Mobiles and Bank Loans

Mobiles are not only for Payments and Remittances. Bank Loans are also a part of a growing range of banking applications that are becoming available on Mobile phones.
FrontlineSMS:Credit is aiming to make every formal financial service available to the entrepreneurial poor in 160 characters or less. By interconnecting the functionality of FrontlineSMS with local mobile payment systems, implementing institutions will be able to provide a full range of customizable services, from savings and credit to insurance and payroll.

Watch Ben Lyon, Executive Director of FrontlineSMS:Credit speaking at the Africa Gathering conference in London recently on just this issue.

Ben Lyon from Africa Gathering on Vimeo.

Mobiles are not only for Banking

In recent times we have seen a huge drive, especially in Africa as regards Mobile Banking. But the Mobile is being used for many other services as well. This video explains many of these services and the growing significance of mobile technology across sub-Saharan Africa and the developing world.

Hacking an ATM

There is no end to people’s ingenuity when there is a fast buck to be made. In this story from Australia a pizza shop employee cum computer wizz was able to make huge withdrawals of cash based on information he found on the internet and in an ATM manual. His plan however had a major flaw - to make the withdrawals he used his own card and those of his mother, girlfriend and two friends.

Although Prosecutors had called for a two year jail term the judge decided a conviction should not be entered after Sommer agreed to pay the money back and applied to become an avionics technician in the Australian Defence Force.

You can read the whole story at
http://www.frasercoastchronicle.com.au/story/2009/10/23/free-money-too-good-to-be-true-no-conviction-recor/

Systemic Risk

The financial crisis has taken us down paths we have never dreamed of. Much research and discussion is taking place (and will for years to come) on many aspects of what we have been experiencing over these past two years.

In a paper published in the September edition of the “International Journal of Central Banking” Piergiorgio Alessandria, Prasanna Gaib, Sujit Kapadiaa, Nada Moraa, and Claus Puhrc describe a prototype quantitative framework for gauging systemic risk which explicitly characterizes banks’ balance sheets and allows for macro credit risk, interest income risk, market risk, network interactions, and asset-side feedback effects. In presenting their results, the authors focus on projections for system wide banking assets in the United Kingdom, considering both unconditional distributions and stress scenarios. The paper “Towards a Framework for Quantifying Systemic Stability” is available at http://www.ijcb.org/journal/ijcb09q3a2.htm

Risk & Payments Training Course Schedule - 2009 - 2010

Browse or Download this handy schedule of our Risk & Payments Training Courses for the remainder of 2009 and early 2010.

Citadel Advantage Course Schedule - 2009 - 2010

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Liquidity & Capital Reform

The UK’s Financial Services Authority (FSA) has issued a discussion paper which focuses on policy measures aimed at addressing the problem of systemically important ‘too-big-to-fail’ banks.

There are huge dangers posed by those financial firms that are seen as too-big or too-interconnected-to-fail, or too-big-to-rescue. In the discussion paper the FSA describes the full range of policy options that are available in order to provide the basis for an informed debate, but also outlines the position which the FSA is currently proposing in various bodies. Key positions are:

• There is a strong case for applying some form of capital (and perhaps liquidity) surcharge internationally for systemically important banks; surcharges could be proportional to continuous and increasing measures of systemic importance, avoiding the dangers created by specific thresholds of systemic importance.
• A capital surcharge could be combined with an approach to global banking groups which places greater emphasis on the standalone sustainability of national subsidiaries, with overt understanding that home country authorities will not be responsible for the rescue of entire groups. The more that groups are organised on this basis, the less the required surcharge at group level might need to be.
• Action should be taken to reduce inter-connectedness in wholesale trading markets, with much over-the-counter (OTC) derivative trading moved to central counterparties (CCPs), and with effective collateral and margin call arrangements for bilateral trades which reduce the dangers of strongly pro-cyclical margin call effects.
• Reform to trading book capital should significantly increase capital requirements and differentiate more strongly between basic market making functions which support customer service and riskier trading activities, with a bias for conservatism in relation to the latter.
• Systemically important banks should be required to produce recovery and resolution plans (‘living wills’) which set out how operations would be resolved in an orderly fashion. If supervision examination of these plans reveals serious obstacles to resolution, then steps will need to be taken to reduce or remove them – this could require restructuring certain parts of the group. Restructuring could include clear separation between retail deposit taking business and businesses involved in proprietary trading activities, with the latter able to fail even if the former were supported in crisis conditions.

The discussion paper also stresses the need to assess the possible cumulative impact of multiple reforms to capital and liquidity regimes now being considered by international standard-setting bodies. It describes the case for significant increases in capital and liquidity requirements to reduce financial instability risks, while recognizing the potential implications for lending volumes and the cost of credit intermediation. It considers methodologies which can help inform judgments on the trade-offs involved.

The FSA’s plan of action includes:
• Living wills: The FSA intends to press ahead with resolution and recovery plans in the UK and work is underway to produce guidance for systemically important firms to use in developing living wills. The plans will build on requirements the FSA has already put in place that contribute to a firm’s preparedness for recovery. By the end of 2009, according to the FSA, a small number of major UK banking groups will have begun to produce living wills as part of a pilot exercise intended to help the FSA develop policy in this area.
• Cumulative impact of capital and liquidity reforms: The FSA acknowledges that given the inherent uncertainties involved in assessing optimal capital and liquidity levels, it means that models such as those described in the DP can never provide ‘the answer’. However, the FSA believes that the conceptual approach described can help inform an effective global debate on optimal capital levels. It will, therefore, encourage global regulatory bodies, industry groups and academics to conduct similar analysis.
•Conference: The issues discussed in the discussion paper will set the agenda for the second Turner Review conference which is being held on 2 November 2009.

The FSA regulates the UK’s financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.

Risk Management Lessons from the Global Banking Crisis of 2008

Senior financial supervisors from seven countries (collectively the “Senior Supervisors Group”) have issued a report that evaluates how weaknesses in risk management and internal controls contributed to industry distress during the financial crisis.

The report—Risk Management Lessons from the Global Banking Crisis of 2008—reviews in detail the funding and liquidity issues central to the recent crisis and explores critical areas of risk management practice in need of improvement across the financial services industry.

The report concludes that despite firms’ recent progress in improving risk management practices, underlying weaknesses in governance, incentive structures, information technology infrastructure and internal controls require substantial work to address.

The observations and conclusions in the report reflect the results of two initiatives undertaken by the SSG. These initiatives involved a series of interviews with firms about funding and liquidity challenges and a self-assessment exercise in which firms were asked to benchmark their risk management practices against a series of recommendations and observations taken from industry and supervisory studies published in 2008.

The report may be downloaded at http://www.newyorkfed.org/newsevents/news/banking/2009/SSG_report.pdf

Bank Lending – Some Basic Principals

By Stanley Epstein - Principal Associate

The financial world is in a pretty messed up shape at the moment. So in examining the Financial Services Authority’s proposals regarding the reform of the mortgage market in the UK I get the basic impression that I am in Alice in Wonderland, at the Mad Hatter’s Tea Party to be exact.

What on earth has happened to basic lending principles? The FSA speaks of a changed approach to a more “intrusive and interventionist style of regulation”. As a part of these proposals they set out what they refer to as “key features”, six in all.
But of the six, three should, as a matter of course, be part and parcel of a bankers’ normal business practice. A regulator should not have to tell a bank what the basic principles of lending money are. Just consider the three following “key features”;

• “Imposing affordability tests for all mortgages and making lenders ultimately responsible for assessing a consumer’s ability to pay” – there are two conditions wrapped up in one; affordability and the lender’s responsibility regarding the borrower’s repayment ability. The first is a dead standard condition for the granting of any consumer loan. The second issue goes without saying.
• “Banning ‘self-cert’ mortgages through required verification of borrowers’ income” –this is like leaving the fox in charge of the henhouse. Third party certification of a borrower’s income is also a standard consumer credit tool.
• “Calling for the FSA’s scope to cover buy-to-let and all lending secured on a home” – lending for a home to live in, is one thing. When a borrower purchases a property with a view to letting it and generating income this is something else. Here he or she is running a business and sound lending practice should also call for additional information like details of the letting market’s potential, letting conditions, contractual arrangements with renters, refurbishment costs, insurance and other business expenses and the like. This is a commercial loan not a consumer one. It is a logical extension of the first “consumer” aspect that the regulator should be looking after both facets of the business, not just one.

There should be absolutely no need to tell a banker, never mind make it a regulation, as to what the basic principles of lending money are. Unless of course the lenders aren’t really bankers! This of course begs the question as to why these people are even allowed to be in the business of lending money in the first place? These “banks” have obviously thrown all caution and prudential behaviour to the wind in their pursuit of market share and profits.

A few days ago I railed in Blog on the Finextra website against a new range of obscene staff bonuses to be paid by Goldman Sachs (“Is this just a Bad Dream?” http://www.finextra.com/community/fullblog.aspx?id=3438 ). I wondered there whether I had awoken in “Alice in Wonderland”. Now I know I have, and I am at the Mad Hatters’ Tea Party.

Good luck to the Financial Services Authority in what they are trying to achieve.

Mobile Payments Operator M-Pesa Ventures Abroad

With the recent expansion of Safaricom’s M-Pesa money transfer service to the UK, Kenyans abroad now have an additional cash remittance avenue besides the well-known Western Union and MoneyGram services.

According to Safaricom’s chief executive Michael Joseph, the firm plans to run the Kenya-UK service for three months before expanding to other markets.

“We would like to introduce the service to Uganda, the United Arab Emirates and US, but only after we comply with regulatory issues in those countries,” said Mr. Joseph.

To send money to Kenya using the service, users will be required to identify themselves, provide the recipient’s name, Kenyan mobile number and the amount being sent in pounds Sterling.

With transaction fees ranging from $5.6 to $9.6, the transfer is converted to Kenya shillings at the day’s prevailing exchange rate, thereby guarding against exchange fluctuations as it is an instant transfer.

Currently, the maximum amount that can be transferred internationally through M-Pesa is $350 with the amount allowed per month from a single sender in the UK capped at $14,000.

M-Pesa, which was launched in Kenya in 2007, had a subscriber base of 7.3 million by end of July, served by an agent network of over 12,000, with cumulative person-to-person transfers of $2.7 billion. The volume of monthly transfers is $2.5 million.

The move to launch the service in the UK is seen as one meant to tap into the international remittances market especially from Kenyans living and working abroad.

M-Pesa Used in Job Scam

A sign of maturity in the development and use of new products is its adaptation to use by criminal elements. M-Pesa the highly successful Kenyan mobile payment system is no exception as this investigative report from Kenya’s NTV shows.

Bank Training – Critical Element for Today’s Banker

Banking has changed dramatically in the past decade. These changes have been so far reaching that the old disciplines that were core to the successful banker of the 1990s have long since relegated to the dusty back shelf.

To succeed in banking today the banker has to master a wide range of new disciplines. Although he may never become a true expert in these he or she still needs to have a sufficient working knowledge of the subject to enable a reasonable level of effective decision making.

This is equally true for bankers at the “coal face” such as those at the front desk or in the back office as well as those in the more lofty towers of head office, be they in accounting, audit, strategy, planning, operations or the like.

This is why staff training is so very critical. Bankers today need to understand the wider world, whether it is the operation of payment systems, credit cards, real time gross settlement, Swift, ACH operations, electronic payments, mobile payments and so on.

They also need to have a clear understanding of where banking and bank operations are heading – what is done today and how it will be done tomorrow. Technology continues to change the world. To keep up with these changes, to exploit them to your organizations benefit you first need to understand them. Just look at how the Mobile Phone is redrawing the banking world. New applications and processes for the Mobile Phone are being developed and launched by the day.

Of course all these changes also bring with them new dangers and risks – ways in which the ever vigilant banker and his staff may be duped. So an investment in Operational Risk Management training is also critical. What is operational risk? How it can be mitigated? What is fraud and how do you manage it? What is Business Continuity and how do you set it up? All these are key issues that the modern banker needs to know about.

Citadel Advantage offers a wide & comprehensive range of professional courses and training for commercial and central banks in the areas of; Operational Risk Management (for Basel II and for back-office risk mitigation), Specific Operational Risk Management areas including Business Continuity Planning, Anti Money Laundering & Payment Systems, and Liquidity Management.

We also offer a range of Workshops and Introductory Lectures dealing with the main areas covered in our full courses. If you can't find the exact course in our schedule that you are looking for, contact us. We may be able to build a course for your specific needs. Professional courses and training are available at a centralized venue, regionally (currently in Southern Africa & Western Europe), or In-house on your premises.

We use real-life case studies to illustrate the course material, so enhancing the learning process.
Our training courses are offered as:

• Public Courses: Citadel Advantage provide courses and lecturers to the key banking and risk training organizations around the world as well as in its own name. Ask your local or regional provider of banking and risk training courses for a Citadel Advantage course.
• In-house Courses (at your location or offsite at a location of your choice): Citadel Advantage provides cost-effective in-house training programs that allow you to determine the, depth, attendee size, length and sequence of the training within the security of your own organization. If you have 5 or more people to train our In-House training service will save you money. All Citadel Advantage courses can be run on your premises anywhere around the world.
• Tailored Courses (to meet your organization's specific needs): Citadel Advantage also provides tailored training services to the banking and financial sector. We can tailor any course to your needs or develop a new course within a relatively short period of time as required.
• CAPMen Program (the “Citadel Advantage Personal Mentoring” program): This service is designed to provide non-judgmental and professional support to those (Mentee) in senior management or aiming to reach senior management positions requiring an in-depth competency in the areas “Payments & Settlements” and “Operations Risk Management”. “CAPMen” Mentoring utilizes the full range of our experience and specialized professional courses to provide coaching, guidance and advice on a one-to-one basis, in your offices, helping you, the professional, set new goals, broaden your vision and build strategies. “CAPMen” mentoring also helps develop personal management skills such as creative thinking, decision-making, problem-solving, and effective use of resources.
  
• For details of our current course offerings please see; http://www.citadeladvantage.com/schedule.htm
  Our full course catalogue may be viewed at; http://www.citadeladvantage.com/catalog.htm

Risk Management - Focus on Fraud

CITADEL ADVANTAGE is presenting a 2-day intensive training course on Fraud within the context of Operations Risk Management in Madrid, Spain on the 22 & 23 February 2010.

Fraud can be extremely difficult to detect and studies show that most fraud occurs from or through trusted insiders. How aware are you or employees of fraud? Do they have a clear understanding of the role they play in detecting fraud? Do they understand you organization’s fraud policies and procedures?

“Risk Management - Focus on Fraud” is a 2-day intensive course on fraud and how it presents huge challenges for banks, requiring them to radically modify behavior and increase their vigilance in many of the traditional risks associated with banking activities.

Can your bank or organization cope with fraud? In fact could you even identify a fraud in your working environment? Are you maximizing your staffs’ potential to reduce fraud and error in your systems?

A major by-product of the financial crisis was the number of frauds which have come to light – frauds that had been running for years.

Don't miss this opportunity to ensure that you and your staff are able to understand fraud and its ramifications.
WHAT THIS COURSE COVERS
What you and your staff will gain from this course

• Understanding the Human Dynamic – Greed and Fraud
• Understand and identify the key Fraud indicators and Red Flags
• Understanding Operational Risk – in the context of Fraud
• Positioning the organization to successfully manage the ever-present Fraud problem.
• Successful approaches to identifying and mitigating Fraud

WHO SHOULD ATTEND?
• Senior Bank Executives
• Risk Managers
• Operations Managers
• Internal and External Auditors
• Operations Officers
• Business Managers
• Compliance Officers
• I.T. applications providers serving financial institutions
• Consultants and professionals serving the financial services industry.

For more details including a fully descriptive course brochure e-mail us at courses@citadeladvantage.com today. Please indicate FRAUD-MADRID in the subject line.

Liquidity – New Risks In Uncertain Conditions

For the past 15 years at least central banks around the world have been pushing “just-in-time” intraday liquidity as the preferred method of banks funding their real-time settlement (RTGS) accounts. While the implementation of RTGS took the settlement risk out of the majority of financial systems, it adoption and use for more and more critical financial systems (such as CLS) has exacerbated another problem – liquidity risk. This weakness has been spotlighted by t the liquidity crises that affected markets in March 2008 and, more severely, in September and October 2008. It can no longer be taken for granted that just-in-time liquidity will be available to financial market utilities at a time when multiple market participants are in danger of defaulting. This is the findings of researcher made public in the “Chicago Fed Letter” (see http://www.chicagofed.org/publications/fedletter/cflnovember2009_268a.pdf )

Online Fraud: Absa takes Client to Court

The Financial Technology portal reports that Absa one of South Afric’a “big four” has taken a client to court over a matter of online fraud.

The full report, which you can access at http://www.financialtechnologyafrica.com/Online_Fraud_Absa_Drags_FoneWorx_to_Court.htm , reads:

‘Johannesburg, South Africa: Big four bank Absa has denied any liability in a fraud case that saw R3 million illegally moved from FoneWorx's accounts. FoneWorx says just over R3 million of its money had been fraudulently moved out of its eight Absa accounts into 183 unknown, and unauthorised, Absa accounts, in February.

It has since recouped R1.56 million of the stolen funds, and now wants the rest paid back to it. CEO Mark Smith says the balance of the missing money was transferred into the company's attorney's trust account, but then again removed by Absa.

The bank claimed the money had been wrongfully transferred and was actually a duplicate payment, he says. But Absa's head of media relations, Patrick Wadula, insists this is a duplicate payment, which FoneWorx has “refused to repay to Absa”. He says the bank has instituted legal action against Foneworx and its legal representatives, Martini-Patlansky Attorneys, for the return of the duplicate payment.

The bank also denies liability for the money having been illegitimately transferred in the first place. Wadula says Absa “at no time had access to Foneworx's cash focus system”. He says the system is operated and managed by the client's system manager, and Absa has no right of access to or control.

“The only way to gain access to the cash focus system and, in turn, to transfer funds on the system is by way of passwords held by the client or its employees and agents. Absa has no knowledge of these passwords,” says Wadula. He adds that the bank is not liable for the wrongfully transferred money.

However, Wadula says, there have been similar, though minimal, incidents previously. “Absa constantly warns its clients to protect user identities and passwords and that security measures must be put in place to ensure that such information is safeguarded.”

Advocate Clive Pillay, the ombudsman for Banking Services, says he is not aware of this matter. However, he says: “In terms of the Code of Banking Practice, banks undertake to provide reliable banking and payment systems services and to take reasonable care to make these services safe and secure.” '

Money Transfers in Uganda

allAfrica.com: Uganda: Telecom Money Transfer Tilts Market

This article from AllAfrica.com provides an intersting insite into the current state of payments in Uganda. It is well worth a read. To access the original please click on the title post.

Kampala — Six months since the introduction of mobile money transfer, MTN and Zain have registered about 250,000 clients onto the mobile money transfer service moving over sh40b in transactions.

The two telecom companies' officials confirm that only the transactional limitation of sh1m seems to be standing in the way of the service which has tilted the market away from the traditional service providers.

Although figures are scanty about the actual market command of each player, there is ample evidence that MTN mobile money and Zain's Zap have eaten into the market share of traditional money transfer services of Western Union and MoneyGram as well as banks. MTN alone moves an average of sh6b monthly, according to Richard Mwami, MTN general manager, public access.
While Zain offers a diverse platform in which customers are able to merchandise, top up airtime and transfer money.

"The next phase which will soon be unveiled will see customers able to synchronise their mobile phone banking platform with their bank accounts with ZAP, " said George Buza, Zain's head of marketing.

The emerging dominance of the two products illustrates the thirst the market has for innovative products that make life easy.

Services like MoneyGram and Western Union have limited agents across the country.
Western Union, for instance, only has seven agent banks - Barclays, Ecobank, Centenary, Diamond Trust, Post, KCB and Crane Bank and a few sub agents.

On the other hand, there are hundreds of mobile money agents in all street corners across the country.

According to Juma Walusimbi, the communications director of Bank of Uganda, Western Union and MoneyGram were given a go ahead to operate under the financial institutions act because they are operating under licensed financial institutions.

"They presented their accounting and operational systems which ensured that they have audit trails and are safe," said Walusimbi.

But Walusimbi feels exclusivity rights on the two companies constrains the financial institutions that want to work with others.

"For instance, if bank A is working with Western Union, they cannot be allowed to work with MoneyGram," said Walusimbi.

Pride microfinance, for instance, falls under Crane bank which limits the amount of money Pride microfinance can collect as a full agent. Yet the microfinance firm is one of the most active branches, according to sources.

MoneyGram and Western Union international are reportedly reluctant in licensing new agents because of the added workload like supervision, training and hiring added workforce.

There are now six registered and operating telecom companies, two of who are offering the money transfer service. The benefits of the service have been boosted by the failure of commercial banks now numbering 21 to translate their services into everyday benefits to the common man.

Interest rates on savings are in point decimals while borrowing rates in Uganda are among the highest in the region. Also, inflation, both in the past (single digit) and present (at 14.5% in September) is way above the interest rates offered by banks for deposits. This means your meager savings in the bank's are simply wiped off by the high inflation.

"People do not save because there are no benefits to saving," said an expatriate working in Uganda.

Banks have remained largely urban based capturing just about 15% of the entire population.
The electronic funds transfer (EFT) and the real time gross settlement (RTGS) offered by banks are expensive, lengthy and uncompetitive. EFTs charges range from sh2,500 to sh10, 000 and take about two days, while RTGS charge upto sh15, 000.

"These two need to lower costs. But there is still business for everyone," cautioned Walusimbi.
In Kenya, the central bank said nearly half (47%) of all money transfers in Kenya are taking place through the mobile phones.

Although a major revolution in the money transfer business, mobile money has shortfalls. There are reports that agents sometimes run out of cash which creates lapses in the smooth running of the service. Also operators decry the lack of a harmonised identification system in Uganda like it is in Kenya and Tanzania.

"Keeping in consideration the sensitivity around money in Uganda, the slow pace at which people have embraced the use of this service in their day-to-day lives and the lack of a national/formal identification that restricts the acquisition of even more subscribers onto the mobile money service," said Mwami.

Leaving the responsibility of settling all claims by agents with little deposits in the rural areas are a burden and have limited growth of the service.

Will telecoms provide money storage as the banks do?

Isaac Nsereko, MTN chief marketing officer, says in the foreseeable future, it is very unlikely that telecom firms will undertake full banking roles like accepting deposits and extending credit.
"What I see more is collaboration on transfer and payment with the banks," said Nsereko.
In this arrangement, the mobile phone will continue to offer the infrastructure.

MoneyGram and Western Union have remained competitive by mainly exploiting strong brand presence and a public that has for long understood their modus operandi.

The mobile money service has clearly redrawn the competition lines with the traditional players.

Business Continuity & Payment Systems

Although many of us bank operations professionals are intimately involved in the day-to-day operations and functioning op payment systems, we tend to loose the true magnitude of what we are dealing with in the "system" with its "technology only" connotation. This is often compounded by an "on-us" view of our bank and our operations.

This view can cloud our thinking when planning for such critical issues as disaster recovery and business continuity. What is often overlooked is the big picture and how it all hangs together.

The events and aftermath of 9/11 clearly illustrated the problem. This is the subject of this short presentation are the events of that day, its impact on the financial system generally (and payment systems more specifically), the lessons learned and what we should be taking forward in our approach to Business Continuity Planning as regards Payment Systems.

The presentation was originally made by Stanley Epstein, one of our Principal Associates, to the Financial Services Technology Consortium in New York on 18 December 2008.

Business Continuity & Payment Systems

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Migrant Worker Remittances - Issues & Opportunities

CITADEL ADVANTAGE are presenting a 2-day intensive training course on Remittance Payments and the Business Opportunities that they create in Johannesburg, South Africa on the 25 & 26 January 2010.

International migration, the movement of people across international boundaries, has enormous implications for growth and welfare in both origin and destination countries. According to the World Bank nearly 200 million people live outside their country of birth. Although Remittances to developing countries are forecast to fall from an estimated $305 billion in 2008 to $290 billion in 2009, they will still outstrip private capital flows and official development aid.

For banks and payment service providers, migrant remittances are the single biggest untapped source of potential revenues. But to benefit from this vast sea of payments, banks and financial institutions need to gain a clear understanding of:
• What remittances are and how they work,
• The nature of the market,
• The market’s geographical spread,
• The customers for remittance services,
• The difficulties that both migrants and their beneficiaries face in the sending and the receiving of these funds, and
• How new initiatives and technology are changing the remittance landscape.

For numerous countries Remittance flows also represent the largest source of foreign exchange. In some developing countries they can account for as much as a 33% of GDP. International research reveals that the flow of remittances appears to be significantly more stable than that of other forms of external finance. This "resiliency" is because many migrants are unlikely to leave their adopted countries and will continue to send money home.

For senders and recipients the process is often times traumatic, and the difficulties associated with them have been increasingly recognized in recent years.
For banks and financial institutions remittances represent a huge opportunity – an opportunity to expand market share in a powerful, worldwide emerging market segment.

The rapid diffusion of technology into the payments world through devices such as the mobile phone heralds the promise of bringing modern real-time banking to even the remotest of villages.

This intensive interactive 2-day course will introduce partctipants to the biggest payment phenomenon of the 21st century. It will open your eyes to rapidly expanding market critically waiting for solutions to its needs.

This course is designed to assist banks, financial institutions and payment service providers who want to improve their understanding of this important market as well as develop the many business opportunities that present themselves.

Join us as we explore the world of Remittances and its many Business Opportunities.

For a fully detailed Brochure for this event please send a blank e-mail to courses@citadeladvantage.com (Please enter Remit -Jo'burg in the subject line)

European Commission Moves Closer to Enforcing SEPA End-Game

The European Commission is in talks with member states about setting a deadline for the migration of national payment schemes to the new Single Euro Payments Area (SEPA) after a public consultation exercise showed widespread support for the move.

The EC initiated consultation with key stakeholders in June on whether and how deadlines should be set for the migration of existing national credit transfers and direct debits to the new SEPA-compliant payment instruments.

The results showed that "a large majority" of respondents support the idea of enforcing dates for the use of legacy payment instruments, says the EC, although users expressed concerns about quality issues relating to direct debits and the need for enough time to become acquainted with the new products.

In July, a coalition of payments systems users published a highly critical report on the SEPA project and the lack of consultation with end-users, warning that the setting of an arbitrary end-date could destabilize the entire scheme.

One option under consideration by the Commission is to set separate deadlines for SEPA credit transfers and direct debits, since both schemes were not launched at the same time and do not have the same level of maturity.

Internal market and services commissioner Charlie McCreevy says: "Setting clear deadlines for the migration to SEPA would send a strong signal that SEPA is an irreversible process. It would provide certainty and predictability and act as a strong incentive for both industry and users to speed up migration."

Sins of the Risk Managers

Have risk managers really been doing their jobs properly? According to many they certainly have not. I came across this interesting item on the sum2llc Blog. It is certainly worth a read.

Click on the post title or the link below.
http://sum2llc.wordpress.com/2009/09/28/day-of-atonement-al-chet-for-risk-managers/

The Bank of England and Payment System Oversight

Central banks’ involvement in the oversight of payment systems arises from their core role as the systems’ settlement bank, providing the ultimate settlement asset, central bank money. This gives central banks a very direct interest in any potential systemic risks inherent in such systems. More broadly, payment systems are crucial to the functioning of the UK banking system and thus the wider financial system and economy, and it is therefore important that they operate in a way that contains risks to the system as a whole to an acceptable level. If payment systems are operated only in the narrow self-interest of their member participants, they may tend to underinvest in the mitigation of those risks. This can be countered by ensuring a broader risk perspective through central bank oversight.

This was recognized in the framework set out in the Memorandum of Understanding (MoU) with HM Treasury and the Financial Services Authority (FSA) in 1997.(1) The Banking Act 2009(2) puts the Bank of England’s oversight of payment systems onto a statutory footing.
On a recently published paper the Bank of England provides a brief overview of the relevant provisions of the Act and describes how the Bank intends to reflect these provisions in its approach to oversight. It also invites comments in relation to the draft Principles the Bank is intending to apply to recognized payment systems once the new framework is in place.

The full Bank of England paper may be downloaded at;
http://www.bankofengland.co.uk/publications/other/financialstability/oips/oips090928.pdf

Fraud and its Control – Get you Knowledge up to Speed

Fraud has been on many people’s minds this past year or so. Bernard Madoff in the US and Satyam in India are just two cases that come easily to mind. Are you able to recognize fraud in your organization? Do you understand the drivers of this specific form of Operational Risk?
“How to loose $360 million” is a case study taken from our extensive library of Operational Risk events. Shortly we will be offering a brand new training course aimed at understanding, recognizing and combating fraud. Watch blog and our Website (www.citadeladvantage.com ) for details.
In the meantime, for a taste of some of the material covered please view our short presentation.

Basel II Opps Risk How To Lose $360 Million Nov 2005

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The Bank Model Is Dead

Chris Skinner did an intersting presentation at a conference this week. In essence he says that the traditional model of banking is dead, replaced by a new one. The dead model is the one where 80% of costs of retailing are in bank branches. Branch based banking is dead. Branches however are still very much alive. What is needed is a new focus. See his presentation here.

The Bank Model Is Dead

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