Top trends in corporate banking webinar

Top trends in corporate banking webinar

Please join me on Thursday, April 21st at noon EST for an overview of the 2016 edition of our Top Trends in Corporate Banking report, which was published in March.

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Corporate banks continue to place an enormous focus on investing in digital channels to meet the ever-increasing demands of clients for enhanced tools while boosting security and fraud prevention. Despite this investment, corporate banking has lagged in terms of adoption of innovative technologies. To improve that performance, corporate banking lines of business are undertaking a broad set of initiatives to overcome the inertia that has left clients behind in terms of innovation. Among the top trends, we will examine the opportunities in trade finance and customer onboarding for improving efficiency and enhancing client satisfaction.  Other top trends include fintech partnerships, distributed ledger technology and open APIs and adapting liquidity management strategies.  I look forward to having you join us on Thursday! 

Click here to register

 

 

 

Congratulations to Celent Model Bank 2016 Winners!

Congratulations to Celent Model Bank 2016 Winners!

Last week many of us at Celent were in New York attending our Innovation and Insight Day on April 13th. It is Celent's flagship event during which we announce Model Bank and Model Insurer winners and celebrate their achievements. In addition, the program includes keynote speeches from industry leaders and Celent analysts, plenty of opportunities to network with peers, and even to experience some of the latest technologies first hand, courtesy of our sponsors.

The theme of this year's event was "Financial Services Reborn", and the Museum of American Finance on Wall Street provided an inspiring setting to celebrate innovation in financial services. Craig Weber, Celent CEO, kicked off the proceedings drawing insightful parallels between the battle of Alamo and the future of financial services. It must have been the first time in Craig's career that he had to come up on stage to the soundtrack of hip hop music, an extract from the Broadway musical "Hamilton", but it set the tone for the rest of the day – to expect the unexpected and to be open to new ideas.

Both of our guest speakers – Nadeem Shaikh, Co-Founder and CEO of Anthemis Group, and Leanne Kemp, Founder and CEO of Everledger – thrilled the audience and opened everyone's eyes to the opportunities presented by Fintech and Blockchain respectively, while our colleague Will Trout spoke eloquently about consumer-led convergence. A big 'thank you' to all the speakers, as well as the sponsors supporting the event!

The rest of the day was all about celebrating the achievements of Model Bank and Model Insurance award winners. As many of this blog's readers know, the vision for Celent’s Model Bank research, now in its ninth year, is to spotlight effective uses of technology in banking. This year we received a record number of submissions – well over 100 – that came from all over the world; the nominations were spread equally between North America, EMEA and APAC. The award winners come from four continents and nine countries and range from credit unions and microfinance institutions to the world's largest banks.

Celent Model Bank 2016 winners are:

  Model Bank 2016 Categories

  Award Winners

  1. Digital Banking Transformation

  Citizens Bank, US

  DenizBank, Turkey

  Garanti Bank, Turkey

  Santander, US

  2. Omnichannel Banking

  BECU, US

  Beyond Bank, Australia

  Standard Chartered Bank, Korea

  3. Digital Payments and Cards

  Bank of America Merrill Lynch, US

  RBC, Canada

  4. Corporate Payments and Infrastructure Modernization

  Bank of China, China

  CBW Bank, US

  5. Cash Management and Trade Finance

  CIBC, Canada

  HBL (Habib Bank), Pakistan

  6. Security, Fraud, and Risk Management

  Alfa-Bank, Russia

  USAA, US

  7. Legacy Transformation

  Sberbank, Russia

  Umpqua Bank, US

  Vietnam Bank For Social Policies, Vietnam

  Model Bank of the Year

  Eastern Bank, US

As always, we published a series of reports with detailed case studies of all winning initiatives. Celent research subscription clients can access the Model Bank of the Year and individual category reports via our website.

This year we also introduced a new award, Model Bank Vendor. We wanted to acknowledge the vendor role in helping multiple clients achieve technology or implementation excellence, one of our judging criteria, and to extend our appreciation to the entire vendor community, which is instrumental in the ongoing success of the Model Bank program. Celent recognized two companies as Model Bank Vendors for 2016:

  • EdgeVerve Systems
  • Nucleus Software

Congratulations to all our award winners! We are grateful to have been exposed to so many extraordinary initiatives and the talented individuals responsible for their success. We look forward to continuing with the Model Bank program next year to identify and award the most impressive banking technology initiatives from around the world, and will begin accepting nominations again in September – stay tuned!

 

A good recipe from the Brazilian banking industry in times of need

A good recipe from the Brazilian banking industry in times of need

The world seems convulsed these days. No matter where you live, something significant is developing around you or about to burst.

Brazil has not been the exception. Economic slowdown and corruption allegations involving high officers in government and the private sector, have led to massive social protests. The Panama Papers only to continue to build a lack of trust on things changing easily. But Brazil is a huge economy, with very talented people and industries that can compete at world-class level. Some things need to change for sure; with a trusted leadership is just a matter of time for Brazil to come back to the right path.

On a positive note from the financial sector, early this year FEBRABAN, the Brazilian banking industry’s main federation, and Brazil’s top five banks entered into a memorandum of understanding with LexisNexis®Risk Solutions by which the latter will provide technical services for a new credit intelligence bureau that will modernize the current Brazilian credit risk information ecosystem.

The effort has the objective of financially including more Brazilians in the long run and efficiently assessing consumer credit risk, with the potential to "change lives, generate sustainable economic expansion in a world-class economy, all the while providing financial institutions with the tools to assess and manage risk more effectively" as indicated in LexisNexis®Risk Solutoins press release. It will make possible for the credit intelligence bureau to process and analyze complex, massive data sets in a matter of seconds. It is expected that the ability to process quickly large volumes of transaction data will help the credit intelligence bureau to effectively manage financial payment experiences, resulting in a bureau with a sophisticated infrastructure.

This decision by FEBRABAN, Bradesco, Banco do Brasil, Caixa Econômica Federal, Itaú Unibanco and Santander comes very handy in order to offset the effects of the country's economic moment by expanding the potential market and providing financial solutions to people that are seeing its purchasing power affected. Banks are not alone in coming up with positive initiatives as insurers have also made moves along these lines.

It’s good to see that, from the banking perspective, Brazil does not stay arms crossed waiting to see what happens; instead they are trying a good recipe to be applied in times of need: Seeking efficiency and growth, by financially including more people into the system through a more effective risk assessment.

 

The new 4 C’s of commercial lending

The new 4 C’s of commercial lending
Last week, I participated in a Finextra webinar on the topic of “Connected Credit and Compliance for Lending Growth” with panelists from ING, Vertus Partners, Misys and Credits Vision.  As I prepared for the webinar, I thought back to my first exposure to commercial lending when I worked for a large regional bank and I recalled the 4C’s of commercial lending from credit training:  character, capacity, capital and collateral.  All of those original 4C’s are still relevant in today’s environment when evaluating borrowers, but when considering the state of the commercial lending business in 2016, we need to think about an entirely new set of 4C’s:
  • Constraints on capital and liquidity
  • Cost of compliance
  • Changing client expectations
  • Competition from new entrants
On a global basis, banks are being forced to restructure their business models, technology platforms, and organizational processes in order to grow their portfolios, remain profitable, and stay in the good graces of their regulators.  All the while, meeting the evolving demands of clients who can view and manage their personal finances on demand, at their convenience, using the device of their choice. Despite these challenges, the panel remains optimistic that banks can and will evolve to grow this critical line of business. finance590x290_0 Where does this optimism comes from? Alternative lenders provide both a threat and an opportunity for banks as they make the difficult decisions on whether and how to serve a particular segment of the commercial lending market. Fintech partners offer more modern solutions than the decades-old clunkers that many banks still use; providing for more efficient and accurate decisioning, enhanced visibility and processing within the bank, and where appropriate, self-service capabilities.  Connectivity with clients and partners will increasingly be the hallmark of a successful commercial lender. For more insights from the panel, please register for the on-demand version of the webinar here: Finextra: Connected Credit and Compliance for Lending Growth.  

Proposed new cyber security regulations will be a huge undertaking for financial institutions

Proposed new cyber security regulations will be a huge undertaking for financial institutions
New York State Department of Financial Services (NYDSF) is one step closer to releasing cyber security regulations aided by the largest security hacking breach in history, against JP Morgan Chase. The attack on JPMorgan Chase is revealed to have generated hundreds of millions of dollars of illegal profit and compromised 83 million customer accounts. Yesterday (Tuesday, November 10), the authorities charged three men with what they call “pump and dump” manipulation of publicly traded stock, mining of nonpublic corporate information, money laundering, wire fraud, identity theft and securities fraud. The attack began in 2007 and crossed 17 different countries. On the same day as the arrests, the NYDSF sent a letter to other states and federal regulators proposing requirements around the prevention of cyber-attacks. The timing will undoubtedly put pressure on regulators to push through strong regulation. Under the proposed rules, banks will have to hire a Chief Information Security Officer with accountability for cyber security policies and controls. Mandated training of security will be required. Tuesday’s letter also proposed a requirement for annual audits of cyber defenses. Financial institutions will be required to show material improvement in the following areas:
  1. Information security
  2. Data governance and classification
  3. Access controls and identity management
  4. Business continuity and disaster recovery planning and resources
  5. Capacity and performance planning
  6. Systems operations and availability concerns
  7. Systems and network security
  8. Systems and application development and quality assurance
  9. Physical security and environmental controls
  10. Customer data privacy
  11. Vendor and third-party service provider management
  12. Incident response, including by setting clearly defined roles and decision making authority
This will be a huge undertaking for financial institutions. Costs have yet to be evaluated but will be in the millions of dollars. It will be very difficult to police third party security because, under the proposal, vendors will be required to provide warranties to the institution that security is in pace. The requirements are in the review stage and financial institutions should join in the debate by responding to the NYDFS letter.

Paying banks to take your money — huh?

Paying banks to take your money — huh?
Corporations have historically parked excess cash in their demand deposit accounts to take advantage of earnings credit allowances. Each month, the bank calculates the earnings allowance for a client’s accounts by applying an earnings credit rate to available balances. The earnings allowance is then used to offset the cost of cash management services. In the United States, corporates got the option of earning interest in money market accounts with the repeal of Req Q by Dodd Frank. The Liquidity Coverage Ratio (LCR) provisions of Basel III and the advent of negative interest rates in some European countries are upending traditional cash flow management for banks and their corporate and institutional clients. The LCR requires large and internationally active banks to meet standard liquidity requirements. It makes assumptions for deposit runoff in times of financial stress, resulting in a liquidity squeeze. Banks must hold enough high quality, liquid assets (HQLA) to fund their operations during a 30-day stress period. Examples of high quality assets include central bank reserves and government and corporate bond debt. The phase-in of the LCR started on January 1, 2015. It requires banks to distinguish between two types of short-term (30 days or less) deposits. Operational deposits include working capital and cash held for transactional purposes. Non-operational balances are other cash balances not immediately required and assumed to be investments; such as short-term time deposits with a maturity of 30 days or less and accounts with transaction limitations, such as money market deposit accounts. Non-operating/excess balances are assigned a 40% runoff rate for corporations and government entities and 100% for financial institutions, making them the least valuable to banks. As a result, corporates with non-operational cash investments may find it difficult to place in overnight investment vehicles. Many banks are reducing their non-operating deposits either by encouraging corporates to place their funds elsewhere, or by creating new investment products such as 31+ day CDs, money market funds and repurchase agreements to avoid the LCR charge on excess balances. Similarly, corporates also face a risk of higher costs for committed lines of credit which also require more Basel III capital to be held by banks. Bank demand for HQLA in the form of central bank reserves along with European fiscal policy has pushed central bank interest rates into negative territory for the safest monetary havens (Sweden and Switzerland). In other countries with central bank rates hovering near zero, once you take the inflation rate into consideration, those rates are negative as well (ECB and Denmark). Central Bank Interest Rates Central banks had hoped that negative interest rates would encourage commercial banks to increase lending, but there’s only been a slight increase in outstanding loan balances. Financial institution clients are hardest hit by central bank negative interest rates, particularly deposits in Euros, Swiss francs, Danish crowns and Swedish crowns. Many global banks are charging “balance sheet utilization fees” or other deposit fees. For corporate clients, savvy banks are taking a collaborative approach—working with corporate treasurers to educate them on the impact of regulatory and economic forces on their cash management and investment decisions and advising them on the available options.