FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

Is Latin America the future of offshore banking?

The Climate Of Greater Transparency And Stricter Regulation Is Forcing Great Changes In The Offshore BankingWorld; Latin America’s Industry Is Poised and Ready For The Future. Offshore Banking. Latin America 2009 combines interviews, analysis and expert opinions on all the most important factors shaping the industry in the region today.

Register for free at to download full report.

Offshore Banking_Latin America 2009 Source: Alternative Latin Investor, September 2009

Filed under: Argentina, Banking, Brazil, Central America, Chile, Latin America, Mexico, News, Services, Wealth Management, , , , , , , , , , , , , , ,

How Latin American banks are performing well in the crisis

Latin American economies have felt the effects of the financial crisis, brought on by a global downturn in both demand and capital from the major world economies. The impact for many banks in the region, however, hasn’t been as direct as it has been in other places, in part because they implemented international standards for banking regulation and followed conservative strategies after the regional financial crises of the 1980s and ’90s. McKinsey analyses of the banking sectors in Brazil, Mexico, and Colombia show that these policies should allow them to remain profitable and well capitalized.

Although the economic slowdown has indirectly affected the region’s banks, they will probably remain profitable and well capitalized.

Banks in Latin America are no longer immune to the global credit crisis. True, it’s had little direct impact on them, because they made only limited investments in US and European mortgage-backed securities. Still, a high dependence on exports and commodity prices pushed Latin American economies into recession after consumer spending and industrial production fell in Europe and the United States. As a result, the rate of growth in lending has begun to decline, nonperforming loans are on the rise, and profitability is down.

Nonetheless, McKinsey analyses of the banking sectors of Brazil, Mexico, and Colombia1 show that strong starting capitalization, liquidity, and capital should allow their banks to remain profitable and well capitalized. Before the crisis, foreign securitized assets ranged from 0 to 5 percent of total banking assets in Brazil, Mexico, and Colombia, and domestic issuance of securitized assets was far below that of the United States and the United Kingdom. As a consequence, Latin America was relatively unscathed when the value of these assets dropped precipitously.

Read full article here

Source: McKinsey, 31.07.2009

Filed under: Banking, Brazil, Colombia, Latin America, Mexico, News, Risk Management, Services, , , , , , , , ,

Mexico Central Bank prohibit some Lender/Credit/Banking Fees

July 21 (Bloomberg) — Mexico’s central bank said it will prohibit commercial banks from applying some fees in a bid to make charges more transparent and bolster competition.

Starting Aug. 21, banks won’t be able to charge fees for depositing checks that are returned, for exceeding debit card limits or for canceling deposit accounts, credit cards, debit cards or online banking services, the central bank said today in an e-mailed statement.

FiNETIK recommends

The measures may force Mexican banks to issue more loans to compensate for revenue they currently get from fees, which may open up credit channels that seized up amid the global financial crisis, said Gabriel Casillas at UBS AG in Mexico City. Fees and commissions accounted for 20 percent of the Mexican banking industry’s operating revenue in 2008, Standard & Poor’s says.

“This is an important blow to one of the biggest sources of revenue for Mexican banks,” said Casillas, who is chief economist for Mexico and Chile. “This should give them an incentive to increase credit and obtain revenue from there.”

Banco Bilbao Vizcaya Argentaria SA, which controls Mexico’s largest lender BBVA Bancomer SA, fell 1.4 percent to 9.675 euros at 12:15 p.m. New York time from 9.81 euros at 10 a.m., when the measures were announced.

Banks will also be unable to charge customers for opening or managing accounts that were opened in order to receive a loan, the bank said.

Antitrust Chief

Mexican antitrust chief Eduardo Perez Motta said in a July 17 interview that authorities needed to make it easier for customers to switch banks so they could more easily shop for low-cost services, which would in turn boost competition.

“When you tell your bank you want to leave, they make your life difficult,” Perez Motta said.

Still, Angelica Bala, an S&P credit and banking analyst in Mexico City, said increased regulations won’t improve competition or transparency.

“The central bank is doing this because there has been a big political push against banks charging so much for fees and commissions,” Bala said in a telephone interview. “But putting a cap on fees and commissions is not a good thing. It has to be driven by competition.”

Source: Bloomberg, 21.07.2009 by : Jens Erik Gould in Mexico City at

Filed under: Banking, Latin America, Mexico, News, Services, , , , , , , , , , , , , ,

Brazil’s Antitrust Chief says ‘Irrational’ Rate cuts may hurt Brazilian banks

July 21 (Bloomberg) — Brazilian antitrust agency chief Arthur Badin said a move by state-owned banks to cut interest rates in a bid to force others to match lower borrowing costs threatens to hurt the banking industry.

“Public banks fulfill an important role in helping the economy recover,” Badin said in an interview in Brasilia. “It’s also important that, under the pretext of increasing competition, you don’t achieve the opposite in the long term, with irrational pricing of interest rates when there exists the possibility for effective competition.”

Brazilian officials, including President Luiz Inacio Lula da Silva, have urged banks to increase lending and cut borrowing costs after the credit crunch last year. Banco do Brasil SA, the nation’s largest federally controlled bank, Caixa Economica Federal and state development bank BNDES have all slashed borrowing costs over the past year.

“Decisions by public banks to lower rates were mainly political and don’t solve structural problems, such as default rates and future rate expectations,” Andre Perfeito, an economist at brokerage Gradual CCTVM Ltda, said in a telephone interview from Sao Paulo. “It may produce results in the short term, but in the long term it will cost more and won’t be very effective.”

Aldemir Bendine, who was made Banco do Brasil’s president in April, on May 25 announced he expanded credit to individuals by 13 billion reais ($6.8 billion), reduced rates on consumer loans and mortgages and extended the maturity of car loans in a bid to revive consumer spending. The boost to personal loans benefited 10 million clients, about a third of the bank’s total.

Brazil also cut its Long Term Interest Rate, used by state development bank BNDES, to a record 6 percent last month.

The share of outstanding credit from public banks rose to 37.8 percent in June from 34.2 percent in September last year, according to central bank figures.

Source: Bloomberg, 21.07.2009 by Iuri Dantas in Brasilia at

Filed under: Banking, Brazil, Latin America, News, Risk Management, Services, , , , , , , , ,

Islamic banks need to ‘revamp model’

Islamic banks in the Gulf Arab region need to adopt a new business model and take on more customers to weather the economic downturn, Ernst & Young’s head of Islamic finance said.

Islamic banks, many of which are investment houses, have been heavily exposed to the real estate market, which saw prices start to plummet at the end of last year.

FiNETIK recommends:

Islamic finance: Sukuk market on trial as Islamic bonds default, Euromoney July 2009

They channelled the wealth accumulated during the six year oil boom that ended in mid-2008 into regional real estate through private equity and asset management.

“They relied heavily on selling investments and placements and that business model is being questioned,” Sameer Abdi, who is also a partner at Ernst & Young, said.

The global liquidity constraints will force Islamic banks to look for new customers and sources of funding, including moving into corporate banking, trade finance and retail banking, Abdi said.

Islamic banks cater to investors who do not want to earn or pay interest, viewed as usury under Islamic law.

Some banks have already started to set up funds that enable retail customers to buy sukuk, or Islamic bonds, which in the past were mostly bought by regional banks and large Western financial institutions.

However, analysts have said that it will not be easy for Islamic banks to reduce their heavy exposure to real estate, as they are too small to move into such areas as regional infrastructure and energy projects, which require large investments.

Islamic and conventional banks in the region still have more of the financial crisis ahead of them, Abdi said. “The financial industry is not out of the woods in the Middle East at all, in fact we are still in the middle of our crisis,” he said.

“It’s going to take some support from regulators and governments to actually come out of the crisis, and that may be six to nine months away, at least.”

The restructuring of the debts held by troubled Saudi family groups Saad and Algosaibi could heavily impact many banks in the region.

The United Arab Emirates alone face at least $3bn in potential losses from their exposure to the two groups, an Emirati newspaper reported on Thursday.

Abdi also said corporate defaults of private sector companies in the region were very likely over the next six months.

Source:Gulf times, Reuters/ Manama, 06.07.2009

Filed under: Islamic Finance, News, Services, , , , , ,

China and Taiwan clamp down on risky wealth management products

China is nipping equity exposure in bank wealth management products, while structured product distribution will be treated with a heavier hand in Taiwan.

Following an announcement last week that the Taiwan Financial Supervisory Commission (FSC) is tightening structured product sales, the mainland market is abuzz with talk that the China Banking Regulatory Commission (CBRC) intends to clamp down on wealth management products linked to domestic equities and sold through banking channels.

The CBRC is said to be looking to put a stop to banks issuing wealth management products with A-share equities, unlisted shares or underlying funds, with the reason being that banks have exhibited that they are inadequately set up to manage investment risk. Wealth management products with QDII funds as the underlying assets are not expected to be affected at this point.

The banking regulator’s latest measure will follow its high-profile criticism of the banking industry’s wealth management practices issued in April last year, shortly after a delta-one product linked to a Barings Hong Kong fund and structured by UBS tumbled by half in value and liquidated. The incident caused public embarrassment and mass threats of class action lawsuits against its issuer Minsheng Bank.

The banking wealth management business first went live in China in 2005. Only banks have authority to issue wealth management products — a regulatory quip of terms which differ from fund or insurance policies sold through banks. These are targeted towards China’s newly rich, but largely unsophisticated high-net-worth clients, with minimum sales starting at Rmb50,000 ($7,352).

According to the CBRC’s published statistics, in 2008 alone, domestic and foreign banks sold a total of Rmb3.87 trillion ($567.1 billion) worth of renminbi and foreign currency-denominated wealth management products in China. However, at the end of 2008, all outstanding wealth management products were worth a total of Rmb823.3 billion ($120.6 billion).

How-How Zhang, an analyst at Shanghai research house Z-Ben Advisors, notes the CBRC move will be a reconfirmation of its previous stated policies against high-risk products; and should not bode any near-term danger for bank QDII developments.

At the height of the QDII craze in 2007, international fund execs fought to be taken onto banks’ wealth management platforms. A single deal with a bank at the time often translated into a multi-million boon for the fund managers. The trend failed to die off after the Minsheng scandal. Zhang says wealth management products with underlying structured products have since overtaken fund-linked products as the bankers’ preferred choice.

Since April 2008, banks have been forbidden to pass through QDII products as a mere distributor. Instead, they are required to assume the role as principal and be involved in product design and risk assessment — making banks the final party responsible for the products — although offshore fund houses or banks could be taken on as advisors.

In Taiwan, meanwhile, the familiar scene of the one-man day-trip sales exec will thankfully be put to an end with the implementation of a new law that tightens offshore structured product distribution.

Back in 2005 to 2006, when Taiwan was Asia’s hottest market for structured product sales, day-trip sales execs were often seen clearing billion dollars worth of deals by rolling their suitcases in and out of the airport on the same day. It was a sellers’ market. Product selection committees were largely under-formed. Such a person would only need two friends in any organisation: a senior official who sat on the management committee and a general counsel to make a deal happen.

Commercial banks and insurance companies at the time were often comfortable selling products already existing in the markets, and generally chose issuing investment banks based on factors beyond product risks, namely: quality and speed of execution, precision in settlements, quality in legal documentation, speed in secondary market making and customer communication.

Now the FSC will regulate structured products originating outside of Taiwan in two categories — wholesale and retail. Now wholesale investors must demonstrate sufficient risk management abilities, product knowledge and a minimum asset size of NT$30 million ($913,169).

The regulator will now apply multiple checkpoints for structured products intended for retail channels, to bring it on a level playing field with fund products.

On top of distributor’s internal product selection and compliance mechanisms, structured products must now be vetted by respective industry associations in banking, insurance and fund management before they are distributed to retail customers.

A legally responsible party must be installed onshore to distribute structured products from now on, either in the form of a local subsidiary or a master agent, who would have to put up guarantee deposits with the regulator before initiating sales in Taiwan. As creditors, investors hurt by actions of the issuer will be entitled to compensation from the deposit funds.

Also mindful of the final days of the Lehman Brothers’ mini-bond debacle, the FSC is stepping up the availability of liquidity for such products, as subscriptions and redemptions are now required to be published daily, with bidding and asking prices, available units made public to investors. Issuers need to get the central banks’ approval before they remit funds into and out of Taiwan.

The FSC will advise little beyond prudence and self-discipline for wholesale investors, hoping industry players will have the ability to self-assess and regulate., 30.06.2009 read article here

Filed under: Asia, Banking, China, News, Risk Management, Services, Wealth Management, , , , , , , , , , , , , ,

Credit Card Crisis: Banks rush to emergency rescue of credit card trusts/securitisation vehicles

Credit card issuers have had to resort to extreme measures to keep their businesses alive as US consumers buckle under the weight of the recession. Record credit card losses are pushing big US banks to come to the rescue of off-balance sheet vehicles they use to transform hundreds of billions of dollars in consumer loans into securities sold to investors.

The support provided by Citigroup, Bank of America, JPMorgan Chase and American Express underscores how the deteriorating health of the US consumer is opening new fronts in the financial crisis.

Losses on US credit cards as measured by Moody’s Credit Card Index rose beyond 10 per cent of total loans outstanding in May, a new high in the 20-year history of the index and the sixth consecutive monthly record.
Most credit card loans are placed into pools – structured as trusts – that are used to back bonds sold to investors. Banks rely on such “securitisations” to fund their huge levels of credit card lending while keeping most of the risk off their books.

Although they are not obligated to support the pools of credit card receivables when losses mount, banks have done so to ensure investors continue to buy such securities.

The doomsday scenario facing banks is that credit card losses will rise to levels that force the vehicles to repay bondholders early.

Banks have been supporting card trusts by issuing – and then buying – bonds that would absorb the first layer of losses in the underlying loans. This is designed to provide a protective buffer for existing bondholders.

BofA bought $8.5bn of junior debt from one of its trusts in the first quarter and put aside $750m to cover losses on the investment.

Citi bought $265m of so-called junior debt from one of its credit card trusts in October and an additional $2.3bn of junior debt from the same trust in April, according to a regulatory filing. JPMorgan and Amex also have issued new junior debt for their credit card trusts.

In addition, JPMorgan has supported credit card bonds issued by Washington Mutual – the troubled lender bought by JPMorgan last year – by substituting its own credit card loans for WaMu’s lower quality ones.

The loss rate on the WaMu pool was 14.8 per cent in October. By comparison, a JPMorgan credit-card pool had an 8.1 per cent loss rate in May.

Source: Financial Times, 24.06.2009 by Saskia Scholtes and Francesco Guerrera in New York

Filed under: Banking, News, Risk Management, Services, , , , , , , , , , , ,

Japanese regulator slams Citi AML systems – Stop Sales Operations in Japan

Japan’s financial regulator has ordered Citi to stop sales operations at its retail division for a month after the banking giant failed to improve poor anti-money laundering systems.

The Financial Services Agency says there are “fundamental problems” with Citi’s compliance and governance system, which is inadequate for monitoring suspicious transactions.

The FSA has publicly upbraided Citi in the belief that the US bank failed to catch and report money-laundering by a Japanese yakuza criminal syndicate.

FiNETIK recommends

Citibank Japan reprimanded by regulators (The US bank is punished for inadequate internal controls in the third such disciplinary action since 2001),, 29.06.2009

The watchdog says Citi has not sufficiently carried out a business improvement order it was given in 2004, when it was told to shut down its private banking arm for similar failings.

The FSA says “control systems necessary for the detection, monitoring, and follow-up of suspicious transactions have not been developed” and that “despite the fact that it mainly relies on screening based on the database, input data is extremely limited; in addition, the database has not been updated since 2004”.

The regulator also slammed Citi’s management in the country, accusing it of a “lack an understanding of the rules applied in Japan”. Despite establishing an internal audit department, the bank has not accurately identified a series of problems.

The bank has now been told to submit business improvement plans by 31 July which should be executed immediately, with a progress update provided on every three months.

In a statement, the bank says: “Citibank Japan takes this administrative action very seriously and would like to express our sincere apology to our customers and other parties concerned. Citibank Japan is committed to implement all necessary measures to prevent any future occurrence of the problems identified.”

Citibank Japan operates in 35 locations and two Internet-only branches throughout the country.

The FSA rap comes just days after it emerged Citi has suspended loan applications at its correspondent division in the US after a review found some property appraisals and income-verification documents were missing.

Source:Finextra, 26.06.2009

Filed under: Banking, News, Risk Management, Services, , , , , , , ,

BANORTE buys IXE’s Afore (Pension Fund) business and lists ADR’s as part of it’s Global Expansion startegy

BANORTE (the only remaining 100% Mexican owned bank) is continuing with it’s global expansion strategy. After listing it’s shares on the Spanish / Latin American stock exchange LATIBEX on June 9th and ADR listing in the US Pinksheet OTC market, it acquired the pension fund (Afores) portfolio of IXE bank extending it’s Afore portfolio to 3.5 million accounts. In February 2009 it signed an cooperation agreement with China Development Bank,giving both banks access to bank payment and transfer service in México, China and the USA. (Note by FiNETIK, 11.06.2009)

MEXICO CITY, June 10 (Reuters) – Banorte, one of Mexico’s top banks, said on Wednesday it has agreed to buy a pension fund business from a smaller rival and that it listed its stock on the U.S. over-the-counter market.

Banorte’s (GFNORTEO.MX: Quote, Profile, Research) Generali unit will absorb Ixe’s (IXEGFO.MX: Quote, Profile, Research) 312,489 pension clients, whose combined accounts are worth 5.45 billion pesos ($399 million).The transaction is subject to approval from Mexico’s competition agency. In Mexico, workers in the private sector save for their retirements in pension funds known as Afores.

With this acquisition Banorte will be ranked 4th in Mexico’s Afores account holding, managing a total 3.2 million pension account. (El Universal, 11.06.2009)

In a separate announcement, Banorte said it had listed its stock through pink sheets (GBOOY.PK: Quote, Profile, Research) in the U.S. over-the-counter market. Companies sometimes tap this less-regulated market before leaping into a larger exchange.

Banorte sees the over-the-counter market as a possible prelude to listing its ADRS on the New York Stock Exchange, a bank source told Reuters.

Only a handful of Mexican companies, like tycoon Carlos Slim’s telecom giants America Movil (AMX.N: Quote, Profile, Research) or Telefonos de Mexico (TMX.N: Quote, Profile, Research), trade their American Depositary Receipts on big U.S. markets with healthy liquidity.

Some Mexican corporations have withdrawn their shares from U.S. markets in recent years to avoid tighter scrutiny from U.S. securities regulators.

Source: Reuters, 10.06.2009, Banking News (ADR Depository), 11.06.2009

Filed under: Banking, Latin America, Mexico, News, Services, , , , , , , , , , , , , , ,

Using IT to Survive Mergers and Acquisitions in a Challenging Economy

Few industries have been affected more by today’s economic downturn than the financial industry. Many financial institutions have been forced into consolidations and mergers, requesting government assistance just to survive. They are pressured to show revenue increases and cost reductions almost immediately, and depend heavily on IT to meet these demands.

First, however, IT departments must successfully integrate the merging companies’ respective technology investments. In today’s economy, large IT budgets and staff are no longer considered assets. If financial companies are going to survive, their IT departments must reduce costs and make their remaining resources as efficient as possible, while ensuring consolidation tasks are accomplished smoothly and safely.

Challenges of a Merger or Acquisition
The scope of the challenges faced by IT in financial industry M&A are unprecedented in today’s economy. Not only must the IT team support demands for “as-fast-as-possible” increases in revenue and reductions in costs, they must accomplish this while meeting the extensive access control, auditing and reporting, and transparency requirements of many new legislative and industry rules and regulations—often, despite downsizing and budget cuts.

Differences in the two organizations’ cultures, business processes and technology platforms can pose huge internal and external risks to security and compliance posture. Intruders may try to take advantage of internal instability, inconsistently-implemented policies and the general chaos of change. Disgruntled employees can pose an internal security risk, as well.

Another security threat during a merger or acquisition comes from messaging and collaboration. E-mail is probably the definitive business-critical IT resource since virtually every business process depends on the availability, integrity and performance of messaging services, as well as collaboration tools like scheduling and calendar applications. Integrating them improperly can open significant gaps in security and compliance, exposing the business to risk from users who should not have full access permissions.

Identity and Access Management
The biggest, most critical challenge posed by M&As is the handling of identity and access management, which defines access rights and privileges throughout the enterprise. Identity and access management plays a central role in maintaining security and is key to assuring the proper handling of customer information. It is the fundamental technology for assuring the enforcement of IT resource access policy. Many organizations maintain a directory system for managing user identities and access privileges. Directories also are used to manage system configuration and access control for resources throughout the enterprise, including servers, file systems, desktops and printers.

Some businesses also use Lightweight Directory Access Protocol (LDAP) directories, as well as databases, to manage user and resource identities and access control. It is vital that rationalization of identity and access management across the merging companies be undertaken with great care. Not only can mishandled identity cause security issues, but identity management breakdowns can take multiple business processes down with them. Combining the two identity management systems requires solutions that recognize and solve the challenges of identity resource integration, including directory interoperability and migration.

Maximize Efficiency
Security, compliance, and identity and access management are just a few of the important issues IT must address during a merger of two financial institutions. Today, those challenges are compounded by the need to quickly create more business value for the institution. There are several ways IT can maximize its own business value, however, and add to the institution’s bottom line. Since IT faces diminished budgets and lowered headcounts, it must reduce department waste and make remaining resources more efficient for the bank to succeed. This can be done several ways:

  • Ease migration challenges by finding a solution that enables competing systems and applications to communicate effectively with each other
  • Eliminate redundant effort by combining resources and automating platform management where possible.
  • Reduce time required for repetitive tasks by automating wherever possible.
  • Reduce excessive expenditures by quickly consolidating the two institutions’ IT toolsets; select best-in-class solutions to provide the biggest positive impact both on IT operations and the business’ bottom line. Also consolidate and reallocate server resources where possible to reduce unutilized server capacity.

It’s possible to actually do more with less by creating a leaner, more efficient set of IT resources—an essential step when combining IT operations. Specific ways to accomplish this include:

  • Consolidation: Consolidate redundant systems and file servers to reduce IT’s internal overhead. Also reduce the number of directories and consolidate the rest into a less complicated infrastructure design. Consolidate non-Windows directories into Active Directory whenever possible.
  • Automation: Use software that handles the most repetitive tasks, especially those performed across different systems.
  • Compliance: Use solutions that address the various aspects of compliance throughout the environment. Consider enterprisewide compliance. Also, create a single configuration control system by implementing configuration controls to extend across platforms. Align access controls to business objectives instead of technologies or platforms; implement change control and auditing on configuration control systems such as Group Policy; and establish a configuration baseline for operating system configurations across the enterprise.
  • Audit and Track: Everything! Consolidate native event logs from Windows, Unix, Linux, Active Directory, Exchange, databases, firewalls and everything else into a single, centralized, tamper-proof database. Use reporting tools to turn the data into the reports auditors demand.
  • Maintain Availability: Besides files, folders, e-mail and databases, back up Active Directory, Group Policy and other “command and control” technologies regularly and automatically. Place them under change and version control when possible, and keep them thoroughly audited to maintain full availability of your IT resources.

Choose solutions tailored to the specific requirements of the consolidation. They should enable different resources in both institutions to interoperate without requiring significant re-engineering of existing solutions. Tools that make efficient use of limited IT personnel and resources can help the IT staff manage and maintain the infrastructure in less time and with fewer budget dollars, which will maintain system security and allow the new blended financial institution to meet the quick turnaround demands for reduced costs and increased revenue.

May 18, 2009

Filed under: Banking, Data Management, News, Risk Management, Standards, , , , , , ,

Mexican banks choose SunGard for operational risk management

Following recent regulatory changes in the country, a group of Mexican banks have signed up for SunGard’s operational risk management technology.

Invex Servicios Corporativos, DE CV Invex Grupo Financiero, Banco Regional de Monterrey, Institución de Banca Múltiple, Banregio Grupo Financiero, Banco Monex, Institución de Banca Múltiple, Monex Grupo Financiero, Banco Autofin Mexico, Institución de Banca Múltiple and Banco ve por Mas, have all signed for the vendor’s Ambit Risk & Performance platform.

SunGard says Ambit will help the banks identify, quantify and manage operational risk as well as comply with Basel II regulatory requirements. The system will provide them with enterprise-wide loss event tracking and management reporting tools to improve operational efficiency and control risk exposure.

Ana Cecilia Reyes Esparza, president, OpRisk Committee, Mexican Banks Association, says: “We believe that by adopting better operational risk principles and practices, we can manage our economic capital more efficiently. SunGard’s Ambit Risk & Performance solution provides a platform to help us accomplish this.”

Source: SunGard, 08.05.2009

Filed under: Banking, Data Management, Mexico, News, Risk Management, , , , , , , , , , , , , , , , ,

SGX sets up Investor Education Fund to benefit Investors

Singapore Exchange Limited (SGX) is pleased to announce that it has set up an Investor Education Fund (IEF) to benefit investors in its securities and derivatives market. The IEF will support initiatives that seek to improve the understanding and ability of investors to make better informed investment decisions.

Funds of the IEF come from money collected from fines imposed for rule breaches. The Investor Education Committee (IEC) comprises both industry practitioners and senior management of SGX. They are:

  1. Mr Sia Cheong Yew, Chairman of IEC who was Supervising Editor of The Straits
    Times’ Money Desk and is now a Media Consultant
  2. Mr Ang Hao Yao, Chairman, Membership, Securities Investors Association (Singapore)
  3. Mr Lim Eng Hai, CEO, Securities Association of Singapore
  4. Mr Gan Seow Ann, Senior Executive Vice President and Head, Markets, SGX
  5. Ms Yeo Lian Sim, Senior Executive Vice President and Head, Risk Management and Regulation, SGX

The IEC will approve projects and allocate funds. It expects to disburse up to $400,000 in the first year of operation.

The IEC held its first meeting on 30 April 2009 and approved funding for two projects. One project is to produce simple, easy-to-use reference guides to assist investors in reading annual reports and help them to become active participants at annual general meetings. The second is the funding for SGX Academy programmes in collaboration with MoneySENSE, a national financial education programme. The committee also agreed to co-fund non-SGX projects that meet the IEF guidelines.

Commenting on what the committee hopes to achieve, Mr Sia Cheong Yew, Chairman of IEC said: “Our aim is to help investors to be more knowledgeable and so, be able to put their money to good use.”

“We also hope investors will learn how to seek out relevant information from the companies they have invested in so that they can keep tabs on what’s going on. With the increased understanding, investors including retail investors can play a bigger role in market activities.”

Please find the funding guidelines in Appendix 1.

Appendix 1


  1. The funds will be allocated for the following:
    • Programmes with clear objectives to equip investors of SGX markets with knowledge and skills for better informed investment decisions;
    • Initiatives that raise the awareness of SGX supervisory issues and requirements; or
    • Initiatives that the Investor Education Committee deems to be in the interest of the market and where benefits to investor education and information can be demonstrated.
  2. SGX currently conducts promotional and educational activities for new products as part of its drive for market participation in new products. New product promotion activities, which are to be distinguished from educational activities, will not be eligible for funding from the IEF.
  3. Funds may also be used to co-fund projects of other organisations. Generally, the co-funding will be up to 75% of the cost of the programme.
  4. Amendments to these guidelines may be effected with the agreement of the Executive Committee of SGX and the Investor Education Committee. These changes will take into account emerging trends and relevant market developments.

Source: SGX 05.05.2009

Filed under: Asia, Exchanges, News, Reference Data, Singapore, , , , , , , , ,

No Swine Flu Emergency Yet, but Banks Should Keep Eyes Open

James Kerr says it’s better for banks to be safe than sorry when it comes to building pandemic-related contingency plans—and Y2K-type backup plans are insufficient.

The swine flu scare hasn’t reached pandemic proportions at this point. However, that hasn’t stopped people and the markets from panicking slightly. Just today, someone working for Ernst & Young in New York was reported to have had swine flu. And stocks are still a little jittery as news of the scope of the disease continues to be broadcast.

“It doesn’t take much to get a reaction out of the market during these uneasy times,” James Kerr, president and managing partner with Cromwell, Conn.-based Best Practices Enterprise Group, told BS&T. “It’s unfortunate that the markets reacted to this because these isolated outbreaks have had little impact on business throughout the world. If it reaches pandemic proportions, yes, some businesses will be in jeopardy. But, as of the moment, calmness should prevail as businesses do what they need to do to prepare for contingency operations.”

Although it’s not yet time to push the panic button, it is still important for banks to monitor something like the spread of swine flu closely and to take stock of their disaster recovery plans. Today’s situation is reminiscent of what happened during the bird flu scare just a few years ago, Kerr comments. “I don’t see any major differences in the way businesses have reacted to this compared to the bird flu scare. Most firms took little action then. I don’t think this scare will make them take any more action now.” This kind of complacency can be dangerous. Kerr senses some banks might think the contingency plans they developed to handled Y2K, for example, are adequate. This is not the case, he asserts, since the steps a bank would take in the event of mass computer outages differ greatly when compared with what must be done if workers are unable to report to the office. “A few years ago many firms built contingency plans to handle a Y2K catastrophe scenario, such as electrical outages, water outages and transportation problems. So, they think that they can just dust those business continuity plans off if a pandemic strikes. But, here again, the Y2K scenario and what you do about it is much different than one where workers can’t work. Certainly, many organizations have done it right and have built pandemic-specific business contingency plans. But, many others have not.”

Based on what he has seen from the research, Kerr is inclined to believe it isn’t a question of “if” but “when” when it comes to a worldwide flu pandemic. “The problem is most of us choose to ignore these kinds of warnings and most of the time we do just fine,” he comments. “But, I advise my clients that it is far wiser to make an investment in planning for this (even if it never happens) because the cost of planning is a lot less than the cost to the business if it gets caught without a plan.”

Source: Bank System & Technology,

Filed under: Asia, Banking, Latin America, Mexico, Risk Management, , , , , , , , , ,

Is Mexico’s New Banking Bill a sign of worse things to come in International Banking Regulations?

A proposal to regulate fees charged by banks operating in Mexico won’t put a big dent in Bank of Nova Scotia’s (BNS) bottom line, but it could be a sign of worse things to come, as banking rules around the world begin to tighten in the wake of the financial crisis.

Brad Smith, Blackmont Capital analyst said:

As of the year-end 2008, Scotia’s Mexican operations were responsible for 9% of total earnings and while this legislation could impact on Scotia’s total operations to be marginal at this time.

The greater concern, in our view, is that this is merely an initial step in increased international regulation of the financial industry, thereby putting increased strain on future profits.

The new banking bill passed by the Mexican Senate, but still required to pass through the lower house, proposes ceilings on credit card and loan interest rates and also seeks to regulate deposit rates and eliminate certain banking fees.

Mr. Smith continues to rate Scotiabank shares a “hold” and left his C$36 price target unchanged.

Source: SeekingAlpha, 23.04.2009

Filed under: Banking, Latin America, Mexico, News, Risk Management, Services, , , , , , , , , , , ,

Asia: Survey sees softer growth in wealth management revenues – BarCap

The industry’s bright spots are China and India, which are viewed as the most attractive markets in Asia.  See Barcleys Capital Wealth Management Report 2009

Revenue growth in Asia’s wealth management industry is expected to soften significantly during the next two years, according to a Barclays Capital survey of Asia’s leading wealth managers who between them have more than $5 trillion of assets under management.

The wealth management survey involved 123 respondents from 53 wealth management organisations in seven countries across non-Japan Asia, including asset managers, insurance companies, local and global retail banks and private banks.

In last year’s survey, around 90% of wealth managers expected revenue growth in Asia of more than 5% per annum in the coming two years, while only 41% of respondents expect such growth in this year’s survey. Worse news still, this year 18% anticipate negative returns.

China and India continue to be viewed as the most attractive markets in Asia, both in terms of potential for business expansion and for their expected revenue growth rate. A majority of wealth managers see China as the most attractive market, with a quarter of them still forecasting the country to generate revenue growth of more than 15% per annum during the next two years. Next in line is India, with a fifth of respondents still anticipating such growth.

Korea is viewed as the least attractive market in Asia, with 29% of wealth managers forecasting negative revenue growth.

This is not a surprising result, as many banks, in anticipation of lower revenues, have cut back their global wealth management staff. And Asia has not been spared.

Challenges and strategies

The key challenge facing wealth managers is how to adapt to the changing regulatory environment. “It is evident that wealth managers share the view that the financial markets will operate under significantly different regulatory conditions in future,” says Kevin Burke, head of distribution, Asia-Pacific at Barclays Capital.

Capital protection continues to be the most common product strategy. Thematic investments dropped from the second most popular product strategy last year to sixth this year, reinforcing the continuing client trend towards simple and transparent products.

The three most important product features for clients are considered to be issuer risk, capital protection and a short maturity. This is a significant shift in investor attitudes away from liquidity and growth, which have typically dominated over the past three years.

“Evidently, risk aversion is currently top of mind for investors, as demonstrated by the great importance they place on protecting their underlying capital, assessing issuer risk and short maturity products for investment flexibility,” says Peter Hu, head of non-Japan Asia investor solutions at Barclays Capital. “This risk aversion is also reinforced by a shift towards increased use of structured deposits,” he adds.

Wealth managers’ recommendations for a balanced-risk investor portfolio have an increased weighting in cash products and bonds over last year’s survey, at the expense of equities and commodities, which is in line with the trend towards capital protection. Looking ahead, a majority of respondents are expecting the allocation to non-Japan Asia equities within their balanced-risk portfolio to increase during the next six months.

The survey also shows that equity and FX remain the most popular asset classes for both flow and structured products. The use of equity has generally declined from last year as investors search for capital protection, and the use of structured products has declined across the board as investors search for simpler and more transparent products.

Source: 20.04.2009

Filed under: Asia, Banking, China, India, Korea, News, Risk Management, , , , , , , , , , , , , ,