a fast-moving market

“We offer a variety of educational resources on different online platforms to empower our traders,” Lima explains. “Beginners can make use of our forex guidebook, which offers a crash course in trading essentials. We also continually refresh our website with the latest market analytics and websites, and we host a series of educational webinars on our YouTube channel, with insights from real, experienced traders.”

Access to clear and comprehensive information can help new and inexperienced traders to make more informed, profitable decisions when it comes to buying and selling. But even when armed with practical advice, new traders can still struggle to enter and navigate fast-paced financial markets. That is where demo accounts can help – by providing a safe space for novice traders to hone their skills.

When using a demo account, traders use virtual capital rather than their own, real money. This gives new clients a risk-free opportunity to refine their trading skills and strategies, and gain confidence in their ability.

“Demo accounts are connected to a live trading platform, and use real-time market data,” explained Lima. “By using a demo account, traders can dive into trading and test their knowledge without risking real money. Then, once traders are familiar with the basics and feel confident enough to place an order, they can easily switch from a demo account to a standard account on our app or through our website.”

Seasoned traders, too, can benefit from exploring new options and strategies on a demo account. Continuous learning is key to success in any industry, and trading is certainly no different. In particular, establishing stop-loss and take-profit levels can prove challenging to new and experienced traders alike, with individuals often unsure on where to place their limits. Demo accounts allow traders to explore the levels that may work best for them, and to refine their risk management approach.

By taking the time to self-assess, reflect and strategise using a demo account, traders of all ability levels can boost their skills, and consequently, their likelihood of succeeding when live trading.

A fast-changing market
The forex market is a dynamic, ever-changing landscape. It has undergone many transformations in the digital age, but perhaps none so profound as the AI-powered evolution that it is experiencing today. When used skillfully, AI can be a powerful tool for traders looking to stay competitive in a fast-moving market. But it also poses its own unique challenges for traders, brokers and regulators alike, with experienced professionals rushing to keep pace with the changes happening in the industry.

Machine learning, a subset of AI, uses algorithms to analyse extensive amounts of data. In a matter of seconds, machine learning algorithms can assess vast quantities of financial information, identify opportunities and even autonomously carry out buy and sell orders. Elsewhere, so-called AI ‘trading bots’ can be programmed to manage every aspect of trading – giving traders the option to let AI make investment decisions on their behalf, if they so wish.

“In the years since FBS has been in the forex market, one of the most profound changes we have witnessed has been the steady increase in instant transaction solutions like trading bots,” said Lima. “Nowadays, around 90 percent of forex interactions are being performed without any human interaction at all.”

There are some inevitable limits to trading bots. It goes without saying that they can’t get every investment decision right, and they also require regular updates and adjustments in order to run smoothly and successfully. There is also the risk that a bot has been trained on flawed or low-quality datasets, resulting in poor predictions. Some users may also feel wary of handing over their investment divisions to an automated bot, especially when there may be significant sums of money on the line. While these are all reasonable concerns, such apprehension will ultimately do little to slow the growing dominance of AI in the world of trading. Amid such far-reaching changes, trust between traders and brokers has never been quite so important. In uncertain and unpredictable times, quality customer service can reassure traders and empower them to make the right decisions for their unique financial goals. With more than 27 million active traders, FBS has emerged as one of the market’s most trusted brokers, offering well-established client support that is available around the clock. “Traders can expect a reply in less than a minute after sending their request or schedule a call-back,” explained Lima. “The comfort and satisfaction of our traders is our priority.”

The next few years will undoubtedly bring further changes to the forex market, as developments in AI and algorithmic trading continue to transform the way that we buy, trade and strategise. Brokers and traders will need to evolve with the times, and for those that do, the rewards may well be significant.

Centennial legacy, magnificent transformation

Posted on July 12, 2024July 12, 2024 by itsupport

The reinvention of a long-established Taiwanese government-owned bank, facing challenges in a tough business environment, would likely involve innovative strategies to adapt and thrive. Embracing digital transformation to stay competitive in the rapidly evolving financial landscape through, for instance, more investments in digital banking platforms, mobile apps and online services would be one of the strategies a bank might employ.

Other challenges include the diversification of services to offer a broader range of financial solutions, which could help mitigate risks associated with fluctuations in specific markets and industries while tapping into new revenue streams, as well as the incorporation of sustainability and social responsibility into business practices to attract socially conscious customers and investors. Social responsibility is gaining significant traction in the financial landscape, contributing positively to society and the environment.

By aligning with global sustainability goals and demonstrating a commitment to corporate social responsibility, the bank can enhance its reputation and differentiate itself in the market. These are the key strategies put in place by the Mega International Commercial Bank/Mega Bank, which came into being as a result of the merger of the International Commercial Bank of China and Chiao Tung Bank, effective on August 21, 2006.

Formerly known as the Bank of China (later renamed as the International Commercial Bank of China) and the Chiao Tung Bank during the late Qing Dynasty and the early Republic of China, it has made significant contributions to the internationalised deployment of Taiwanese manufacturers and enterprises, industrial upgrades, and activated economic development through its global presence and extensive remittance network. Presently, it plays a leading role in Taiwan’s banking industry including international trade and foreign exchange operations, international syndicated loans, project financing, and start-up and entrepreneurial investments, among other things.

Mega Bank has been cultivating a comprehensive culture of compliance

Leveraging the advantage of its global presence and correspondent banks, the bank has made immense contributions in supporting domestic companies to expand internationally, upgrading industries, and promoting economic developments. In recent years, by following in the footsteps of peers in advanced countries, the bank has dedicated all efforts to optimising corporate governance and promoting sustainable development.

Mega Bank is headquartered in Taiwan, with overseas operations mainly in Asian countries. The group is focused on developing emerging markets and countries in Southeast Asia, and as of the end of 2023, has 108 branches in Taiwan and 39 overseas operations in 18 countries/regions. Among the 39 overseas locations, Mega Bank has 31 overseas branches and sub-branches, three overseas representative offices and marketing offices, and five subsidiaries and branches in Thailand.

Chairman Paul C. D. Lei holds a Cornell Ph.D. in Economics and took office in June 2023. He told World Finance that Mega Bank cannot rest on its laurels. He expects all employees to adopt a proactive attitude of “facing challenges and embracing changes” to tackle various obstacles, including geopolitical conflicts, escalating inflation, and intensifying competition in the financial landscape.

Lei also outlined three major strategies, which include the implementation of environmental, social and governance (ESG) principles, systems optimisation, and nurturing talents, aiming to lead Mega Bank into another century of glory. Mega Bank also actively develops new financial products and has launched marketing projects to continuously promote business development, to respond to market dynamics, meet customer needs in real time, and adapt to technological and digital financial trends.

Mega Bank also continues to strengthen research and development, deepen various digital financial services, seek cross-industry cooperation opportunities, expand service scope and develop new customers. While Mega Bank is actively investing in digital financial research and development, it has also applied for financial patent protection. As of August 31, 2023, a total of 564 new patents and a total of 116 invention patents have been approved by the Intellectual Property Bureau of the Ministry of Economic Affairs, for a total of 680, which ranks it first among public stock banks.

Committing to net zero
Mega Bank places great emphasis on global climate change and carbon reduction initiatives. It has set targets aligned with the Science-Based Targets initiative (SBTi) and Taiwan’s 2050 Net Zero Emissions Goals. It not only aims to reduce 25 percent of greenhouse gas emissions by 2030 but also to achieve net zero emissions by 2050.

It has planned an ‘Environmental Sustainability Pathway’ by implementing systematic carbon reduction measures and introducing various international ISO standards and green building solutions to enhance its operational environmental and energy management efficiency. Currently, three of its self-owned office buildings have obtained dual certifications for ISO 14001 environmental management and ISO 50001 energy management systems.

The bank has made immense contributions in supporting domestic companies to expand internationally

Moreover, Mega Bank incorporates sustainable business concepts into financial product design, as well as investment and financing approval systems to encourage Taiwanese enterprises to prioritise and implement ESG practices. In line with the Financial Supervisory Commission’s ‘Green Finance 3.0’ policy, it offers various sustainable-related financial products and services, effectively guiding its customers towards low-carbon transitions. For example, it provides venture capital loan projects focusing on renewable energy and job creation, consumer credit products for green buildings and maternity support, issuance of green credit cards, and investment in green energy technology industries amplifying Mega Bank’s core business impact on positive sustainable finance.

System optimisation
In response to the rapid changes of the digital era and challenges of outdated core host system architectures, Mega Bank has initiated a five-year core host system transformation plan from 2021. Starting from the perspectives of users/customers, employees, and senior bank management, it has gradually adjusted the traditional ‘big core and small peripheral’ system architecture to a ‘lightweight core and micro-services’ architecture.

Meanwhile, it has introduced key middleware components, including applications, data, reports, and monitoring, to achieve the long-term goal of core host system transformation. This allows front-end services to be applied flexibly and to respond to business needs swiftly, meeting customer demands. Taking the transformation of the consumer finance business as an example, credit loans have been streamlined with an online application platform while ensuring personal data security and privacy protection.

Mega Bank has introduced the Autonomous Use of Personally Related Data (MyData) platform and integrated personal data functions with the bank’s IXML (Financial Electronic Certificate), simplifying the loan approval process with the i-Loan Approval Management system. Leveraging automated preliminary review and data analysis, along with the development of a ‘Loan Value Model Calculator’ for data-driven portfolio evaluation, the bank aims to deliver a satisfying lending experience to its customers.

Talent cultivation
Lei emphasised that employees are the most valuable assets of an enterprise, and a primary aspect of implementing ESG is taking good care of them. Immediately after assuming office, Lei took steps to ensure an immediate increase in employee remuneration and increased meal subsidies and maternity benefits. These measures, which resonated deeply with the employees, show Lei’s commitment to supportive leadership and a positive work environment.

Indeed, Mega Bank is deeply committed to fostering a happy workplace. Apart from offering competitive salaries and benefits, it promotes effective communication channels between labour and management through employee dedication surveys, human rights due diligence investigations, and labour-management meetings. Furthermore, Mega Bank also cares for the physical and mental health of its employees, obtaining ISO 45001 certification for occupational health and safety management systems in 2022.

On the other hand, its employees in this happy enterprise reciprocate with enthusiasm and dedication to their work. In 2023, Mega Bank achieved a post-tax net profit of NT$31bn ($960m), with each employee contributing an average of NT$5.11m ($158,130). The post-tax earnings for the first quarter of 2024 reached NT$9.9bn ($306m). As Mega Bank is a systematically important bank (D-SIBs) in the Coalition of Movers and Shakers on Sustainable Finance, Mega Financial Holding, its parent company, has been selected for inclusion in the ‘TWSE RA Taiwan Employment Creation 99 Index’ and ‘TWSE RAFI Taiwan High Compensation 100 Index’ for many years. With such honourable achievements, it is no surprise that Mega Bank has been rated as Taiwan’s Best Commercial Bank by World Finance magazine for two consecutive years.

However, these are not the most important achievements for Lei. In his vision, Mega Bank should be “a happy Mega Bank for its employees; a friendly Mega Bank for its customers; a profitable Mega Bank for its shareholders; and a sustainable Mega Bank for Taiwan.”

Establishing a compliant corporate culture that balances profitability and risk is crucial for the long-term success and sustainability of any financial institution. In recent years, Mega Bank has been cultivating a comprehensive culture of compliance, balancing short-term profitability, business expansion, and risk management.

Developing clear ethical standards, implementing a comprehensive compliance framework, fostering a culture of compliance from the top down, providing ongoing training and education programmes to ensure that employees have the knowledge and skills necessary to comply with regulations and internal policies, as well as implementing solid risk management practices, are only some of the strategies put in place to ensure a balanced approach that helps to protect the interests of stakeholders while maintaining regulatory compliance and upholding ethical standards.

The implementation of the Global AML and Sanctions Programme aims to enhance the effectiveness and sustainability of the overall anti-money laundering system. With a solid foundation in place, the bank further strengthens its overseas profitability and business development, giving its overseas branches a significant boost.

A look at Mexico’s pensions reform

Posted on July 11, 2024July 11, 2024 by itsupport

On May 1, a major new reform was introduced to Mexico’s pension system, which included the guarantee of a 100 percent replacement rate for pensions of below-the-mean-wage workers in the individual account scheme, with an additional fiscal cost to be initially financed by the creation of the Welfare Pension Fund, WPF (Fondo de Pensiones para el Bienestar). This reform is not an isolated event – the country’s retirement system has very recently undergone several transformations to correct aspects of the defined-contribution scheme while strengthening it.

Previous problems and reforms
The original Mexican pension system of the Mexican Institute of Social Security (IMSS) operated under a defined benefit, pay-as-you-go scheme until 1997, when, prompted by Mexico’s economic and demographic shifts, a significant transformation occurred. That year, Retirement Funds Administrators (Afores) were established, marking the shift to a defined-contribution scheme, with retirement savings through individual accounts managed by the Afores. Subsequently, public sector employees were integrated into the Afore system in 2007 (they contribute to another institute, ISSSTE).

The 1997 and 2007 reforms, although helpful in coping with the rising and unsustainable fiscal costs of pensions, presented several drawbacks in terms of coverage. First, for those who did not remain in the old system, minimum contributory years to gain the right to a pension were raised from 10 to 24, a problem in a country where workers contribute on average only 43 percent of their active life to social security. Additionally, the minimum guaranteed pension (MGP) for those who did qualify for a pension was less than 25 percent of their average wage and very few workers were expected to get a pension above it. When the first generation of the Afore system filed for a pension in 2021, 24 years after the implementation of the scheme, only a few of them were going to actually receive it and they would mostly get the very low MGP.

Facing these immediate problems, the administration of President Andrés Manuel López Obrador introduced two critical reforms. In 2019, the Welfare Pension for Senior Citizens (Pensión para el Bienestar de los Adultos Mayores) was established, providing a non-contributory pension funded by the federal government to all individuals aged 65 and over. Later, a reform to the Afore scheme in 2020 increased mandatory contributions that will gradually rise from 6.5 percent of wages in 2021 to 15 percent in 2030, reduced Afore managing fees by 30 percent to a cap aligned to an international reference, enhanced the MGP, and decreased the number of weeks needed to qualify for a pension (from 750 in 2021, to rise gradually to 1,000 by 2031).

An overview of the new measures
The new pension reform approved this year was also supported by President López Obrador. It intends to further strengthen the system by increasing the pension to equal the last contributory wage to all workers earning a salary lower than the current IMSS average of 16,777 Mexican pesos a month (around $1,000 at the current exchange rate), provided they are subject to the Afore system and are at least 65 years old. If the worker takes an earlier retirement the pension remains unchanged. Additionally, they must fulfill the years of contribution requirement for a pension.

This recent reform is part of an ambitious pension programme of the current federal government administration

The government will ensure this benefit through the so-called Solidary Supplement (complemento solidario), which will be added to the MGP. In Mexico’s pension system, workers save their contributions as well as their employers’ and the government’s into individual retirement accounts managed by Afores. Upon retirement, their monthly pension comes from this saved amount. If the balance is not enough to reach the MGP, the government subsidises their pension as soon as the worker’s savings are insufficient, so that they receive the MGP. Now, with the 2024 reform, the Solidary Supplement will be added to the MGP so that the pension is equal to the last contributory wage.

The Solidary Supplement therefore creates a new fiscal obligation to be financed, precisely, by the WPF, which is set to start with an initial capital of 64bn Mexican pesos (around $3.8bn). The fund will draw on a variety of sources, like proceeds from the liquidation of the National Agricultural Development Fund and real estate revenues generated by the National Fund for Tourism Promotion, among others. One issue that sparked debate in the media is that the WPF will also receive funds managed by the Afores that have not been claimed by the workers or their beneficiaries 10 years after they had the right to them, in cases where those accounts have been inactive for a year.

The new laws of IMSS, ISSSTE and the Institute of the National Housing Fund for Workers previously stated that accounts in such a situation would be disposed of by their corresponding institutions, provided they created a reserve to return the funds to workers or their beneficiaries in case they eventually claimed them. Under the new legislation, those unclaimed accounts will go to the WPF, which will be established by the Ministry of Finance as a public trust fund at Mexico’s Central Bank (Banco de México). The obligation remains to create a reserve to ensure that refunds can be made to workers or their beneficiaries whenever claimed.

Fact check: unravelling speculation
More than a few media outlets and commentators sparked a heated debate at the time of the legislative process by asserting that the new measure implied an unlawful expropriation of workers’ savings by the government. This assertion proved to be false, as the new law clearly establishes that property rights of the workers over the assets are imprescriptible and the reform merely represents a shift in the institution managing them for those who meet the mentioned criteria (it is estimated that the resources to be transferred to the WPF add to less than 0.5 percent of the total managed by the Afores). In other words, unclaimed funds previously managed by social security institutions will now be managed by the WPF, with the same obligation of maintaining a reserve to pay any claims that may arise. In fact, the pre-reform system never failed to return any claimed funds, due to the reserve created; there is no reason to believe that with WPF this would be otherwise.

The benefits of the reform
The number of beneficiaries receiving the Solidary Support Aid is projected to grow from 8,529 individuals in 2024 to approximately 2.7 million by 2050. The amount of the supplementary subsidy each pensioner receives is expected to average 4,592 Mexican pesos per month (around $275). To ensure sustainability, the reform includes a provision for an actuarial review of the funding sources every eight years, enabling adjustments in case the projected figures fall short.

Key takeaways from the pension reform
This recent reform is part of an ambitious pension programme of the current federal government administration, which has showed a stark determination in going the extra mile in retirement benefits.

Complementing the 2019 and 2020 changes with the latest in 2024, the country has created a unique mixed model, which brings about a more inclusive and robust environment: it now has a universal non-contributory pillar which is very important for a labour market characterised by high informality – that is, low density rates of contributions. At the same time, it has reduced the years of contributions required to gain access to a pension, favouring the first generations of workers under the Afore system, who would otherwise fail to even reach a pension.

The country has created a unique mixed model, which brings about a more inclusive and robust environment

Additionally, the reform passed in May 2024 assures that those first generations of workers reaching a pension in the individual-account, defined-contribution system, receive pensions with a 100 percent replacement rate if their wage is below average. In a country like Mexico, where half the population still works under informal schemes, this measure may very well be a missing incentive for more workers to seek formalisation.

Regarding the funding of the reform, the WPF provides a sustainable financial source for at least the next decade. It is a good provision of the law however, to mandate an actuarial assessment and an eventual replenishing through additional sources after eight years of operation. This will allow for adjustments to be made in case they are necessary at that time.

By taking the best elements of both non-contributory and contributory schemes, the new Mexican mixed pension model represents a significant advancement in the labour conditions of the country and, very importantly, it not only preserves but actually strengthens the Afore system. This is very relevant, as besides being an optimal and worker-aligned management system for retirement funds, Afores have an important role in the Mexican economy, currently representing domestic savings equivalent to 20 percent of the country’s GDP. Before the new model, this number was estimated to rise to 35 percent by 2040, but now the estimate is as high as 56 percent of the GDP of that year. This is no doubt good news not only to the workers but also to the financial environment and economic stability of Mexico.

The value and importance of rural development

Posted on July 11, 2024July 11, 2024 by itsupport

At Campo Capital, we are firmly convinced that rural development is crucial for both economic growth and social wellbeing. Our primary objective is to allocate capital into rural areas in South America, a mission we have successfully pursued for over 13 years. Our projects have provided work for hundreds of people in remote areas of Colombia and Peru. As well as improving and investing in the living conditions of local communities, our work positively impacts both the environment and the economy of the regions we work in.

We specialise in the development of agroforestry, forestry, and environmental projects, alongside offering consulting services in these sectors, generating significant environmental and social impacts aligned with the Sustainable Development Goals (SDGs) of Colombia.

In previous years, the Colombian government has included Campo Capital on its list of companies contributing to the achievement of the SDGs in the country, an accolade we are very proud of. Through our investment management strategies and operations we contribute to rural areas and promote climate change mitigation.

In addition to our investment management endeavours, we focus on structuring and executing greenfield projects aimed at delivering substantial environmental and social benefits, in harmony with the SDGs. Through our initiatives, we have efficiently reforested over 11,000 hectares, preserved biodiversity, and improved the quality of life for workers and local communities.

We work with a diverse range of clients at Campo Capital. Our clients include international and local entities such as the Global Green Growth Institute, the International Climate Fund, Mirova Capital, Finagro, the Growth Institute, IICA, Corpocampo NGO and Total Energy, among others. We also collaborate with governmental entities like the British embassy and private companies in the agricultural sector.

Making an impact
Both Campo Capital and its Impact Fund are deeply committed to the achievement of SDGs and we have guided our impact policies towards this target. All of the projects managed by Campo Capital and sourced in the fund’s pipeline are evaluated not only from an economic scope, but also thoroughly from a social and environmental perspective.

From an economic point of view, we aim to help regions with their financial development. For example, our flagship project is called Sustainable Agroforestry in the Orinoquia, which is an area in central Colombia of approximately 7,500 hectares. Our aim was to help with the region’s economic development by commercialising products derived from cocoa and annatto, while also contributing to the environment through reforestation and helping to improve the living conditions of the local communities.

Investing in sustainable practices is essential and its importance cannot be overstated

From an environmental scope, we set important targets and indicators for each project. These include taking into account soil conditions, species to be included in order to increase biodiversity, overall carbon sequestration potential from the project’s different activities, total area impacted by reforestation and restoration activities, and many more.

These indicators are periodically measured to make sure each project advances positively and is aligned with our strategy and objectives. At a time of vast and concerning environmental change, investing in sustainable practices is essential and its importance cannot be overstated.

From a social standpoint, our projects have provided and continue to present stable employment opportunities for rural communities that have historically experienced limited or precarious working conditions. We see this as a vital part of making a positive social and economic contribution to each region. Additionally, we consistently pursue certifications, such as FSC, to validate our commitment to social practices concerning our employees and the local communities.

The next steps for Campo Capital
Campo Capital is positioned to expand its portfolio of operational projects and impact projects that not only offer economic returns but also have social and environmental impacts. We aim to collaborate with large companies interested in contributing to SDGs.

The fund is set to close by 2025, with plans to begin investing in forestry, agroforestry, and environmental projects. Additionally, we intend to continue expanding our portfolio through consultancies to gain further insights into our areas of operation. Looking ahead, Campo Capital is currently innovating and developing a technological package focused on native species of the Amazon. This novel endeavour underscores our commitment to strengthening our knowledge base and replicating our success in this field.

Forging a sustainably driven transport sector

Posted on July 10, 2024July 11, 2024 by itsupport

The creation of Canadian Pacific Kansas City Limited (CPKC) in April 2023 reshaped the North American freight rail industry. With global headquarters in Calgary, Alberta, Canada, CPKC is the only single-line transcontinental railway linking Canada, the US, and Mexico, offering shippers unparalleled rail service and access to major North American ports and global markets. Stretching approximately 20,000 route miles, and employing around 20,000 railroaders, CPKC is a major transportation service provider, employer and neighbour to communities across the continent.

CPKC’s combination of two historic railroads – Canadian Pacific (CP) and Kansas City Southern (KCS) – has steadily built momentum, bringing new competition to supply chains and creating more value for our customers, while remaining steadfast on the integration of our operations, service and safety. This strategic union also created a unique opportunity to embed responsible business practices as we continue to build our business for the future. Since CPKC’s formation, our progress has been firmly rooted in early-stage integration measures encompassing governance, workforce, and systems integration. These strategic steps have supported us in upholding our commitment to safety, supporting seamless service delivery to our customers, and fostering sustainable operations.

In a year of significant change for our company, we ended 2023 with a strong performance. CPKC led the industry with the lowest Federal Railroad Administration-reportable train accident frequency among Class I railroads, building on CP’s legacy of 17 consecutive years leading the industry in this metric. We established a new climate goal for CPKC’s combined locomotive operations and continued to invest in industry-leading low-carbon technology. We deepened our connections with local communities through impactful community investment initiatives and meaningful partnerships. We also reconstituted our Diversity & Inclusion Council to lead our efforts in this area as we integrate CPKC.

These important measures clearly demonstrate to our employees, customers, suppliers and the communities where we operate our continued commitment to being a sustainability leader. As we move through our second year as CPKC, sustainability remains front and centre of our integration journey.

A sustainably driven culture
Combining two railroads operating in three countries and a diverse team of around 20,000 railroaders is a significant undertaking. People and culture are key drivers to CPKC’s success. A primary goal of our integration has been to foster a culture united in the pursuit of safety excellence, best-in-class service for our customers and responsible business practices.

Sustainability remains front and centre of our integration journey

Safety is foundational to everything we do, and maintaining stringent safety standards is crucial amid the complex changes taking place in our business. In 2023, we rolled out Home Safe, our flagship safety programme, across our Southern US and Mexico operating regions. Through Home Safe, we work to protect our railroaders, our communities, our customers and the environment. Upholding our Home Safe commitment daily, we enhance our safety culture through quarterly safety walkabouts and celebrating safety performance through our annual Safety Awards for Excellence. Safety walkabouts bring together management, Workplace Health & Safety Committee members, frontline railroaders and various regulators to proactively identify and address workplace hazards while promoting a safe working environment.

Throughout our network, many passionate railroaders embody our Home Safe commitment and actions. Every year, we recognise these individuals at the CPKC Safety Awards for Excellence, honouring their commitment to championing our Home Safe principles and looking out for the wellbeing of their colleagues every day. While we continually work to be safer today than we were yesterday, we also recognise that safety is a journey, not a destination. We will continue reinforcing a robust safety culture in pursuit of our goal of being North America’s safest freight railroad.

With employees in three countries, fostering a culture where all perspectives are heard and valued is essential to unlocking the full potential of CPKC’s workforce. We established a Diversity & Inclusion Council led by senior leaders to champion the development of our diversity and inclusion strategy as we integrate CPKC. The council held 15 virtual Diversity Dialogue engagement sessions to tap into the wealth of CPKC employee perspectives. Over 200 employees participated in these sessions, providing insight to help inform the evolution of CPKC’s strategy.

Expanding our operational reach brings added responsibility. As a neighbour to hundreds of communities across North America, CPKC is dedicated to operating safely and making a meaningful impact in the communities in which we live, work and operate. In 2023, we expanded our emergency response training and public safety awareness engagement with personnel, community first responders and other stakeholders in communities along our right of way. CPKC organised or participated in 82 community awareness and emergency training events, attended by more than 4,000 emergency responders. In support of local food banks, our annual 2023 Holiday Train programme reached communities across our network in Canada, the US and Mexico, raising CAD$1.8m and collecting over 160,000 lbs of food.

CPKC climate strategy
The transportation sector has a vital role to play in the transition to a lower-carbon economy. Our goal is to be a leader in this transition. Freight rail is the backbone of global trade, moving goods across vast distances with greater fuel efficiency than long-haul trucking. CPKC strives to reduce operational emissions and drive change within freight rail through innovation and collaboration with industry partners, customers, governments, and suppliers on climate solutions.

Freight rail is the backbone of global trade, moving goods across vast distances

One of CPKC’s early accomplishments was to release our commitment to climate action, which sets out our commitment to develop an emissions target aligned with a 1.5°C future. At the same time, we announced a GHG emissions reduction target, which was validated by the Science Based Targets Initiative, to reduce our well-to-wheel locomotive emissions by 36.9 percent per gross ton-mile by 2030 from a 2020 base year.

As we refine our climate strategy, we continue to implement initiatives to reduce operational emissions, including exploring and investing in industry-leading low carbon solutions. This includes developing North America’s first line-haul hydrogen-powered locomotive using fuel cells and batteries to power the locomotive’s electric traction motors. Since the programme’s inception in 2020, we have continued to meet key milestones in this pioneering endeavour. In 2023, we completed two hydrogen locomotive conversions and advanced production on a third, as well as the installation of hydrogen production and fueling facilities. Together with CSX, we announced a joint venture to build and deploy hydrogen locomotive conversion kits for diesel-electric locomotives at CSX’s locomotive shop in West Virginia.

In March 2024, we marked another important milestone with the one-year anniversary of our locomotive biofuel trial project. As part of this initiative, CPKC is collaborating with our industry peers and locomotive suppliers to test the long-term operational impacts of utilising diesel blended with 20 percent biodiesel renewable fuel within our locomotive fleet. In 2023, we completed more than 500 fuelling events and utilised more than 8.2 million litres of B20 fuel in our locomotive operations. For every litre of conventional diesel fuel that is replaced with B20, we reduce total emissions by 18 percent. This pilot project is a critical step in validating the operational impacts of utilising advanced blends of renewable biofuels in CPKC’s locomotive fleet.

In addition to our investments in low carbon initiatives, CPKC continues to upgrade our locomotive fleet and rail network to improve overall efficiency and provide system reliability through our capital expenditure programme. In 2023, we invested CAD$2,468m in capital expenditures to maintain and upgrade our locomotive fleet and network to improve overall efficiency and ensure system reliability.

These accomplishments reflect CPKC’s commitment to operating sustainably and a culture of continuous improvement. As we advance through our second year as CPKC, we are keeping sustainability front and centre in our integration journey. We remain committed to promoting positive change both within CPKC and beyond.

Please see our filings with securities regulators in Canada and the US for additional information and cautionary statements relating to our sustainability efforts, including factors that could affect the forward-looking information in this article.

Breaking down barriers and achieving ambitions

Posted on July 10, 2024June 13, 2024 by itsupport

“An entrepreneurial spirit led me to start my own ventures,” says Isavella Korelidou-Evripidou, Founder and Chief Executive of Global Financial Services Consultants (GFSC Global) – an award-winning consulting group offering services across the corporate, legal, regulatory, financial and banking fields.

“I founded and managed several businesses and thrived on identifying opportunities, with the aim of making a positive impact in the business world,” she says. Today GFSC Global operates in more than 70 countries, providing advice, planning support, structural management and licensing services to clients across the world.

“We work with a broad range of corporate and private clients, including multinational corporations, small and medium-sized enterprises (SMEs), start-ups, entrepreneurs, financial organisations, banks, crypto exchangers, investment funds and high-net-worth individuals,” she says. “We specialise in worldwide licensing, AML/compliance support, legal support and company formation, providing tailored solutions with over 20 years’ experience.”

Overcoming gender bias
For Korelidou-Evripidou, founding and running the business has come with an abundance of rewards – but it hasn’t been without its challenges, especially when it comes to gender equity. “Breaking into leadership positions as a woman often requires overcoming biases and stereotypes that may exist within organisations,” she explains.

Female founders and CEOs have a chance to drive meaningful change within their organisations

She believes the under-representation of women in senior leadership roles can in turn make it harder for female founders and CEOs to find mentors, sponsors or role models who have navigated similar paths. “The other issue is around work/life balance,” she says. “Juggling demanding leadership roles with personal commitments and family responsibilities can be particularly challenging.” But for Korelidou-Evripidou, being a woman in a male-dominated industry can also offer opportunities.

“Female founders and CEOs have a chance to drive meaningful change within their organisations and the industry as a whole, shaping policies, practices and cultures, while contributing to greater gender diversity and inclusion within the industry,” she says. “Successful female leaders can inspire other women to pursue leadership positions in finance and break down barriers for future generations.”

Diverse leadership
Korelidou-Evripidou believes cultivating that diversity doesn’t just benefit women; it leads to better outcomes for everyone involved. “Companies with diverse leadership teams tend to perform better,” she says. “Female founders and CEOs can contribute to improved business outcomes through their unique perspectives and experiences.”

Learning from her own experience, she has made it her mission to encourage greater diversity in all forms. “I believe creating an environment where all team members feel comfortable sharing their perspectives and ideas is crucial for encouraging diversity,” she says. “My top tip for leaders is to encourage open communication, active listening and collaboration among team members to ensure that everyone’s voice is heard and valued.

“It’s also crucial to recognise and celebrate the unique backgrounds, experiences and perspectives that each team member brings to the table, and to ensure that leadership positions reflect diversity by actively promoting and supporting individuals from under-represented groups,” she says.

Adapting to change
That progressive leadership style isn’t just seen in Korelidou-Evripidou’s response to diversity; it is also reflected in the company’s approach to major challenges – most notably demonstrated during and since the pandemic.

Despite the challenges, GFSC Global managed to continue to grow, improving its financial results in 2023. “We did this by focusing on our strengths and building on our core competencies, putting the emphasis on strategic cost management, innovative business models and digital transformation,” she says.

The firm invested in technology to enhance its operations and improve customer experiences, and saw an opportunity to explore new markets and diversify its revenue streams. “With shifts in consumer behaviour and preferences, we sought opportunities in emerging markets and untapped demographics,” she continues. “This involved strategic market research, analysis of consumer behaviour and targeted marketing efforts to effectively engage with new customer segments.”

Future ambitions
The pandemic isn’t the only hurdle the company has faced; Korelidou-Evripidou points to regulatory challenges as one of the key issues for the industry. “As governments around the world strive to protect consumers, investors and the public interest, they have implemented stricter regulations across various sectors,” she says.

“This has led to a greater burden on corporations to ensure compliance with these regulations, resulting in increased legal and regulatory costs. The rapid pace at which regulations are changing makes it challenging for corporations to keep up with the latest requirements.”

But if the company’s past approach to challenges is anything to go by, these setbacks will only create further opportunities for innovation, adaptation and growth – and the company is already plotting its expansion plans. “We are approaching new jurisdictions for licenses in brokerage, crypto, gaming, banking, investment funds, blockchain and many other projects,” she says.

“We aim to continue the success of 2023 this year and beyond, using our experience and knowledge to deliver the best possible service to our clients,” she says. “We also want to continue cultivating a diverse, supportive team that not only benefits the bottom line, but inspires others to break down barriers and achieve their ambitions – as I am proud to have done,” Korelidou-Evripidou concludes.

Bulgarian banks are ready for the Euro adoption

Posted on July 9, 2024July 9, 2024 by itsupport

Bulgaria’s accession to the eurozone and the adoption of the world’s second most used currency is a long-anticipated process. This step will positively impact our economy and will be a driver for accelerating reforms, increasing prosperity, and reaching at least the average European living standards. It will offer numerous benefits to citizens and companies, not only by reducing transaction costs but also by improving the investment environment, activating local and foreign investments, with increased investment activity expected to support employment.

Eurozone membership will offer another benefit. Because of the expiring derogation, banks must allocate capital for purchasing Bulgarian government securities in euros and for holding euro deposits at Bulgarian National Bank (BNB), which is highly illogical given that we have been in a currency board for over 25 years.

This year, the effect is estimated at approximately BGN400m (€205m) of additional capital, and next year it is expected to double. Instead of guaranteeing risk-free loans to the state, this capital could enable us to increase loans to the real economy by several billion leva.

Adopting the euro is expected to boost Bulgaria’s international trade

The ECB will be able to act as a lender of last resort, minimising the risk of bank failures due to a liquidity crisis. Bulgaria will have the opportunity to participate in the decision-making process regarding monetary policy, instead of just being a silent bystander. Although all banks in Europe follow the same laws and regulations, being outside the eurozone, we bear the burden without the benefits.

Adopting the euro is expected to boost Bulgaria’s international trade, especially in agriculture, services, and tourism, as well as in certain manufacturing sectors where Bulgaria has already established strong positions within the EU networks.

In the Association of Banks in Bulgaria, we plan to launch an educational campaign among citizens, for which we count on the support of BNB and the government, to explain all the benefits of adopting the euro, which will significantly improve the business environment for everyone. Banks, businesses, and the state must unite to communicate clearly and help our clients, our employees, and the society navigate through the abundance of information and counteract misinformation, enabling everyone to understand the advantages of adopting the euro. The euro has already become a part of our daily lives, with a significant portion of real estate prices listed in euros, and Bulgarian citizens frequently conducting transactions in this currency.

All systems go
Together with other member banks of the Association of Banks in Bulgaria, we have even more initiatives in the field of environmental protection, social policies, and corporate governance, the so-called ESG. The role of banks is primarily to focus on the areas where we can have the most significant impact to achieve positive effects. Banks are key players in the green transformation, accelerating the path to climate neutrality not only through the decarbonisation of our operations but also through prioritised financing of our clients’ projects. Environmental protection is the most visible aspect of these initiatives, but it is far from the only one. We lead in promoting good governance practices, women’s participation in management, and the independence of our control bodies. For us banks it is important to meet all requirements and prepare our information systems accordingly. We will invest additional resources in cyber security enhancements and increase security measures, protections against cyber threats such as hacking, malware, or phishing.

Alongside that preparation, the contribution of the banking sector is extremely notable in digital banking. Habits today differ from those of yesterday because life imposes its own dynamics. The accelerated implementation of high-tech solutions enhances the user experience. Thus, we provide our customers with even higher quality, faster, and more efficient banking services because the foundation of banking is the relationship between the consumer and the financial institution. In this process, the major market players have an advantage because we possess the resources and means to implement various technological solutions and ensure even higher quality and efficiency in banking services. Digital cards, virtual wallets, and QR-code payments are all part of the new reality. However, the speed of technological transformation depends on the people in the team. We make significant investments in process re-engineering and human resources to create client-friendly applications that enhance the pleasure of interacting with us. The Phygital model is the future of banking. Hybrid forms of banking, a complex model blending digital and physical services, and consumer experience across different channels and platforms – sequentially, in real-time – are what we do at Postbank and what our clients expect. On the other hand, digital payments play a crucial role in stimulating economic growth, innovation, and consumer convenience.

Finally, the euro adoption is a historic moment, and we are well prepared for this significant step. And if there is a system in the Bulgarian economy that is already in the eurozone in terms of requirements, regulations, good business practices, and behaviour, it is the banking system.

So, I can confidently state that we, the banks, will be ready by January 1, 2025.

Lying in corporate elections

Posted on July 9, 2024July 9, 2024 by itsupport

We live in polarising times. The current political and cultural environment is arguably the most heated and controversial in decades. One of the most prominent victims of our era: the truth. As Mark Twain famously said; “A lie can travel half way around the world while the truth is putting on its shoes.” Political election campaigns, in particular, are riddled with misleading statements, half-truths and outright lies. Our fragmented media ecosystem and the pervasive influence of social media make it easier than ever to distribute falsehoods to a vast audience near-instantaneously, compromising the integrity of political elections.

While not as extreme as with political discourse, similar issues have emerged in corporate elections. In recent years, it seems there have been more half-truths and outright lies in proxy contests than perhaps ever before. During proxy season, hardly a day goes by without a press release, shareholder letter or investor presentation containing questionable statements.

Public companies, as securities issuers, face heavy scrutiny of their disclosures under areas of federal securities law beyond the proxy rules. A company simply cannot make recklessly optimistic statements about its future prospects without exposing itself to liability.

Misleading statements, half-truths and outright lies undercut the ideals of corporate democracy

Dissident shareholders like activist funds, on the other hand, generally escape similar levels of scrutiny. There are rules designed to protect the integrity of corporate elections – the federal proxy rules under the US Securities Exchange Act of 1934. Unfortunately, however, these proxy rules – many of which were adopted decades ago and long before the advent of the digital age – are increasingly under stress. In fact, many activists repeatedly violate the proxy rules, yet apparently face no repercussions.

Constraints on misstatements
Rule 14a-9 under the US Securities Exchange Act of 1934 prohibits false and misleading statements in a proxy contest. The rule also prohibits the omission of material facts when such omission would make statements false or misleading. The rule provides examples as to potentially misleading statements, including:
predicting future market values;
making disparaging claims without sufficient facts;
obfuscating who is disseminating the proxy solicitation materials in question, and;
making claims prior to a shareholder meeting regarding the results of a solicitation.

While helpful on its face, rule 14a-9 leaves substantial leeway for interpretation of a statement. The application of these rules has often failed to rein in even clearly problematic behaviour in proxy contests.

For example, the legality of statements about proxy tallies prior to the closing of the polls remains an unresolved issue. As noted above, rule 14a-9 lists ‘claims made prior to a meeting regarding the results of a solicitation’ as an example of a misleading statement. On that basis, several courts have ruled that such disclosures can spoil the fairness of the voting process by creating a ‘bandwagon effect.’ This is the phenomenon that many shareholders may vote for the purported likely winner in the belief that the outcome has become a ‘foregone conclusion.’

Yet, many courts have been reluctant to intervene even in seemingly clear cases. For instance, in one court case, an activist announced preliminary proxy voting results several weeks prior to the shareholder meeting, claiming that it was clearly leading with 80 percent of the shares voted. These numbers turned out to be false. However, the court declined to issue a preliminary injunction, and the dissident proceeded to succeed in its proxy contest. This explains why we still see leaks of alleged or actual preliminary vote tallies pre-meeting on a regular basis, including in a recent high-profile proxy fight.

SEC review
In the past, the SEC staff in the Division of Corporation Finance, through the comment letter process, strove to enhance compliance with these proxy rules. Whenever a party overstepped boundaries, the other party would send a private and confidential letter to the SEC, noting the violations. To the extent its staff agreed, the SEC would often react promptly to those letters by issuing comments to the offending party. This process ensured that the rhetoric in proxy contests remained significantly less heated and more truthful than in political elections.

We believe it is time for Congress to level the playing field

In recent years, practitioners have observed a decline in the number and breadth of SEC comments in proxy contests. This surprising trend contrasts with the SEC’s extensive focus on proxy contests prior to the adoption of the universal proxy rules in 2021. The SEC’s packed agenda and limited resources have likely shifted attention towards other pressing matters.

Moreover, the SEC’s authority under the proxy rules has always been limited. The Division of Corporation Finance can only provide comments. If proxy rule violators do not comply with those comments, their staff can only refer a matter to the SEC’s Division of Enforcement. However, we are not aware of any enforcement action prior to a shareholder meeting in recent years.

Litigation in federal court
Companies waiting for SEC action can instead bring suit against proxy rule violators in federal court. However, litigation poses significant risks for a company.

As an initial matter, lawsuits are not inexpensive. While there is often insurance when companies are the defendants in a lawsuit, there is typically no insurance available for companies to pursue litigation as plaintiffs. Moreover, proxy advisory firms and investors frequently criticise companies for initiating litigation against shareholders. This is certainly an important consideration in a proxy contest where a company needs to weigh any potential win in court against a loss at the ballot box.

More substantively, there is also the reality of condensed proxy fight timelines and the burden of proof. Proxy contests are fast-paced and shareholder meetings are typically only a few weeks away. Therefore, a litigant needs to move for expedited proceedings and file for a preliminary injunction to have any hope for a ruling prior to election day. The burden of proof for the issuance of a preliminary injunction, however, is greater than that required in regular proceedings. A preliminary injunction is an extraordinary remedy that generally will be granted only in limited circumstances.

Many activists repeatedly violate the proxy rules, yet apparently face no repercussions

This type of remedy is available generally only when the plaintiff establishes that: 1) there is a likelihood of success on the merits; 2) there is irreparable harm if the injunction is denied; 3) the balance of the equities tips in the plaintiff’s favour; and 4) the public interest favours the requested relief.
This standard requires plaintiffs to clear a high bar – a challenging proposition in the midst of a proxy contest.

A further complicating factor is that many federal judges are not familiar with the intricacies of proxy contests because such cases are relatively rare. As a result, the case law originating from the federal courts has been uneven and inconsistent.

For example, a court last year ruled that certain disclosure claims can be ‘mooted’ by the defendants by merely filing the complaint with the SEC and stating that they disagree with the lawsuit. This holding is antithetical to the purpose of the securities laws, which focus on accurate disclosure. This ruling has become yet another potential obstacle to enforcing disclosure claims in federal court.

A call for action
It is time to protect the integrity of corporate elections and the shareholder vote. Misleading statements, half-truths and outright lies undercut corporate democracy. We believe it is time for Congress to level the playing field. The SEC should receive more resources to monitor proxy contests. In addition, the proxy rules should be tightened and provide the SEC with more authority to sanction violations. For instance, the SEC should have the right to require proxy rule violators to publicly withdraw false statements. The SEC should also be authorised to enjoin proxy contests and impose severe sanctions on repeat violators (freeze-out periods, for example). Lastly, it should be clarified that the mere filing of a complaint with the SEC is insufficient to ‘moot’ a lawsuit over misstatements in a proxy contest.

These changes would correct a fundamental imbalance in our current system between companies and activist shareholders. Simply put, both companies and investors should be held to the same standard. Some may argue that in our free market system, investors should engage in their own research before voting, rather than relying on a government regulatory agency to police proxy contests.

However, in fast-moving proxy fights, even institutional investors do not have the time, resources, or manpower to fact check all statements. Proxy advisory firms like ISS and Glass Lewis, who influence significant portions of the vote, are similarly ill positioned to combat misinformation. Retail shareholders, a major focus of the SEC’s mandate, are even more vulnerable to disinformation in proxy fights. For these reasons, the investor community cannot solve this issue on its own.

Given current trends, it’s already past time for Congress to step in. The SEC takes a leading role to combat misleading or untruthful statements in other contexts – and Congress should enable it to do the same in proxy contests. Lying with impunity should not become a norm in our corporate elections.

‘We’re trying to do good things, rather than just wave a flag’: EBC unites to beat Malaria

Posted on July 8, 2024July 8, 2024 by World Finance

In the final part of our interview series with David Barrett, CEO of EBC Financial Group (UK) Ltd, he discusses the various outreach efforts of the global brand. First, his appearance as part of the University of Oxford economics department’s ‘What economists really do’ programme; then, EBC’s partnership with the UN’s United to Beat Malaria campaign.

Confused? This interview started by asking David about the regions and demographics that are driving growth in online trading, and the challenges that the relatively new brokerage has faced in its rapid growth journey.

World Finance: Before I let you go, David, you recently appeared in a webinar for the University of Oxford economics department – part of its ‘What economists really do’ programme. Can you tell me about that?

David Barrett: So, as with everybody, Oxford University is trying to push its brand. So it has a world class, world leading economics department. But most people from the outside look at Oxford as very insular, living inside its own bubble. They would think of economics as something that sits within the bubble of a bubble. And I think for institutions like Oxford, they’re very keen to humanise what they do.

They’re actually on their second series of podcasts, and they pick a different topic. The one that we were involved in was about potential tax abuse, or harmonising the tax regime and how financial markets can help or hinder that.

And I think what they’re trying to do is the same as us. They’re trying to connect with the wider audience, they’re trying to promote the quality of their brand. And they’re also trying to humanise what they do on a day to day basis. And I think for us it’s a good way of us showing that we interact on lots of different levels with lots of different people, and it helps professionalise some of the content and education that we push out to our clients.

World Finance: The headline activity in your outreach efforts seems to be your partnership with the UN’s United to Beat Malaria campaign; how did that come about?

David Barrett: Previously we spoke about how the UBO has an ethos, and how that’s pushed through the company. The different locations that we have offices are engaged locally with charities, they help support local orphanages, they go to food banks, soup kitchens, this kind of stuff.

Malaria is one of those things that touches a lot of locations that we’re in, and it’s a global thing. It kills more children than any other disease of its type. And it’s relevant to the people who work for us, and it’s also relevant to the clients that deal with us.

So for us it was a natural area to get involved in.

Being in Washington was a real eye-opener. I was approach by an American guy; Malaria everywhere, everybody’s wearing a t-shirt. And he said, ‘What are you doing?’ I explained, Malaria, UN… ‘Why is that anything to do with the US? Why do we pay for that?’

And the good answer to that, which I’d learned from talking to people during the week was, actually, you have more serviceman overseas than any other country. The biggest debilitator of those servicemen is malaria. If they catch it they have to go to the hospital. They’re out of action. For some of them it stays with them for life – as it does with children locally, and the local populous. So by helping to cure that, you’re not just helping the local populous, but you’re helping everybody else.

And I think that message of, we’re trying to do good things, rather than just wave a flag over here, is part of the reason why we got involved.

World Finance: And will there be more of these outreach programmes in EBC’s future?

David Barrett: I think so. I think as part of the ethos of the company, I think they want to give. And I think they want to be seen to be interacting with their client base. So part of the way of promoting the brand, and part of the way of getting across the ethos that exists in the company, is to be involved in local and sometimes global events that can help real people on the ground, in a real way. It’s important, I think.

World Finance: Fantastic. David, thank you very much.

David Barrett: You’re welcome

How to defeat a clone attack, and other lessons from a rapidly growing brokerage

Posted on July 8, 2024July 11, 2024 by World Finance

EBC Financial Group is a globally regulated broker, founded in 2020 and growing rapidly in the APAC region. But after a few years of building a strong and trusted reputation, its brand was hijacked: stolen by scammers who tried to use it as part of a crypto scheme. David Barrett, CEO of EBC Financial Group (UK) Ltd, explains how the company overcame this clone attack, as well as the other challenges presented by growing a disparate workforce across the globe.

Watch more with David Barrett, including why EBC has joined the UN’s campaign to beat Malaria, and the future of brokerage as regulators tighten restrictions in mature jurisdictions.

World Finance: David, as a relatively new player in the brokerage space, I’m interested in the challenges that you faced since starting up. Let’s begin with, how it was to grow and scale the company.

David Barrett: Yeah, I think it’s difficult. Once you’ve elevated the brand, you have to capitalise on that. There’s a lot of effort involved in elevating the brand and pushing the brand out there, so you get the demand in. I think you have to be careful about where you go, how quickly you expand, because there’s dangers in expanding too quickly as well.

So the company generally has expanded organically, as the brand and client intake has grown up. We’ve tended to go to good, solid, recognisable destinations, and we try and capitalise on the quality of people that you can employ there as well.

The other thing I would say is that it matures. So you have to grow the infrastructure of the business: HR, accounting, all of that stuff comes with a growing business as well. And that presents its own unique problems.

I mean, the group has a few hundred employees now. It started off very, very small. That growth has to be tempered and managed as well. It’s quite a logistic operation.

World Finance: A particular challenge you faced last year was your brand being hijacked, essentially – stolen by scammers who tried to use it as part of their operation. In an industry where reputation is so incredibly important, how did you overcome that?

David Barrett: If you’re in our space, and particularly if you’re a new and growing brand, you’re vulnerable. And you’re vulnerable because people want to leverage off of your hard work.

So as the brand became more recognisable, there was a crypto token that was very similarly named to ourselves. It started to gather money, people were funding and seeding the token. The website had my name, my bio, and a different picture next to it. It had the UBO’s name, bio, and a different picture next to it.

We contacted them direct, didn’t get very far. We engaged with a globally well renowned cyber security company. And I have to say it was pretty impressive: within two days they were off everything.

And it’s a world that I didn’t really know too much about, but you have to know about it, and you have to be aware. So now we have world wide web and darkweb monitoring 24/7. For a group like us it’s an unfortunate distraction. But it’s not uncommon. If you go on the FCA website, you’ll see it’s everywhere.

And I think what you need to do is you need to educate internally, which we’ve done a lot of. And you need to join forces with a good global brand in cyber security that you know can really help you, as opposed to just tick the boxes.

World Finance: Going back to your rapid expansion, how do you keep a global and presumably quite disparate workforce all pulling in the same direction? What’s the EBC ethos?

David Barrett: Yeah it’s very difficult right, because you have a mix of cultures, you have a mix of timezones, and you have different identities within all of that.

I would say the UBO has been the driver of that. He has quite extensive experience in fintech as well as the brokerage market globally. So when he set up the company, he did all the key hires, he still does okay all of the key hires. He’s very good at delegating to the people below him. And I think everybody that he’s hired is in his shadow, in terms of the way that they think about things.

So it becomes an organic push down to everybody that comes in to the company.

He has this ethos where, you don’t grow for growth’s sake. You grow for good, because you’re doing good things and you’re doing things well. And I think that permeates through the company.

World Finance: And how does that come through for your customers, what does that look like?

David Barrett: You have to deliver, and you have to deliver in a consistent way. You have to deliver best in class, you have to deliver what they want, how they want it, in a way that’s practical, and in a way that’s sustainable. So that trust between us and the client needs to be something that’s strong. And the reason that they’re dealing with you is because they do trust you, and they do appreciate the quality of the service you’re giving, them, and they do understand that you’re trying to do things at all times, in the best way possible.

Offshore brokerage will boom as onshore regulations tighten, says EBC UK chief

Posted on July 8, 2024July 8, 2024 by World Finance

The first years of the pandemic saw a surge in online trading activity, as the working-from-home trend and low interest rate environment saw more and more people taking their financial future into their own hands. David Barrett is CEO of EBC Financial Group (UK) Ltd, which was founded in 2020: he discusses the demographics and regions that have been driving growth in the brokerage industry, why EBC chose the Cayman Islands’ CIMA as its newest regulator, and the forces likely to push more smaller brokerages offshore.

There are more videos from this interview with David Barrett, where he explains how EBC defeated a clone attack, and why the company has United to Beat Malaria.

World Finance: David, bringing a new company into the brokerage market at that time, what was your experience of the demographics and the regions that were driving growth in the industry as a whole, and for EBC in particular?

David Barrett: So I think generally speaking in brokerage area for everybody, APAC has been the main driver. The growth in virtually every broker’s client base has come from that region. China clearly is very busy, but there are a lot of other countries in the region that have very, very strong growth.

I suspect a lot of it is to do with the demographic of people out there. There’s a young audience, they’re gambling online more, they have better access to tech, the ability to, you know, connect, is much, much better than it always used to be. And I think they have disposable income, they’re more affluent than they have been. And they probably want to achieve and to strive.

And I suspect that’s why APAC has been such a big driver of it.

World Finance: After that initial pandemic surge, was there a big drop-off in active accounts?

David Barrett: It’s very difficult to draw a baseline as to what you’re comparing against. Because if you think about what happened during the pandemic, clearly everybody was at home, everybody was twiddling their fingers, everybody was looking for something to do. And I think online trading in general boomed.

The volumes on some of the exchanges, and particularly the Asian exchanges, went up by up to 50 percent. There’s no doubt there was a lot of growth, and there’s no doubt that a lot of people once they want back to work fell away from their daily activity of logging on and doing some trading.

I think also, you know, the meme stock thing drove a huge amount of interest. Once that turned around and collapsed, a lot of people will have lost money and a lot of faith in what they were doing and what they were being told on social media about what they could achieve.

But for the group, I would say our volumes have done nothing but go up.

World Finance: You’ve been growing extremely rapidly – you recently set up offices in Singapore, Bogota, Kuala Lumpur. You’ve just been licensed in the Cayman Islands. How is this setting EBC up for the years ahead? What’s the strategy?

David Barrett: A lot of it is, as they brand recognition has come up – and I think our marketing team have done a tremendous job, because it’s a fairly saturated market, but I think our brand recognition has gone up. And you look to grow. And you look to grow into regions and centres that have good support, good infrastructure, good quality staff that you can onboard. And the places that we’ve gone to have tended to be along that way.

Caymans, we set up mainly because our belief is that the offshore brokerage market will continue to get more difficult from a regulatory / banking / technology provision side of things. So if you’re looking at an offshore jurisdiction then the Caymans is probably one of the best out there. CIMA, who’s their regulator, is very similar to the FCA in terms of the way that they look at things, and the way that they monitor, so the credibility of being able to get a licence there is quite high.

But I think what you’re trying to do is, you’re trying to build out the brand at a pace that makes sense. And you’re trying to do it in a way where you’re touching the right environments in the right locations.

World Finance: And what do you see as the future of the industry? As you said, more mature markets are particularly challenging, regulators are really tightening up on leverage – how do you see this playing out?

David Barrett: I think that continues. I think the regulators in mature jurisdictions will continue to be tough. I think we’ll see more and more of the smaller players getting driven out of those jurisdictions, because the friction costs of maintaining a business is very high. You need more staff, you need more tech, you ned more capacity to be able to put what the regulator’s asking you for.

So the natural, sort of, byproduct of that, is that the smaller brokers will tend to go offshore.

That can be a good thing or a bad thing. If you’re a client and you’re looking for more leverage, you’re looking for different products that you can’t get in a good jurisdiction and you go offshore, there’s nothing wrong with that. But what I would say is, if you’re going offshore, you have to be aware of who you’re dealing with, what they do and how they do it. There’s a lot of bad actors out there. Do your homework and look after yourself, because it can be dangerous.